YET more evidence of continued strong growth emerged yesterday as the Department of Finance unveiled the latest Exchequer figures.

The highest ever surplus at the end of a quarter - Pounds 732 million - has been recorded for the first six months of this year, according to the figures.

Economist are now pencilling in double digit growth, significant tax cuts and zero borrowing in time for Minister for Finance, Mr McCreevy's first Budget in November. Mr McCreevy's assessment that he was on target to eliminate borrowing in two to three years time was seen as very conservative.

The end of June Exchequer returns showed that the Revenue spent Pounds 721 million less than it took in. A surplus had been expected on the basis of Budget projections, but the amount exceeds all expectations.

As a result, the Department is now pencilling in an overall Exchequer Borrowing Requirement of less than Pounds 300 million, the lowest since modern records began.

However, Mr Jim O'Leary of Davy Stockbrokers and Dr Dan McLaughlin of Riada Stockbrokers both now believe that zero borrowing is achievable this year.

Higher than expected tax receipts, as well as lower spending, combined to push the surplus above predictions.

The Pounds 721 million surplus, compares to a deficit of Pounds 455 million inthe first half of last year and Pounds 155 million for the first six months of 1995.

Tax revenue grew by 23.5 per cent to the end of June. However, this was boosted by special factors such as the carry-over of VAT payments and on- time payment of corporation tax receipts.

But even taking these into account, the growth in tax revenue was 14.4 per cent compared to a Budget estimate for 6 per cent growth. Tax revenue is expected to exceed the Budget target by about Pounds 500 million, according to the Department. However, private sector forecasters believe this is an extremely conservative figure.

All the main types of tax contributed to the growth. Income tax was up 16.3 per cent due to strong employment growth, VAT was up 24.2 per cent, reflecting strong consumer demand, particularly for services while corporation tax was also up over 14 per cent.

One notable feature was the slower growth in excise duties than the other main areas. This implies that consumers are spending on services rather than on more alcohol, tobacco or petrol.

On the spending side, the Department is pencilling in a "significantly increased" provision for Hepatitis C payments, higher pay costs after the settlement of the nurses pay dispute, allowances for gardai and prison officers overtime as well as pay-outs to soldiers suffering from deafness.

Mr Michael Tutty, second secretary at the Department insisted that the only allowances in the figures are for the pay disputes which have already been settled.

However, Dr McLauglin said, even if the overshoot on the spending side were to double to Pounds 300 million, zero borrowing and substantial tax cuts are still possible.

Money in Government prize bonds and savings bonds and certificates all fell significantly. This could be the result of a withdrawal of funds to support share buying in the Norwich Union flotation.