Labor's tax sums backed by Treasury

In a credibility boost for Labor on the eve of the federal election, the Treasury has endorsed the Opposition's costings of its tax cuts, rejecting claims by Peter Costello of a $700 million hole.

Two weeks ago, Mr Costello said he would stake his economic credibility on his assertion that Labor had understated the cost of its tax cuts, which provide up to $8 a week for low and middle-income earners.

But in a serious embarrassment for the Treasurer, his own department concluded in an analysis released last night that the tax cuts, in fact, would cost less than Labor estimated.

Now that the treasurer no longer (by his own judgment) has any economic credibility, does that mean re-electing him threatens the interest rate?