As has become their habit, Department of Finance officials were yesterday playing down yet another outperformance for the public finances.

It was a "solid but not roaring" picture, according to the head of the Department's finance directorate, Mr Philip Hamell. The outcome in question was a €33 million surplus for 2004, which compared to a Budget 2004 expectation of a €2.8 billion deficit.

The turnaround leaves the Minister for Finance, Mr Cowen, stepping into his first full year of the job in a very comfortable position. He has room to manoeuvre, and with the economy showing signs of maintaining last year's pace of growth, this situation is not expected to change significantly over coming months.

This means that higher taxes look like an ever more distant possibility and public spending targets appear more than achievable. It is a state of affairs for which most of the finance ministers in Europe would swap their right arm.

It would however be a mistake to take the surplus, small as it is, entirely at face value.

An analysis of yesterday's figures shows that if proceeds of the booming property market were to be stripped out of the 2004 result, the Exchequer would have been about €1.5 billion worse off.

This illustrates precisely how tightly the fortunes of the Republic's construction sector are tied into economic growth.

As 2004 began, the Department of Finance was warning that a slowing property market would eat into Exchequer returns over future months. In fact, the bonanza continued.

Capital gains tax provided €665 million in unexpected income as property-owners continued to cash in their chips.

Stamp duty was €489 million, or 31 per cent, above forecasts, with the extra growth attributed to both residential and commercial properties. VAT from property was also significantly higher than expected, with a boom in construction employment making its presence felt in income tax receipts too.

No wonder Mr Cowen said he was "pleased" with the housing and construction sectors. He will also have been content with the Revenue Commissioners, which delivered some €695 million to the Exchequer last year from various special investigations.

A gain of €200 million has been pencilled in for the same source in 2005, but it would not be surprising if the Revenue's enquiries into single premium insurance products netted significantly more. This would again produce a healthy boost for income tax receipts, thus continuing the cycle of flattering the actual income tax performance.

Without this flattery in 2004, income tax receipts would have come in very close to Department of Finance expectations.

This would have represented a healthy, if not outstanding, performance that would fit in with Mr Hamell's "solid but not roaring" analysis.

This extends to other areas of income too, with excise duties holding up well despite the loss of substantial revenue from cigarette sales. Wine sales, for example, were ahead by 12 per cent on 2003.

Government departments are meanwhile proving that they are more than capable of living within their means, again contributing to the near-perfect Exchequer balance.

Between them, they spent €343 million less than had been expected last year, with the Department of Agriculture accounting for about one third of this. Making projections for this year in the public finances is at this stage not an easy task.

The Department of Finance has said it will probably borrow about €3 billion but, if the 2004 out-turn is anything to go by, the actual result could be very different indeed.