Managing the economy has been one of the unexpected successes of the Labour government.

Most economists give Labour high marks for keeping inflation in check while avoiding a serious recession.

And relationships with the City and industry are generally seen as positive.

The decision to give independence to the Bank of England is singled out for particular praise.

But a number of economists warn that hard decisions could yet lie ahead.

And there are more worries about the management of the micro-economic issues, like deregulation.

Independence for the Bank

The most important economic decision by the new government was to give operational independence to the Bank of England to fix interest rates.

Bank of England independence: widely praised

According to Michael Hughes of Barings Asset Management, this was crucial in lowering inflationary expectations. He says that the Bank "aggressively" raised interest rates to curb inflation, and took equally decisive action when there was a danger of a recession setting in.

Roger Bootle of Capital Economics, a critic of the original decision, agrees that the Monetary Policy Committee has "worked well".

But both Mr Bootle, and independent economist Bronwyn Curtis, caution that the Bank was operating in a relatively benign atmosphere, where inflation was falling around the world.

For Ms Curtis, the low interest rates could yet stir up excess demand pressures in the economy - which would give the government and the Bank more of a real test.

And as Adam Cole, UK economist at HSBC Bank, points out, changes in policy can take up to two years to work through - so an equal credit for curbing inflation should go to the previous Conservative government.

Healthy public finances

The government is also praised by economists for introducing tough tests to keep public spending in check. Under the 'golden rule', Chancellor Gordon Brown has said he will only borrow for public investment, not to fund current spending on things like pensions or teachers' salaries.

Chancellor Gordon Brown: more tests to come

Michael Hughes believes this has been a tough test, yet most of the surprises have been positive - government borrowing has been less than expected.

Roger Bootle believes, though, that the government could have cut the deficit more in the first year by raising taxes.

He argues that the low inflation and strong economic growth made it easy for governments around the world, including the UK and the USA, to cut their budget deficits.

Not yet tested

Economists are more sceptical of the claim that the government has managed to eliminate the boom and bust cycle in the economy.

"Far too early to tell", is the verdict of Michael Hughes. "An extraordinary coincidence", says Roger Bootle.

And Bronwyn Curtis believes that the government's success may be due more to luck than judgement.

It has not yet had to take any really unpopular decisions, she says.

She worries that the government's reluctance to support membership in the euro after a poor showing in the European elections could be a sign that electoral considerations will outweigh an evaluation of the economic fundamentals.

Relations with industry

The Labour government has also surprised some observers by its attempts to move closer to industry.

Adam Cole says that the Labour government has been "more industry-friendly than anyone would have expected when they were elected".

But both Michael Hughes and Roger Bootle are worried that the government has a far less clear vision when it comes to micro-economic measures than in managing the economy as a whole.

Mr Hughes believes that the government is shifting the burden of provision, for example for pensions, more onto the private sector.

And he says that criticising bosses for 'excess profits' is incompatible with fostering the culture of enterprise.

Mr Bootle argues that the private sector, especially small business, is far from happy with the extension of workers rights to such areas as parental leave, minimum hours, and the minimum wage.

Nor has manufacturing industry been particularly happy with the strong pound.

Rating the Chancellor

Although praising the Chancellor, Gordon Brown, for his management of the economy so far, most economists argue that it will take a full business cycle before his skills can be truly measured.

It will be the next recession, coming possibly in the second term if Labour is re-elected, that could prove the real test of the mettle of the Chancellor.

And that, if coupled with a decision about Britain's membership of the euro, could prove far rockier than coping with the Asian crisis.