As supporters of President Luiz Inácio Lula da Silva celebrate his commanding victory in Brazil’s presidential run-off election on Sunday, first indications are that his new government will favour those who led the “developmentalist” wing of his first administration over those who favour fiscal orthodoxy.

“The Palocci era is over,” said Tarso Genro, minister of institutional relations and one of those given most credit for the president’s recovery from his symbolic defeat in the first-round vote on October 1, when he surprisingly failed to win a majority.

Mr Genro was referring to Antonio Palocci, finance minister from January 2003 until March this year and the man most responsible for the government’s use of high interest rates as a tool of inflation-targeting and for its maintaining a degree of fiscal austerity. He was opposed by leftwingers in the government and criticised for sharing the credit for economic stability with the previous administration of the centrist opposition PSDB.

Mr Genro is a member of what Luciano Días, a political consultant in Brasília, described as Brazil’s new “Gang of Four”. The others are Dilma Rousseff, the president’s chief of staff, Marco Aurélio Garcia, president of Mr Lula da Silva’s party, the left-leaning PT, and Guido Mantega, who replaced Mr Palocci as finance minister.

All have spoken of the need for a change of emphasis from stability to growth. All appear to agree that the best way to achieve growth is to stimulate consumption through income distribution, rather than – as argued by those who support more orthodox policies – by cutting government spending to release money for investment.

Mr Lula da Silva appeared to support this view in his first speech after winning the election on Sunday night. He promised to maintain “tough fiscal policies” but added: “At the same time I am convinced that the solution for Brazil’s problems is no longer to make the people suffer with heavy adjustments [i.e. spending cuts] that end up being borne by the poor.”

He said that whereas in the past it was said that Brazil must grow in order to distribute wealth, his view was that Brazil must first distribute wealth in order to grow.

A further weakening of orthodoxy was suggested by press reports quoting “government sources” saying the central bank would no longer report directly to the president but instead be subordinated to the finance minister. When Mr Mantega replaced Mr Palocci in March, Henrique Meirelles, head of the central bank, demanded direct reporting to the president as a condition for staying in his job.

The proposed change suggests a weakening of the central bank and a setback for those who advocate its formal independence from ministerial oversight. The bank has enjoyed operational independence under this government and has been attacked by leftwingers and by industry leaders for using what such critics see as unnecessarily high interest rates.

Issues of governability will become clearer only in the coming weeks, as the president picks his ministers following negotiations with the main parties in Congress. Mr Lula da Silva faces opposition in the Senate, where opposition parties have a majority, but should be able to build a working majority in the lower house following negotiations with the catch-all PMDB, which is split between those who support and those who oppose the present government.

One threat hanging over the new government is that opposition politicians could press for criminal action and even the president’s impeachment over corruption allegations that have dogged the first Lula administration.

Partly in response to this threat, Mr Lula da Silva and his aides have spoken of the need for dialogue with the opposition to support a programme for growth.

Sérgio Fausto, an aide to former president Fernando Henrique Cardoso of the PSDB, said neither impeachment nor full co-operation were to be expected from the opposition. “There won’t be any war [between government and opposition],” he said. “Brazil has many defects but no suicidal tendency. Our way is more muddling through. There will be a lukewarm truce.”