The May Budget will have no plans for tax cuts, Prime
Minister John Key confirmed yesterday, and he sought to dampen
expectations that there would be anything significant in the
He warned that increases in spending well beyond his own
Government's "modest" plans of $1 billion extra a year would
risk increasing interest rates and mortgages higher than they
would otherwise go, and lifting the exchange rate.
"If a political party tells you they are going to spend a lot
of money, ask them how much it is going to cost your
Labour leader David Cunliffe rubbished the speech, saying it
was clear Mr Key did not have a plan for the economy and
blamed National for interest rate rises.
The Budget would confirm a "wafer thin" surplus, he told
reporters after delivering a speech to the North Harbour
Theoretically there could be some for tax cuts "but my
message is it might be much smaller than people might think".
He said it would also show surplus in future years for either
spending a little bit more or potentially returning a little
"But little is the operative word."
The Budget would contain no plans for tax cuts or changes in
the tax brackets in the coming financial year or others.
The half-yearly opening of the books last December forecast
an $86 million surplus after six years of deficit, followed
by surpluses in the following years of $1.6 billion, $3.1
billion and $5.6 billion.
Mr Key said the Government would remain disciplined around
government spending. New operating spending in its five
budgets had averaged $250 million a year compared with
Labour's $2.7 billion-a-year average.
He said any change to paid parental leave or parental tax
credits would be in the Budget but if there were changes,
they would be "modest".
With the economy back in growth, the Reserve Bank increased
the Official Cash Rate last month for the first time since
Mr Key said that rise was "a sign of strength" but that any
rises brought on by higher government spending would be
contributing to the problem.
Voters would ask whether government spending was part of the
solution or part of the problem.
"At around $1 billion of new expenditure, we are part of the
solution. At a lot more than that, we are part of the
Mr Cunliffe said Labour would also run surpluses as it had in
every year in the last Government.
National's failure to address the underlying issues of the
economy meant New Zealanders would be paying more for their
"They are fiddling while interest rates, rents and mortgages
rise," he said.
"The Government has ignored the major issues for the economy:
a distorted tax system, a pitiful savings record, funding
superannuation and outdated monetary policy settings."
Labour's "economic upgrade" would focus on investment,
innovation and industry development.
- Audrey Young of the New Zealand Herald