Dr Cullen yesterday unveiled his ninth budget, announcing a three-year tax cut programme that starts on October 1.
National immediately raised expectations of what tax cuts it will be able to produce when National leader John Key attacked the Government's tax cuts as "far too little" and "far too late".
"Under National, New Zealanders will do much better," Mr Key said.
Dr Cullen's programme will deliver tax cuts of between $12 and $28 a week from October 1. At the end of the third year, the cuts will have risen to between $22 and $55 a week.
Mr Key said the tax cuts on October 1 would deliver the equivalent of a $16 family-sized block of cheese to the average worker.
He also said the Government's tax cuts were being cynically done, coming in on October 1 when an election would be held only weeks away.
But National has not yet said what it will do, and only plans to reveal its tax cuts much closer to the election, possibly at the start of the election campaign.
Dr Cullen told Radio New Zealand today that Mr Key would have to be careful about the timing of his tax cuts announcement so he took into account the pre-election fiscal update.
But Dr Cullen believes the tax cuts package he announced yesterday keeps the poll-bashed Labour in the running politically.
"I think it keeps us in the game. I think we've always been in the game actually for a number of reasons. I think this keeps us in the game.
"I think the National Party has a major problem. If they promise much bigger tax cuts then the question is going to be what gives in that -- is it a lot more borrowing or is it cuts in social spending?
"If they don't then the only issue that they've run on for some years now has suddenly disappeared because they have no other great policy differentiation."
Some economists are predicting the tax cuts package means the Reserve Bank will hold off on lowering the official cash rate or that interest rates could rise.
"I think the market reaction was excessive," Dr Cullen said.
The net impact of the tax cuts for the remainder of the financial year from October 1 to June 30 was $1.5 billion, he said.
For the following financial year it was about $2.3b.
"So it's by no means wildly in excess of the anticipated amounts over the next two years," he said.
Some analysts had not "caught up with" the fact that one of the reasons for the operating surplus falling was because of the increased costs of Kiwisaver.
"Now of course that money is going into savings, it's not going into consumption and I think they need to perhaps drill a little bit deeper into what's in the structure of this budget in that regard."
The Government was moving to cash deficits of $3.5b a year which was why he was saying to the National Party it should be careful of what it was promising on top of the Government's tax cuts package.
