National to press on with big tax cuts despite warnings

NEW ZEALAND HERALD: National says it will not water down its plans for tax cuts because of the economic slowdown, saying the short-term pain of a hit on the Government's books will pay off in longer-term economic benefits.

Despite Labour saying there is no room for substantial tax cuts without borrowing or cuts to services, National MP Bill English said yesterday the party was still hoping to offer "significant" reductions in tax.

Speaking earlier on TV One's Agenda, he said National was focusing on the longer-term benefits it expected tax cuts to have on economic growth, but effectively admitted there would be a short-term fiscal impact.

"If there's some fiscal impact of them in the short term, that may be worth wearing for the longer-term benefits and that's our focus."

Mr English told the Herald later that his party would not know the state of the Government's books until they were opened before the election, but the current forecasts were for a zero surplus in three years.

"It's possible it could go into the red, but that won't be a reason for us to pull back on tax cuts."

Finance Minister Michael Cullen has repeatedly warned there is no room for larger tax cuts than Labour's own three-year programme unless there is increased government borrowing or cuts to services.

Despite this, National has also not backed away from leader John Key's earlier references to a figure of $50 a week for workers on the average wage.

Mr Key said yesterday $50 was his estimate of the kind of cuts New Zealanders were expecting, "and we are doing our best to meet expectations".

He said the party anticipated announcing its policy at the start of the election campaign "but we remain committed to meaningful tax cuts".

"We've always argued there are two benefits to tax cuts. One is immediate relief they will give to New Zealanders. The other is that it's important for a healthy growing economy."

Mr English said Labour's current policies would come at a cost to the next government, including the purchase of TranzRail and future investment.

"It's not our intention to allow the thrashing around of a dying government to dictate what happens in this country for the next three to five years. There will be some costs to the rather desperate policy choices Labour are making at the moment, but we are not going to let that get in the way."