What will the tax cuts mean for you?KEY POINTS:
New Zealanders on the average wage will get the equivalent of a $16 block of cheese under the tax cuts unveiled by the Government today and will only get the cuts within cooee of an election, National leader John Key said today.
"There you have it, Michael Cullen's ninth and final budget. It may have been his election year budget but it was also his valedictory," Mr Key said.
When Dr Cullen in 2005 announced he would adjust tax thresholds, his plans were derided as the "chewing gum" tax cuts when it was revealed some people would only get an extra 67c a week. The plan was eventually scrapped.
Today he unveiled a new three-year tax cutting package with workers on the average $45,000 wage taking home an extra $16 a week from October.
But Key mocked the offering, saying it was "too little, too late".
"Labour's going to get a revival, well they think, going to the polls having given the average worker of New Zealand a family-sized block of cheese. That's it. That is the tax cut.
"Nine years of waiting and a family-sized block of cheese and you get two blocks before the election and you're meant to be grateful," Mr Key said.
Mr Key has pledged to top the tax cuts, which will reach $10.6 billion over the next three years.
"The next time you get a tax cut theoretically under that budget is not for two years. That's a long time between toasted sandwiches. It's a long time between macaroni cheese."
For nine years, Dr Cullen had argued the country could not afford a tax cut, Mr Key said.
But with this year's election just a few months away, suddenly it could despite Dr Cullen being ideologically opposed to them.
There was a "smell of desperation" to Dr Cullen's budget, Mr Key said.
Speaking in Parliament after the Budget speech, Mr Key said: "Under National, New Zealanders will be better off. Under National, personal tax cuts are a priority."
He did not immediately give any details of what those tax cuts would be.
New Zealand First leader Winston Peters said the Budget had some good aspects but also some missing elements.
Dr Cullen's ninth Budget dropped the bottom tax rate from 15 per cent to 12.5 per cent and raised the 33 per cent and 39 per cent thresholds.
From October, the top tax rate will kick in for people earning more than $70,000 a year.
Dr Cullen said a couple with two children on the average household income of $72,000 a year would be better off by $43 a week, including a raise in Working for Families payments, from October.
Further tax cuts will take effect in 2010 and 2011, giving annual savings in three years' time of between $1,130 and $2,870 depending on earnings.
The total cost of the package, which Dr Cullen described as "a fair deal for all", is $10.6 billion by 2011.
In his speech to Parliament he said the Budget was about "continuing to build a fair society and strong economy against an economic background which is the most challenging New Zealand has faced in over a decade."
He said the tax cuts would provide relief from rising prices, while maintaining public services.
Dr Cullen told a media briefing that the Budget made a priority of "tax relief for workers who are struggling with rising costs of living" and acknowledged some people would be feeling poorer than they were a year ago.
In a thinly disguised message to National, he said it would be "quite difficult" to have any further tax cuts without either borrowing heavily or cutting public services.
He said the tax cuts would provide relief from rising prices, while maintaining public services.
But Greens co-leader Jeanette Fitzsimmons called the Budget "short-sighted" and "all but ignoring the environment".
Ms Fitzsimmons said the Budget "ignored 61 percent of New Zealanders who last month said they would rather not have tax cuts if it meant cuts to social spending like health, benefits and education."
The Budget health offering also came under attack.
Mr Cullen pledged $750 million a year to the health sector for three years, mainly to boost spending at struggling district health boards (DHBs).
But a group representing more than 500 aged care homes has accused the Government of having no vision.
HealthCare Providers NZ chief executive Martin Taylor said the Government had neglected to take steps to deal with the increasing numbers of elderly, now and in the next few years.
"The reality is under-funding a sector for five years and then giving some financial relief does not address the issue of assuring future supply, or of insulating the sector from inflation," Mr Taylor said.
But pensioners did get some relief with the floor of New Zealand Superannuation being raised.
Superannuation for married couples will increase by $45.88 a fortnight from October 1 and by $23.84 for single people.
The Government is considering a winter heating subsidy for elderly SuperGold Card holders, budget documents reveal.
Mr Cullen also singled out investment in infrastructure - particularly transport - as of vital importance to the nation.
He said $33m had been set aside for the first stages of a transport plan for Canterbury as well as $30 million over three years to improve regional development in Northland and Tairawhiti.
"Significant expenditure will be needed to invest in new rolling stock as well as further upgrades of the track, stations and other infrastructure.
"Rail has made a big comeback as a preferred mode of transport in many developed countries over recent years. New Zealand now has the chance to catch up with the trend.
"Nowhere is this truer than in Auckland. If a slowly phased in regional petrol tax is available then the current plans for electrification can proceed.
"Beyond that there is a need for longer term vision stretching out over the next 20 years to the Britomart loop line, to connect rail to the airport and to consider dedicated rail tunnels to cross the Harbour so as to create a true electrified rail network which can then link to other transport modes."
The Budget also includes funding for police to meet their target of 1000 new sworn staff and 250 other staff in this electoral term.
The target was part of Labour's 2005 confidence and supply agreement with New Zealand First.
Police Minister Annette King said police would get $180 million extra operating funding over the next four years and $9.5 million in capital funding over the next year so it could hire an extra 332 sworn staff and 90 non-sworn staff to meet the target in the next financial year.
She said the boost in police numbers had made communities safer.
Also in the budget is $91 million to recruit 89 more probation officers.
- with NZPA
