KEY POINTS:
This is the rainy day Budget.
Michael Cullen has been as good as his word.
When the economy was booming and the Government's coffers were overflowing, he banked the surpluses and took the political heat.
Now economic growth is at a standstill, he is shovelling out the contents of the coffers for all he is worth, dispensing the strongest fiscal stimulus the economy has seen since 1997.
Instead of the fat surpluses we have become accustomed to, in the 3 to 6 per cent of GDP range, the surplus shrinks to less than 1 per cent next year and almost zero by 2012. Such small surpluses could easily turn into deficits if economic growth and Government revenue turn out weaker than forecast - and forecasting is a very inexact science.
It is almost as if Dr Cullen thinks that if that turns out to be a problem, it will be someone else's problem.
But to be fair, it means he is running fiscal policy in the counter-cyclical way he has long said it should be run, cooling things down when things are running hot and warming it up when the cycle turns frigid. By his lights Dr Cullen has done as much as he can to stimulate the economy. Now the onus is on Reserve Bank governor Alan Bollard.
He will look not only at the tax cuts but the totality of the Government's transactions with the rest of the economy - how much it spends, including capital spending, and how much it takes back in tax.
This stimulatory Budget may have pushed back the start of interest rate cuts by a matter of weeks. But the most immediate effect of an easing in interest rates could well be a sharp drop in the dollar. While blessed relief for exporters, it would mean more pain at the pump and the supermarket.
* Proposed tax cuts and development issues the main talking points for our panel:
Laila Harre, former Alliance cabinet minister, National Secretary of the National Distribution Union
Labour hasn't thrown down the gauntlet but the Budget will help neutralise things before the real election campaign starts. With a minimum wage worker getting only 40 per cent of the tax cut going to someone on $80,000, Labour has broken its own rule that tax cuts should not increase inequality in favour of a direct appeal to the better off. It's as close to the Nats as they can get - leaving plenty of room for Green and Maori Party differentiation.
Richard Prebble, former Labour minister and Act leader
New Zealand is the loser in the Budget. The Treasury predicts rising prices, high interest rates, growing unemployment and a dramatically slowing economy. There is no plan to solve any problem. Forgotten is the objective to lift New Zealand to the top half of the OECD. New Zealand is about to fall below Greece on our voyage to the bottom of the OECD. As a vote winner the Budget fails to help the middle earners as the average increase in home mortgages wipes out the tax cut.
Claire Robinson, Head of the Institute of Communication Design, Massey University
It is great that Labour has finally responded to voters' calls for tax relief. This Budget has taken the wind out of National's sails for the time being. But introducing the tax reductions on 1 October this year with no further change until 2010 was a gamble that leaves the way clear for National to offer additional relief on 1 April next year. In what is shaping up to be a pork-barrel election campaign, voters may be faced with interesting choices come election day.
John Tamihere, former Labour minister, broadcaster
This is one of the most clever budgets Michael Cullen has ever delivered. He is lucky in that he is the Minister of Finance presiding over his ninth budget with surpluses. The discussion is the first in a generation about what we spend and invest in rather than about how we save. This is an election year budget. It buys unequivocally the Grey Power voter with gold card incentives and increases. He's giving everyone something. It challenges the opposition to say what spending it would cut and therefore for what voters it will disaffect. The real question is whether it's too clever, too late.
