KEY POINTS:
Finance Minister Michael Cullen expects National to offer larger personal tax cuts before the election than Labour.
However, he said that would risk eroding New Zealand's economic platform.
Dr Cullen made the comments in a speech to the AUT business faculty this afternoon.
"In the budget I will announce a programme of personal tax cuts. I do realise that the package I announce is likely to be smaller than my political opponents will propose going into this year's general election," Dr Cullen said.
"But what I also realise is that my opponents will not be able to outspend the Government on tax cuts without eroding New Zealand's economic platform in the process."
The Government remained committed to its four tests for tax cuts; no borrowing to pay for them, no cuts in services, no impact on inflationary pressures and no contribution to greater inequality.
Dr Cullen said New Zealand would be affected by a global economic downturn despite high employment and increased incomes and profits.
He said Labour had rebuilt the economy in power and put it in a good position for more difficult times.
From next month company tax would be less and businesses would get research and development tax credits.
Also April would see the new $12 minimum wage kick in along with increases to the minimum wage and superannuation and benefit payments, and the start of employer contributions to KiwiSaver.
"Our April 1 initiatives are a reminder that this is a Government that has a plan for the future of our economy, that we are delivering real solutions for the economy today, and that we are serious about the challenges we face."
Speaking on Breakfast on TV One this morning National leader John Key said his party would bring forward tax cuts - which would normally kick in 2010 following the 2009 budget - if National won the election.
"We just think New Zealanders have waited an awfully long time, I mean nine years now... if we can bring it forward we'd like to," Mr Key said.
National would make savings by reining in bureaucracy and cutting "low quality spending" and Mr Key said he was concerned Labour would make irresponsible promises leading up to this year's election.
Dr Cullen said if National had got into power in 2005 services would have been cut to fund the tax cut promises.
He said in that time Labour reduced the cost of doctors visits, built more schools and hospitals and made other progress.
Labour's "commitment to investing in families, seniors and services during this challenging economic moment will emerge as one of the key dividing lines in the debate over the next few months", Dr Cullen said.
He criticised National's record in the 1990s and said it left the country vulnerable to the Asian economic crisis.
"I am entitled to my judgement that we should celebrate the fact that we strengthened our fiscal position ahead of a downturn, especially when we see other countries rushing to do so now once the downturn has well and truly begun."
He said cutting services would worsen contraction of the economy.
Dr Cullen also touched on the ethics that led to the sub-prime mortgage problem in the United States.
While New Zealand had not suffered the same situation, Dr Cullen said questions had to be asked about the culture of international elite financial institutions.
National's finance spokesman, Bill English, said Dr Cullen was mounting a "farcical defence" of the Government's failure to deliver tax cuts during nearly nine years in office.
"Sound economic management has gone out the window - Labour is committed to spending every dollar it has save up to buy the votes of people who have been overtaxed to pay for it," he said.
"Households under pressure will get the crumbs after Labour has had a feast."
- NZPA
