Jonathan Milne: Budget offers mere crumbs

Finance Minister Michael Cullen has brought Dancing with the Stars to Parliament: a stylish Budget quick-step whose rapid action disguises the fact that he leads his partner nowhere fast.

Cullen's new striped navy suit and red rose could have been a vote-winner for television celebrity swirler Shane Cortese, but voters were left as scantily-clad and shivering as Cortese's dance partner.

The changes to the tax thresholds are worth 67c a week to low-income New Zealanders - half a pack of chewing gum, as Winston Peters pointed out - and they have to wait until 2008 for it.

The long-awaited KiwiSaver scheme is - let's not be churlish - a significant step to encouraging middle-income workers to save. Workers taking new jobs will be automatically signed up for the scheme, it will be low-hassle and the Government will cover most of the administration costs.

The Government's $1000 contribution to kick off savings will mean a lot to those on low incomes, though it is hard to justify for those on high incomes who are already saving.

But where the scheme makes little progress is in the support for first home-buyers to manage to put together a deposit.

Again, Cullen offers nothing until after the election: the saving accounts will open in 2007, and home-buyers will not be able to withdraw any Government subsidy until 2010 at the earliest.

It will be of little assistance to the aspiring home-buyers who need help in the pricey Auckland and Wellington markets.

With worsening economic projections, Cullen appears to have lost his stomach for the $10,000 contribution he had planned in April for individuals saving for a house deposit, $20,000 for couples.

Those contributions had been halved by Thursday: a $5000 contribution will make only a dent in a 10 per cent deposit of $30,000.

Moreover, those wanting to buy in Auckland City and other expensive markets could miss out altogether: it is available only to those buying houses in the bottom quarter of the regional housing market. For example, on Quotable Value figures for the final quarter of last year, the cut-off for Auckland region would be $275,000 - and only about 200 houses sold below that figure in all of Auckland City.

Meanwhile, those on low incomes in the provinces may be encouraged to buy cheap houses that provide roofs over their heads - but also provide a very poor investment that may be worth less every year.

Supporting first home-buyers is notoriously difficult. In Australia, the Government's $14,000 subsidies simply caused house prices to rise. And back here, the New Zealand Institute's call for a $4 billion annual contribution to saving for first homes and retirement simply caused eyebrows to rise.

The brutal truth is that the sunny era in which all New Zealanders could aspire to own a home is over. Housing Minister Steve Maharey made that clear by targeting the package at those earning between $40,000 and about $100,000.

On a low income or a benefit, investing your savings in a house may be neither realistic nor wise.