KEY POINTS:
Save it - or forget it. That is the blunt choice offered to wage and salary earners by Michael Cullen's bold and meaty eighth Budget.
In fact, he is not offering much of a choice at all. The Finance Minister's expanded KiwiSaver scheme may not be compulsory superannuation in name.
But it is the next best thing. The scheme dangles juicy-looking tax credits in front of wage and salary earners.
Someone paying $40 a week into the scheme stands to end up with $100 once matching employer contributions reach their maximum levels.
It would seem stupid for people not to accept an offer which Dr Cullen is making so difficult to refuse, especially if the superannuation fund handling their KiwiSaver account allows them to divert part of their own contributions into paying off their mortgage.
To get the tax credits, however, people must start saving themselves. And they don't get the loot until they are 65 and their KiwiSaver nest-egg finally matures.
These conditions mean a straightforward tax cut would have been far more attractive for many people. They may be saving already and prefer cash in the hand. They may not be saving because they desperately need the cash in the hand now.
The modest-income earners (and Labour voters) to whom the scheme is targeted may bristle at having to take an immediate cut in their income even though they get a far larger gain later.
They may similarly feel miffed at missing out on tax credits if they do not sign up.
KiwiSaver will perform a crucial role in changing saving habits. It cements Dr Cullen's place in history as the Finance Minister with the vision and tenacity to address New Zealand's abysmal savings record and thus avert a crisis in pension payments brought on by an ageing population.
Short-term, the scheme's extra beauty for Dr Cullen is that it reduces his embarrassingly high surplus, but keeps the money out of an overheating economy.
But the swings and roundabouts in joining KiwiSaver make it an unlikely panacea for Labour's slump in the polls. It might have helped Labour had Dr Cullen complemented it with his so-called "chewing gum" tax cut or a more generous variant thereof through lifting income thresholds at which middle and top personal tax rates cut in.
That was scheduled to happen next year. But having already pumped a further $600 million into Government spending above the $1.9 billion he had already set aside, Dr Cullen erred on the side of caution and ditched the modest tax cut to ensure he could not be blamed for any further raising of interest rates by Reserve Bank Governor Alan Bollard.
Although Dr Cullen cannot cut taxes in the short term, it would be of considerable help to Labour were he to look amenable to cuts at some stage.
But yesterday he grumpily dismissed the idea that next year's Budget would be heralding significant cuts, saying he was not into "lolly scrambles".
This was a missed opportunity to reassure taxpayers who have been waiting for some recognition from Labour that tax rates and income thresholds have not been adjusted for a decade. They are still waiting.
If Dr Cullen won't reassure them, National most happily will.
