KEY POINTS:
Labour will dangle another carrot in front of voters today with Finance Minister Michael Cullen expected to indicate it will offer ongoing cuts in personal taxes over at least the next three years if his party wins the election.
In his first major economic speech this year, Dr Cullen is expected to tell the Auckland Chamber of Commerce that he will set out a programme of progressive tax cuts over the next three-year parliamentary term.
It is understood he will also hint at a longer-term plan for cuts beyond that.
Labour promised to deliver personal tax cuts at the party's conference in November, but Dr Cullen's speech is the first indication that it will be an ongoing programme of cuts, rather than a one-off election year offer.
However, he is also expected to use the speech to dampen expectations of significant cuts in this year's Budget by reiterating the four tests Labour will apply when setting tax cuts.
The test Dr Cullen applies is that he will not offer tax cuts that result in Government borrowing, cuts to services, or cuts that increase inflationary pressures or inequalities.
Labour's intention that personal tax cuts will be phased in over at least three years echoes National's plan to offer progressive tax cuts.
John Key said in his state of the nation speech last week that National would bring in a regular programme of ongoing tax cuts.
Dr Cullen set aside $1.5 billion for tax cuts in December, but said it was not necessarily an indication of what will be offered.
The size of Labour's tax cuts and how they will be spread among the income groups is not expected to be revealed until this year's Budget, partly to allow time for adjustments allowing any further global economy activity to be taken into account.
Both parties have downplayed the size of the cuts. At National's caucus retreat, Mr Key said National would be fiscally responsible with its campaign promises and warned not to expect an election "lolly scramble".
However, if National's offer tops that of Labour's, Labour is likely to claim it cannot do so without borrowing, cutting services or placing inflationary pressure on the economy.
Mr Key has denied his tax cuts would result in service cuts, saying National would hold government spending steady, rather than continue to increase spending at the same rate.
Helen Clark announced Labour would offer personal tax cuts at Labour's party conference in November, after successive years of high surpluses without personal tax cuts.
The Government has already allocated about $4 billion a year to Working for Families tax credits for low to moderate income families, and business tax cuts to 30 per cent and the KiwiSaver savings scheme announced in last year's Budget.
Although both Helen Clark and John Key started the year with keynote speeches on youth crime and education policies, the rising cost of living and interest rates will make voters' pockets a big focus of the campaign.
In a January Herald Digi-Poll, tax cuts was chosen as the issue most likely to influence their vote by about one quarter of all respondents - more than for any other single issue.
As well as personal tax cuts, both parties are also promising further policies to address affordable housing.
Dr Cullen is also expected to promote Labour's record by emphasising it has presided over the longest period of growth since World War II.
