KEY POINTS:
Despite global financial turmoil, National's finance spokesman, Bill English, has indicated the party is still considering tax cuts of $50 a week.
Asked on Radio New Zealand whether cuts of that magnitude were still on the table, Mr English replied: "It will be around those expectations."
His comment comes just before the next Treasury quarterly report is expected to show a recession, and follows ongoing ructions in the United States with the bankruptcy announcement of investment bank Lehman Brothers and forced sale of Merrill Lynch to the Bank of America.
The detail of National's tax cuts package will not be revealed until closer to the election, and last night Mr English would not comment further.
He is expected to wait until after the pre-election fiscal update before setting the cuts programme in stone, but Mr English's comment and his earlier statement that he was happy to live with cash deficits in the short term indicate National is still considering sizeable tax cuts.
Mr Key first mentioned the $50 figure before the May Budget, saying National would deliver "meaningful" cuts and voters' expectations were for cuts "north of $50".
Labour's tax cuts of $12 to $28 will begin on October 1 and Mr Key has already promised National will deliver a further tranche in April next year, followed by more cuts in 2010 and 2011.
Finance Minister Michael Cullen yesterday sent the country a further warning that the Government's cupboard was bare, saying the pre-election fiscal update was expected to show "significantly worse" deficits than the $3.5 billion forecast in the Budget.
Asked if it would put the brakes on any big spending promises in the election campaign, Dr Cullen said: "We face some significant pressures ... so any government moving forward has to be very careful."
The minister said the economy would be one of the defining issues in the campaign.
He suggested the forced sale of Mr Key's former employer - Merrill Lynch - in the US showed the National Party leader was not a safe pair of hands to manage it.
"You don't want a gambler and short-term money market player who will risk billions and billions of dollars. We are seeing in the United States the consequences of that kind of mentality unfolding right now."
The Treasury's next quarterly report on September 26 is expected to show the economy is in recession but will turn positive by the end of the year.
Yesterday, Dr Cullen remained insistent National would be unable to afford larger cuts without extra borrowing - something Mr Key has ruled out, although he has said his party will borrow more to fund long-term infrastructure projects.
Dr Cullen downplayed suggestions events in the US spelled worse news ahead. Much of what happened yesterday was predicted, he said, and the Treasury believed New Zealand's economy would pick up from the end of the year.
He said National had "talked up" the economy so it could justify the bigger tax cuts.
"Now I've pointed out it looks like we're coming out the other side and things are looking better, they're trying to talk down the economy, which seems rather strange."
Mr Key has said National will announce its policy in the "first week" of the campaign. A spokesman wouldn't confirm an exact date.
He said nothing had changed in the message National was giving since Mr Key's comments before the Budget.
It follows a week in which the Reserve Bank cut the official cash rate to 7.5 per cent.
Reserve Bank Governor Alan Bollard said he had moved more aggressively than usual to counteract the international credit crunch.
Party pledges:
Labour's tax cuts of $12 to $28 will begin on October 1.
John Key has already promised National will deliver a further tranche next April, with further cuts over the following two years.
The Treasury's next quarterly report on September 26 is expected to show the economy is in recession with a June quarter of negative growth, although it is expected to turn positive by the end of the year.
