KEY POINTS:
Finance Minister Michael Cullen attacked National's tax policies as a poorly designed tax package "dressed up as an economic package".
"Basically it says economic growth is not about savings and investment and innovation at all. It is simply about encouraging people to spend, nothing more than that.
"This is a great package if you are somebody who is better off, if you don't have any children, if you have already got your first home and if you are not saving."
Dr Cullen said the lesson of the current world situation was that those countries that had been borrowing so heavily in order to maintain consumption have got to lift their savings and lift their own investment over time.
"This package does exactly the opposite of that. It is designed to reduce savings and increase consumption and therefore increase New Zealand's national borrowing."
Prime Minister Helen Clark told Radio New Zealand this morning National had "wrecked Kiwisaver" for a few dollars a week more for the average worker.
"They've also wrecked support for a more innovative and higher value economy," she said.
Mr Key told the broadcaster that the tax package was a key part of the medicine National would deliver to New Zealand's ailing economy.
Potential National allies United Future and Act, who both advocate a flatter tax structure, were also critical of the tax package.
United Future leader and Revenue Minister Peter Dunne said it was overly complex and would be difficult to administer. He said superannuitants and low income earners were the big losers from the package.
Act leader Rodney Hide said John Key had failed to address "profligate" state spending or red tape, instead choosing to stick with "Dr Michael Cullen's economic policy".
"John Key has failed to provide any economic leadership or direction to the country at a time of world financial turmoil."
Groups representing workers and families roundly criticised the plans, saying they would offer average working families nothing.
The Engineering, Printing and Manufacturing Union, the country's largest private-sector union with 50,000 members, said the policy was "reckless short-term thinking".
"If this package were in place today the CEO of Telecom would be more than $500 a week better off while a family on a single average wage of $44,000 a year and receiving Working For Families would actually pay more tax and at the same time lose their employer's contribution to their KiwiSaver schemes," EPMU national secretary Andrew Little said.
He estimated the average worker in KiwiSaver would lose more than $200,000 over their working life.
"That's bad enough for individuals but there are 800,000 people signed up to Kiwisaver and for business that means a huge loss of investment capital, as does the removal of the research and development tax-credit which would also be scrapped to channel public money into this package."
Council of Trade Unions economist Peter Conway said the tax cuts were pitched at those on the average wage, but two-thirds of New Zealand workers earned less than that.
Susan St John, co-director of Auckland University's Retirement Policy Centre and spokeswoman for the Child Poverty Action Group, said the policy reduced the value of family assistance by introducing rebates for those without children.
"The interaction between Working For Families, tax rates and KiwiSaver is very complex and this policy looks like it's going down the path of adding even more complexity and uncertainty to an already complicated area."
