KEY POINTS:
Tax cuts are overwhelmingly popular with Kiwis - but they don't have to be big, and they shouldn't lead to rises in interest rates or cuts to social spending.
New research by the Business Council for Sustainable Development shows 85 per cent of Kiwis want more of their
pay packet in their wallets - up 9 per cent since the last survey in October.
But 71 per cent would change their minds if prices and interest rates rise as a result - and almost two-thirds don't want tax cuts funded by slashing budgets for benefits, health and education.
The survey shows 81 per cent of New Zealanders believe the Government can afford to cut personal taxes, 9 per cent more than those surveyed in October, with 18 per cent now admitting a tax cut will be the main influence in how they vote at the election.
Almost half of those surveyed by the Business Council said the tax cut didn't have to be big: 49 per cent would settle for $20 a week or less.
BNZ economist Tony Alexander said tax cuts were still likely but there was little chance of the Reserve Bank cutting the interest rate, with inflation increases a possibility.
"It's hard to argue against measures which would take pressure off the many families currently under stress from high interest rates, rising food and energy costs, and worries about their house price."
ASB economist Nick Tuffley thinks consumer price index figures released this week will show inflation running at 3.7 per cent, driven by petrol and food price rises.
"Even though growth will likely prove to be slow in 2008, we don't see the Reserve Bank having sufficient confidence in the inflation outlook to cut interest rates in 2008.
"The caveats to that view are that 2008 is a year of uncertainty and global credit markets remain a wildcard."
Tax expert and chairman of PricewaterhouseCoopers accountants John Shewan said cutting the top tax rate was less likely to lead to more inflation than lowering the rate for the less well off.
That's because those on higher rates earn more, have more disposable income, and are more likely to save, not spend, money gained from a tax cut.
The Business Council for Sustainable Development, which lobbies on behalf of companies around climate change issues, said its survey results show the "fine balancing act political leaders must perform to ensure long-term equity is retained, but wealth creation rewarded".
Researchers ShapeNZ runs an online panel of more than 9000 members, most recruited to match the 2006 Census population profile.
The council says the maximum margin of error is 1.8 per cent.
