Tax cuts for all in New Zealand pre-election budget

May 22, 2008, 4:14 GMT

   Wellington - All New Zealand workers will get a tax cut on October 1 as a result of a budget introduced on Thursday by the Labour-led coalition government which opinion polls indicate faces certain defeat at a general election due a few weeks later.

   Finance Minister Michael Cullen has resisted calls to cut taxes in his budgets over the last eight years, despite New Zealand's longest period of economic expansion since World War II, preferring to spend surplus income on health, education and welfare.

   But he succumbed in what could be his last budget, announcing a package of tax cuts totalling 10.6 billion New Zealand dollars (about 8.3 billion US dollars) over the next three years.

   Lowest paid workers and families with children will benefit most, with the bottom rate of tax falling from 15 per cent to 12.5 per cent, but higher income earners will be allowed to keep more before they have to pay the top rate of 39 per cent.

   The elderly will also benefit from higher pensions, free travel on public transport in off-peak hours and increased subsidies for hearing aids.

   Noting global economic trends and rising food and petrol prices and higher mortgage repayments due to the international credit crunch, Cullen said, 'The government's strong fiscal management means we can deliver timely tax relief for workers who are struggling to make ends meet.'

   Labour has led minority coalition governments since 1999, but opinion polls show it is facing a landslide defeat at the hands of the conservative opposition National Party in the election which must be held by mid-November.

   The opposition has persistently attacked Cullen over the years for his refusal to cut taxes, but he insisted on running what he called fiscally responsible policies in the interests of the majority of workers.

   The budget predicted that the current economic downturn would see growth bottom out at at 1.5 per cent in the year to next March before rising to 2.3 per cent in 2010 and 3.2 per cent the following year.

   Prime Minister Helen Clark said, 'The government's previous eight budgets have been marked by careful stewardship of the economy. Now when faced by global economic uncertainty, the strength of the New Zealand economy enables us to prioritise the needs of Kiwi families young and old, and continue to invest in our common future.'

   She said the budget enhanced public investment in education, health care, social agencies and other important services.