Claims of a budget for the rich dismissed by Nats

On the eve of the budget the National Party's leadership has continued defending accusations its proposed tax package is for high earners, saying everyone will benefit but that investing in higher earners will help improve the economy.

Tax changes and an expected rise in GST will be a focus of the budget and while the Government admits high earners will get more cash in the hand, it says no-one will be worse off and those in line to get more will be taxed more in other areas, such as property ownership.

Affirming an intention to steer people away from a tendency to invest heavily in property, Finance Minister Bill English said today; "By and large, higher income New Zealanders will be paying higher effective tax rates on property". He didn't give further detail.

In Parliament today, Prime Minister John Key responded to a question by Labour leader Phil Goff about why he had said New Zealanders should not be envious of the rich getting more from the budget tax package, and what that meant to middle income earners.

"What I actually said on Monday was that people paying the top personal rate included skilled professionals like doctors, engineers, scientists, and the like who fit into some core and critical categories in the economy," Mr Key said. "Those people are in demand all around the world and we need to have their careers here, and for them to be put to work in New Zealand."

Mr Key said he was not referring to "rich" people, because those people generally did not pay the top personal rate. He indicated the tax system would be tightened to clamp down on high income earners who arrange their affairs to avoid paying tax.

"Really wealthy people will probably find that they are paying considerably more tax as a result of the budget tomorrow, not less."

Mr English said it was not fair that high salary earners like doctors, scientists and engineers were often paying more tax than wealthy property speculators and the budget would address that.

Mr Goff said if tax changes were going to be revenue-neutral as claimed, that meant middle and lower income earners struggling to meet rising costs would get less.

Mr Key said that was not the case.

"The good news for them tomorrow is that they will be getting more. The interesting thing is that someone earning $60,000 a year, with no children, who waited 10 years under a Labour government to get absolutely not a cracker, will be getting more in the budget tomorrow than he or she might expect."

Mr Goff also queried GST increases, saying banks had forecast inflation would rise 5 percent or more as a result over the next year, while average wages were forecast to go up 3 percent or less.

"...if there is to be an increase in GST, then the Reserve Bank looks through that and the economic implications in terms of inflation from that will not have a bearing on interest rates", Mr Key said.

He also down-played any suggestions that increases in property tax would simply be passed on to the 30 percent of New Zealanders who rented their homes.

"I can say that the budget will spell out clearly tomorrow what Treasury’s advice was on that matter. I can advise the member that the effect is negligible."

Mr English and Mr Key have talked about health and education getting the lion's share of budget money, and Mr Key said today the health sector was in line to get "the highest amount ever spent in this country", and the aged care sector would get a big chunk of the spend.