Election year kicks off with policy announcements

Prime Minister John Key and Labour leader Phil Goff outlined their policies in speeches this week starting this election year offering the public marked differences to choose from.

Mr Key yesterday announced plans to partially sell-off some state assets, including power companies, to free up as much as $10 billion. Also the budget's new spending allowance would be cut from $1.1b to about $800 million.

The day before Mr Goff said a Labour government would make the first $5000 of income tax-free, cracking down on tax avoidance and raising the top rate to a figure still to be decided.

The National government has promised no asset sales in its first term and the issue is sensitive after unpopular sell-offs in the 1980s and 1990s. Mr Key said decisions would not be made until advice was provided but he wanted the public to know the direction.

"We will be going into the 2011 campaign campaigning to have a mixed ownership and allow New Zealand mums and dads to but up to 49 percent potentially of (Mighty River Power, Meridian, Genesis and Solid Energy) and potentially reducing the stake we have in Air New Zealand."

The argument was that the partial sales would help fund a forecasted $33b of new assets over the next five years, meaning the Government would not have to borrow more and pay more interest.

Mr Goff said the plans were a recipe for disaster and foreigners would end up owning the assets.

"It doesn't have an economic plan so it's simply rehashing the failed policies of the past."

Mr Goff said low and middle income earners were ignored in Mr Key's tax cuts, and would face cuts to health and education and increased power bills.

Mr Key disagreed that costs would go up and said the companies would be better run with more private ownership.

Asked what areas could face further cuts Mr Key said the majority of new spending would go to health and education but further reprioritisation within budgets was likely.

Meanwhile, Labour's $5000 tax-free zone was estimated to cost about $1.3b a year in lost revenue. Mr Goff said that would be funded by cracking down on tax avoidance and closing loop holes as well as a higher top tax rate.

Mr Key said the Labour policy was unrealistic and combined with other promises a fantasy.

"I wish it worked like that."

He said the savings expected from changing tax rules would not be as great as Mr Goff expected as people would restructure their finances to continue avoiding paying.

The voters would decide what was feasible, he said.

"There's a big difference (between Labour and National policies) but in the end I want to campaign on what I believe in and that is running the country properly.

"And if that costs us the election it costs us the election. I would much rather be up-front with kiwis and say 'this is what we can afford and this is how we are going to do it'."

But, Mr Goff says it is Mr Key that is being less than honest.

"Labour ran budget surpluses and reduced net government debt to zero. In comparison, National has mismanaged the economy and is now crying poor in an attempt to convince New Zealanders it has to sell off valuable assets and make brutal spending cuts.

"John Key told the country we'd come aggressively out of the economic recession. We haven't. Unemployment is up and wages are stalled. He said he wouldn't increase GST. He did. He said he wouldn't sell off state assets. He now says he will. This is a man who can't be trusted."