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Key warns of pain in budget

Prime Minister John Key has dampened down expectations for Thursday's budget calling it "solid and sensible".The budget was "another plank in delivering National's economic growth agenda", he said."I don't think anyone's ever argu

Tue, 18 May 2010

Prime Minister John Key has dampened down expectations for Thursday's budget calling it "solid and sensible".

The budget was "another plank in delivering National's economic growth agenda", he said.

"I don't think anyone's ever argued that one individual budget or one individual measure can deliver all that we need to deliver a step-change in our economy but I do think that when you consider what's happening there's a lot of positive steps there."

Mr Key was not expecting the budget to make him overly popular.

"(Former finance minister) Michael Cullen once famously said you don't win support in budgets you tend to lose it, I guess we'll find out whether he's right or not come Thursday, Friday."

Expected tax reform has dominated pre-budget debate. Income tax rates were expected to drop, the biggest fall would be in the top rate. GST was also signalled to increase.

Mr Key said it was important to take the tax package "in totality" and take into consideration that the Government was trying to "drive faster economic growth".

It was also aimed at getting fairness into the system, he said.

The Government has been criticised for expected tax rate cuts and a rise in GST which would benefit New Zealanders on high incomes.

"Looking at what's in it for individuals but looking at what's in it for New Zealand is important," Mr Key said.

"By definition if you change tax rates those who earn more, because they pay a lot more tax, will get a bigger tax cut."

He has said New Zealand needed to offer incentive for those on high incomes to remain here.

He was coy on releasing further details.

"It's probably unhelpful if I dissect the package now, we're only a couple of days away from people seeing it... all will be apparent on Thursday come two o'clock."

Labour leader Phil Goff said high income earners should pay more tax because the had more money.

"I'm in the bracket and it's fair that I should pay more because I can afford to pay more."

Mr Goff said under expected tax cuts he would get $200-$300 a week extra.

"I think it's wrong that the chief executive that got a $1000 extra last year in salary increase, this year will get $700 a week net extra in tax cuts while a person on the average wage will get a miserable $5."

GST increases would disproportionately affect low income earners, he said.

"It's not a fair share."

Meanwhile, the Greens said the Government was rewarding tax avoidance by cutting taxes for those on higher incomes -- many of whom did not pay tax on all their income.

Mr Key said the Government would also address high income earners who were finding loopholes to avoid paying tax. But he would not divulge details before Thursday.

Other expected announcements included changes to the housing market which could force rents up and deliver first-home buyer opportunities.

Property Investors Federation vice-president Andrew King said ministers were convinced rental property deserved to be taxed higher than other businesses or investments.

"A false picture has been painted by greedy people with vested interests in order to further benefit their own incomes."

There was not an over investment in rental property in New Zealand and tenants would pay more rent to cover any tax increase, he said.

Mr Goff said something needed to be done in the property sector and to promote investment in productive sectors but increased costs to landlords would be passed down to renters, he said.

Tue, 18 May 2010
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Key warns of pain in budget