Budget 2006: Expert analysis

The Herald's political and finance writers give their instant reaction to the Budget:

John Armstrong, Political Corespondent

This may not have been Michael Cullen's last Budget. But it may go down in history as Cullen's last stand. The Budget will not stem the tide for tax cuts. If anything it makes the case for them even stronger.

However, like General Custer, the Finance Minister fights on. There will be no surrender. Unfortunately for him, he has been shot down by his own cavalry in the form of Inland Revenue's far more optimistic forecasts of the size of the Government's tax grab in coming years.

Suddenly the cash deficits on which Dr Cullen rests his case gets a whole lot smaller or disappears altogether.

As for the big injection into road construction, Dr Cullen would have been slaughtered politically if he hadn't. Otherwise the Budget is predictable, solid Labour stuff.

Brian Fallow, Economics Editor

The Treasury is forecasting a soft landing for the economy, with growth slowing to 1 per cent in the year to next March. But they are more optimistic than most forecasters about the speed of the rebound from there, citing the effect the lower dollar and buoyant world economy on the export sector, while lower interest rates boost the internal economy.

Over the past six years, the New Zealand economy has grown faster than Australia, the US or the OECD average, Finance Minister Michael Cullen said.

It now faced a normal cyclical slowdown but thanks to his prudent management of the public finances the Government could manage its way through the downturn "without evasive action".

Colin James, Political Commentator

An on-theme Budget with lashings of "economic transformation" and "family" and some "national identity" - special mention for Maori after being ignored last year - and "investment" sprinkled liberally through the speech.

No tax cuts and little room for any before 2008, so lots of attack room for National, but Michael Cullen' has covered off his exposed flank on roads, boosted skills, and eased the foot off the health accelerator.

After sucking out money into enormous surpluses, he switches from Scrooge to Santa to shovel money back in as we go through a dull patch.

Fran O'Sullivan, Political Commentator

The "shallow secret" Michael Cullen boasted he had hidden in his 7th Budget is now revealed. There are no tax cuts! And there's now no guarantee either that the minimal movement in tax thresholds he promised this time last year will be implemented while Cullen is still Finance Minister. Funds have been shuffled to boost roading. Telecom has had its wings clipped and Cullen's made good on Labour's election bribes.

From a business perspective if the Budget is the Government's plan, it deals to some long-term strategic issues but fails at the tactical level by failing to implement tax cuts now that will boost New Zealand's international competitiveness at a time when it really matters.

Audrey Young, Political Editor

A Budget that gives a big bang on transport for very few bucks. Much of the $1.3 billion investment in transport infrastructure comes from an asset sale (Meridian) and private up-take of infrastructure bonds.

But credit must go to Cullen for planting the accelerator on roading projects, advancing them from 10 years to five. Cullen continues his obsessive resistance to personal tax cuts. If IRD's more optimistic revenue forecasts prove correct ($1.4 billion more than Treasury in 07-08), someone other than Cullen will have to implement them.