The Economy Hub: Proposed $3b tax cuts 'threatens' budget - economist

Finance Minister Bill English. Photo / Mark Mitchell.

John Key's promise of $3 billion in tax cuts some time in the next few years threatens to make next week's budget "obsolete", Westpac chief economist Dominick Stephens warns.

Finance Minister Bill English is expected to take a conservative approach to the Government finances with an eye on paying down debt and heading back to surplus when he delivers the Budget next Thursday.

But if there are no tax cuts announced "but the plan is to deliver them further down the track then the fiscal accounts laid out next week are not actually relevant," Stephens says.

He argues the capacity of the Government to deliver both tax cuts and pay down debt this decade is limited and possibly based on overly optimistic Treasury forecasts

"Treasury hasn't really taken seriously the downturn associated with the unwind of the Canterbury rebuild." he says.

Auckland Chamber of Commerce chief executive Michael Barnett says business isn't expecting huge things from the Budget next week.

There would be a focus on surplus and debt reduction from English, he said.

"It's Bill's style and business would say he has been a prudent minder of the books," he said.

But there was a risk, with the cost of borrowing at record lows, that we may be missing out on the opportunity to build new infrastructure or cut taxes

"If you were in business you'd be taking advantage of that, you'd probably be taking a bit more risk," he says. "I don't think we'll get it from Bill."

Stephens agrees, saying it was a good time for the Government to invest in infrastructure given the low cost of borrowing and construction capacity increasing as the Christchurch rebuild winds down.

Barnett says he would also like to see the Government delivering some strong initiatives for regional growth.

"I don't think we're doing as well there as we should," he says.