KEY POINTS:
Taxpayers and senior citizens are set to get more money in their pockets just weeks before this year's election, with Labour also dangling the prospect of further tax cuts as an incentive to voters to keep it in power.
Finance Minister Michael Cullen's long-awaited tax-cuts programme will give all workers between $11.92 and $28.08 a week from October 1.
That figure will rise to between $21.73 and $55.19 in 2011 if Labour gets voted back in.
Superannuitants also feel flow-on benefits with an increase of at least $20 in their fortnightly payments from October 1 this year.
But politically, the real hit of the Budget's broad package to put money back into people's pockets could be Dr Cullen's move to also raise Working for Families payments further from October 1.
It means families with children can get close to $50 a week extra in certain circumstances - a move that potentially makes it harder for National to win over those voters later in the year.
In order to deliver the tax cut package, Dr Cullen is sending the Government's books into a hefty cash deficit of $3.5 billion, which he admitted was the limit of his "comfort zone".
That deficit will be met by reducing other financial assets and by borrowing - but Dr Cullen rejects any assertion he is borrowing to fund tax cuts.
"We will be borrowing for capital investment over that period," the Finance Minister said.
PERSONAL TAX CUTS
Labour is delivering a three-year tax-cut programme that will be worth $10.6 billion by the time it is fully in place in 2011.
Every taxpayer benefits from the cuts, which feature a drop in the lowest tax rate as well as adjustments to the thresholds at which the middle and higher tax rates kick in.
As a proportion of income, the tax cuts will benefit lower-income people the most. But in pure dollar terms, higher-income people get the most in their pockets.
That is because Dr Cullen has moved to neutralise criticism of the 39c personal tax rate that Labour introduced when it came to power eight years ago, by pledging to raise its threshold to $70,000 on October 1 and eventually to $80,000 in 2011.
Dr Cullen said the tax cuts were "fair" and would help people meet the pressures of international food and oil prices, while probably not triggering a further round of interest rate rises.
National leader John Key said the cuts were "far too little, far too late", but his party last night voted for legislation implementing them.
WORKING FOR FAMILIES
Most people with children will get an extra boost from the Budget in addition to the tax cuts Dr Cullen has announced.
Labour has decided to bring forward an increase in Working for Families tax-credit payments to October 1 in order to further lift family incomes at a time when many households are under pressure.
The increase comes because the tax credits and the income thresholds at which they kick in are going to be adjusted to take account of inflation since April 1, 2007.
The change was always going to happen at some point, because the legislation that brought in Working for Families demanded that once consumers price index inflation reached 5 per cent after April 1, 2007, adjustments had to happen.
Labour would not have had to make those adjustments under the law until April 1, 2009 - but it has moved to bring them in sooner to give families more money this year instead.
The overall changes are expected to be worth $1.1 billion over four years, and the cost of bringing them forward by six months is $99 million.
The inflation adjustment that is taking place is a 5.22 per cent increase.
For a two-earner family earning $45,000 and $20,000, with two children under 13, an extra $42.76 will flow into their pockets from both tax cuts and Working for Families changes.
SUPERANNUITANTS
Pensioners are also winners from the Budget, because their payments are linked to the average take-home wage, which naturally increases when taxes are cut.
From October 1 this year, superannuitants will get between $20.74 and $23.84 extra a fortnight from the Budget changes.
Payments will increase again from April 1, 2009, because of the regular annual adjustment - though the size of this is not clear yet because it will be determined early next year once actual inflation and wage figures for the year are known.
Forecasts suggest the April 1, 2009, increase might be $14.72 a fortnight each for a married couple, and for single superannuitants who live alone, $25.12 a fortnight.
But the Government is stressing these figures are forecasts only, and the actual figures could be quite different.
Labour and New Zealand First are trumpeting the increase, but National's deputy leader, Bill English, last night said it was happening only because it had to, and the Government had been forced to make the rise.
