Finance Minister Michael Cullen today pledged at least three-years of tax cuts - but immediately followed the promise with a list of strict conditions.
Dr Cullen, who has been under intense pressure over tax cuts since his so-called "chewing gum budget" of 2005, has gradually hinted at the possibility of easing the burden on taxpayers in recent months.
National has pledged that it would cut taxes if it forms the Government after this year's election and has said they would be introduced over a number of years.
This afternoon, in a speech to the Auckland Chamber of Commerce, Dr Cullen said: "After delivering $4 billion in tax relief per annum from 1 April this year to families, business, and savers the ongoing strength of the economy and our surpluses means that we can now deliver personal tax cuts."
However, he said Labour would not borrow, cut services, increase inflation, or let tax cuts increase social inequalities.
Dr Cullen also referred to the wage differential between New Zealand and Australia which has been blamed for growing numbers of people crossing the tasman.
"Yes, we should aim to close the wage gap with Australia, but we should do more than talk about cutting taxes to help us get there. The government can only do so much - business must also pick up the challenge," Dr Cullen said.
He said KiwiSaver continues to be a success and even though the scheme had required investment from employers, the capital investment base will benefit everyone in the long run.
"Labour will deliver tax cuts because it is fair - money that we do not need to meet our obligations to New Zealanders should not be held indefinitely in crown accounts," Dr Cullen said.
He said a programme for the tax cut roll-out will be laid out for the next three years, with a further plan for the longer term.
Dr Cullen's other major announcement today centred on infrastructure. He said the Government would look into public, private partnerships.
He said a $2 billion project to complete Auckland's Western Ring Route could be completed by 2015.
Dr Cullen said the economy was strong but issues facing the US economy and rising global food and transport costs are increasing inflationary pressures world-wide.
"I will not downplay these uncertainties, even in an election year. Doing so would undermine the economic credibility that has been one of the linchpins of Labour's record of success in office," Dr Cullen said.
But he said since 1999, the New Zealand economy had strengthened with growth rates out-pacing the OECD average, household incomes up by 25 per cent and wages up in real terms by 15 per cent.
He said it had been the largest expansion of the economy since World War Two.