Bill English has achieved two remarkable political feats this week. The first was to loosen the handcuffs with John Key by giving the clear impression that he is finding being Prime Minister while the boss is overseas "well, easy".

He has in fact directly suggested this in a light-hearted manner when he has held the reins before while Key has been out of the country on official business.

In theory, English is Acting Prime Minister in these circumstances. But in reality, Key is still the PM when it comes to dealing with the daily demands of journalists. And both the Acting Prime Minister and the one who was off leading a Middle East trade mission were subjected to yet another round of pesky questions about Key's ponytail-pulling episode.

If English had been of a mischievous bent he could have inflicted some political damage on "the boss". But he dead-panned: It was inappropriate. Key had apologised. (Helen Clark would have added: "Move on".)


Luckily, they sang in relative unison. There was just the slightest twinkle of amusement at the real Prime Minister's discomfort. And the tantalising (good word this) hint that English might just enjoy a real go at the top job if Key did manage to throw himself under a political bus as the result of an episode of horseplay turning into total horse dung.

That's in the realm of speculation.

What isn't are the reports that Bill English is still promising future tax cuts on the very day he confirmed his projected Budget surplus has turned into a mirage. The ability to promise that - his second feat of the week - will be of the highest order if the reports turn out to be correct.

English is a no-nonsense and well-grounded politician. He has built a strong reputation for prudent fiscal management since he became Finance Minister as the global financial crisis was still roiling the New Zealand economy. That reputation is the envy of his counterpart in Australia, Joe Hockey, who has struggled to get political support for his own fiscal repair plan.

But yesterday's reports should not be taken at face value.

What English did say in his pre-Budget speech was carefully defined: "We remain committed to further reductions in income tax rates or thresholds, when fiscal and economic conditions permit."

The prudent English wasn't going to "bet the bank" on promising tax cuts at the 2017 election to get sufficient voters to put National back in power. What the speech did indicate is the Finance Minister's preference that tax cuts should not occur until Budget surpluses are being posted on a sustainable basis.

But others - possibly most - will not read it that way.


His very mention of tax cuts will continue to stoke expectations that they will be part of National's 2017 arsenal of election pledges.

How refreshing it would have been if English had simply said the projected fiscal track now rules tax cuts out of the picture. Which it does. Unless (of course) such largesse - even if only for low-middle income earners - is delivered via a fiscally neutral tax switch. Dream on.

English has blamed the lack of fiscal creep for the deterioration in the Budget outlook. Tax flows are down because the low inflation and low interest environment has reduced the revenue to the Government's coffers - even though there has been strong economic growth.

"Although we're seeing more bank deposits which would ordinarily lead us to collect more tax, these are being more than offset by lower interest rates," he says. "Consequently the Government is collecting less tax."

The Finance Minister stressed he would not be pursuing cuts in services or income support in a "knee-jerk response to lower tax revenue".

But irrespective he is up against the wire.


Market players suggest this environment could persist for a considerable time. New Zealand's interest rates are still high by global standards and the inflationary track is downwards.

Australia has again reverted to being New Zealand's top trading partner as the shine comes off dairy which is New Zealand's major export category to China; although tourism continues to be a good money-spinner.

The question is whether getting back to surplus is a reasonable objective in the absence of adjustments at either the spending or revenue levels. Particularly as Treasury is forecasting tax revenue will be $4.5 billion lower over the next four years than was expected a year ago.

This debate will inevitably intensify. Neither English nor Key wants to squander any of National's precious political capital.

Key's instincts will be to stoke the flames of political promise. English's to dampen them.