Prime Minister Helen Clark is fending off suggestions that her Budget tax cut package could delay interest rate cuts and be eaten up by high mortgage costs.
The Government began the hard-sell of its election-year Budget across the country yesterday, and both Helen Clark and Finance Minister MichaelCullen were quizzed at business lunches about whether the early start date of their tax cuts might keep interest rates high for longer by putting pressure on inflation.
Helen Clark acknowledged that the October 1 date that the first tax cuts kick in was earlier than the Reserve Bank factored into its thinking, but said she still did not think there would be a "significant" impact on interest rates.
"We've gone a little earlier than he [Governor Alan Bollard] factored in, but then of course the economy has probably slowed and other indicators have shown slowing trends at a faster rate than he would have anticipated," the Prime Minister said.
"So I think it balances out."
Asked if her use of the word "significant" implied there was likely to be a smaller effect on interest rates, Helen Clark said: "We just don't think there will be any significant effect. I think generally the markets will look through what happened yesterday and see that it's not exacerbating inflation."
Tax cuts were the centrepiece of Thursday's Budget, which Labour feels has given it a chance in the election race.
Ministers appear pleased so far at the way the Budget is being received, and Helen Clark said she thought people had been pleasantly surprised by the size of the $10.6 billion tax cut package.
Labour feels it has put National into an awkward position by leaving little room for John Key to offer bigger cuts. Now Helen Clark is looking to turn up the heat by openly challenging National to come up with some detailed policy - a challenge National is unlikely to take up any time soon.
"Our plan for the future is laid out in detail with full costings," the Prime Minister told a 200-strong Auckland Chamber of Commerce post-Budget lunch audience. "We are utterly transparent. It's now time for others to put their plans on the table."
