Tax cuts out of frame for 3 years

The Labour-led Government has ruled out "significant" tax cuts in the next three years in its blueprint issued at the state opening of Parliament yesterday.

The so-called speech from the throne by Governor-General Dame Silvia Cartwright - written by the Government - emphasised the aim to lift productivity by producing more per worker and reiterated the plan to review corporate taxation.

But it gave no hint that National's close shave with victory in the election on its campaign of substantial tax cuts had softened Labour's stance.

National's finance spokesman, John Key, scoffed at it, saying tax cuts would help to lift productivity.

The speech said consumption-driven growth had led inflationary pressure that had translated to tighter monetary policy.

"It certainly means that significant fiscal loosening - either by way of large expenditure increases above those already signalled or by way of significant tax cuts - cannot be considered."

The security of the New Zealand economy depended on the ability of its companies to be part of a high-productivity and high-wage economy, the speech said.

The relatively high growth rates of recent years had been achieved by more people working and people working more hours.

"The emphasis must now switch to producing more per worker."

The Government also aims to put a greater proportion of research investment into longer-term funding - a hint that fewer but proven groups will receive greater funding.

Mr Key said New Zealand taxpayers would be "devastated to know that the Government sees increasing spending on a range of issues as a greater priority than returning taxes to those who have earned it".

It was highly unlikely that Labour would make any substantial changes to taxes because of "deep ideological reasons".

"Despite overwhelming support for a reduction in taxes as we saw in the election, New Zealanders will have to wait for a National government to see tax cuts."

These would provide an immediate impact on productivity by giving an incentive for skilled New Zealanders to return home, and returning earnings to companies for further investment, Mr Key said.

There were virtually no surprises in the speech, though it said the Government would develop a "national energy strategy" with priority given to renewable energy resources.

And it foreshadowed a more "aggressive approach" to energy efficiency to reduce growth in demand.

However, when asked what the national energy strategy was, the new Energy Minister, David Parker, was not able to shed light on what such a plan might be.

He said in a statement: "Changing oil prices over the past year and the general acceptance that we have human-induced climate change mean that energy policy is increasingly important to New Zealand and around the world.

"The speech from the throne highlights that fact and recognises that the Government has an important leadership role to play in leading the development of the strategy.

"The Government is giving high priority to this issue because it affects every New Zealander and business."

The three-year plan

* Lift productivity.
* KiwiSaver Scheme.
* Review corporate taxation.
* Interest-free student loans.
* 5000 more apprentices.
* National energy strategy.
* Review Pharmac.
* Faster broadband uptake.
* Lift the minimum wage.
* Boost Working for Families.
* School-ready health check.
* Lift superannuation.
* 1000 more police.
* Review home detention.
* Set deadline of 2008 for historic Treaty claims.
* Address irrigation needs.
* 'Buy Kiwi-made' programme.
* Energy efficiency programme.