Michael Cullen the lone happy homeowner

"The Reserve Bank's announcement that interest rates will remain higher for longer will make Michael Cullen the only happy home owner in New Zealand. He's been looking for an excuse to back off his latest promise of significant tax cuts and today he'll argue he got it," says National's Finance spokesman, Bill English.

"The Reserve Bank warned that tax cuts larger than those factored into its forecasts 'would add further impetus to the growth and inflation outlook'.

"Michael Cullen has stated he won't deliver cuts if they add to inflationary pressures or result in cuts to government spending. Yet, he has also suggested his tax cuts may be larger than the $1.5 billion the Reserve Bank has ear-tagged for tax cuts.

"The Monetary Policy Statement warns that, on top of mortgage rates at 10-year highs, rising rents, and spiralling food prices, households will have to deal with higher prices for petrol, electricity and other goods and services as the impact of Labour's emissions trading scheme works its way through the economy.

"These factors together cast doubt on Labour's ability to meet Dr Cullen's so-called four tests for tax cuts.

"Given the emphasis Dr Cullen has placed on meeting his four quickly thought-up tests, he should explain."