Tax cuts strengthen economy, promote fairness

The first phase of the government's personal tax cut package will deliver tax cuts of between $12 and $28 a week for full-time workers, delivering some relief for households hurt by skyrocketing global commodity prices this year, says Finance Minister Michael Cullen.

"The Labour-led government's three year tax cut programme, which starts to take effect from today, was designed to both strengthen the economy while promoting fairness in society," Dr Cullen said.

"The three phase tax cut package is locked into place by law which means that people have certainty not only for the tax cuts that take effect from today, but also for the tax cuts that by law take effect from April 2010 and then from April 2011," Dr Cullen said.

The package, at full implementation, will cut personal taxes by roughly one quarter at the current full-time minimum wage, by one sixth at the current level of the full-time average wage and by about one eighth at $80,000 a year.

"I am confident that the Government of the United States will soon reach an agreement to restore more confidence in global credit markets. It is vital to the world economy, and to New Zealand's economic outlook, that that confidence be restored.

"We have come through a challenging first half of the year and New Zealand is back into positive growth starting in this December Quarter. The government's $10.6 billion personal tax cut programme will counterbalance some of the dark clouds affecting overseas markets," he said.

"New Zealanders can be proud that we have come through a mild recession with our unemployment rate still very low compared with most other developed countries and with the financial accounts of the Government very strong compared with many other countries, although weaker than they were earlier in the year," Dr Cullen said.

The personal tax cut package comes on top of the $4.6 billion worth of tax relief the government has introduced since 2004, including Working for Families, KiwiSaver and business tax reform.