$9 billion of tax reduction

National looks set to deliver significant tax relief on Monday, confirming today that the tax cuts over three years will total over $9 billion. The annual reduction from 2008/09 on will be about $3.9 billion.

The forecasts the package was done on, do not include the extra $2.2 billion of revenue revealed in PREFU yesterday.

The reduction in tax will still lead to a healthy OBERAC surplus of 2% of GDP (around $3 billion). And that is after allowing for an extra $1.5 billion a year of new spending.

A small portion of capital expenditure will be funded by debt (as is absolutely normal commercial practice) but the increase in gross debt is less than the $1.7 decrease in net worth if Labour’s student loan bribe was implemented.

The ‘alternative budget’ looks like a very mainstream approach to fiscal management – a 2% of GDP surplus, $1.5 billion a year of new spending and then a reduction in surplus revenue above that level.

Of course people will be keen to see the details of how much particular rates are adjusted by, and how much certain thresholds move. Only three days to go.

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