While today's budget is the most positive change in direction for a decade, it is still fumbling in its approach to stimulating long term growth, says the New Zealand Institute of Economic Research (NZIER).
And it ignored the elephant in the room of an aging population, said chief executive Jean-Pierre de Raad.
"We're slowly turning the Government spending supertanker, but we've missed the boat on dealing with tough looming policy issues, such as the affordability of superannuation and healthcare," he said.
NZIER has provided independent economic analysis for the past 50 years, and takes a long term view of economic performance.
"The tax package sets the right course by rewarding work and enterprise instead of spending, borrowing, and tax dodging," Mr de Raad said.
It showed a firm resolve to constrain the growth in government spending below the growth of the economy. This would help redirect resources to the most productive, competition-exposed sectors of the economy.
But ultimately it is not a game-changing budget, he said.
"The tax-reform package will not set us on a new growth path: the Treasury forecasts the package will only add 0.9 percent to GDP over seven years. That is not going to be enough to catch up with Australia."
Mr de Raad welcomed the drop in the company tax rate, but said it only got New Zealand level with Australia.
"Changes in depreciation offset any benefit. It does not help overcome other disadvantages New Zealand faces, or set us apart as a great place to invest and do business," he said.
"The switch is positive and was needed, but needs to be built on."
