Today the Reserve Bank is likely to raise interest rates, in part because the Government broke its promise not to fund tax cuts for the wealthy from extra borrowing the country cannot afford.
Budget 2010 is a tax swindle, a lost opportunity and a massive broken promise to New Zealanders.
The tax changes reward the wealthiest but swindle the middle class by gobbling up their "tax switch" in the highest (5.9%) inflation in decades.
The changes are unfair: a third goes to the top 5% of earners and 15% goes to the top 1%.
Most Kiwis will be worse off. Their tax cuts will be wiped out by inflation before they even get to the checkout.
By the Government's own figures, an average wage earner will be $30 a week worse off after inflation and a person on $70,000 will be $45 a week worse off.
And that excludes known increases in charges such as ACC, student loan levies and early childhood fees.
With 5.9% inflation next year and based on Treasury's projected wage and inflation track, it takes average wage earners until 2014 to catch up to where they were before Budget day.
That's two elections away and no doubt there will be lots of service cuts before then.
The savage cuts to early childhood education add up to a potential $31 per child per week in affected ECE centres, and that's just the start.
New funding for health is way below previous years' levels and is several hundred million dollars short of keeping up with next year's inflation.
That will mean longer waiting lists and more frail elderly deprived of their home help. Tertiary education funding is flat-lining and restricted entry will become the norm.
The Government has asked state power companies to lift their financial performance. That means higher power bills for Kiwi households this winter (which the new Electricity Bill does nothing to prevent).
A local pensioner told me her super went up $3 a week on Budget day, but her power bill went up $5 the same week.
If you are renting, just wait for your landlord to pass on the cost of the tax changes to building depreciation.
Bill English was forced to admit in Parliament that the Government's online tax calculator leaves out the full inflation factor, even though it is in the Budget documents.
I call that downright misleading. Inflation can't be glibly dismissed as a "one-off spike": it is embedded into all future prices and erodes the housekeeping money before the groceries get bought.
The Government has also broken its promise to be "revenue-neutral" on the tax package.
It is borrowing an extra $450 million gross next year; $1.1 billion over four years; and $9.2 billion by 2023-24.
Dr Alan Bollard will have to raise interest rates, and we will all pay for that in our mortgages, rents and business-loan costs.
The additional "strategic deficit" is a big black hole that the Government will later tell you they need to cover by further savage service cuts, or flogging off what's left of the family silver.
John Key says he will "never, ever sell" Kiwibank, but Bill English says it could be gone in a second term: why can't they ever agree? All this has occurred without a credible plan for increasing jobs and incomes being put in place.
There is no plan to close the critical savings gap: instead the Government cut KiwiSaver incentives to 2% and have kicked pre-funding superannuation out into the never-never.
There is no plan to boost innovation, skills and technology.
Instead the crucial research and development tax cuts were axed, while Australia raised its R&D rebate to 140%. The so-called R&D package in this Budget is a pale 39% of the investment Labour made but National cut on taking office.
And there is no plan to close the current account deficit that even Treasury predicts will blow out from 3% to a disastrous 7%-8% of GDP. Funding for economic and regional development is cut. Small business policy is a vacuum.
There is no rethink on monetary policy. The Government is relying on "trickle-down" economics to create jobs and growth. It won't even allow Hillside Workshops to bid for the new Auckland locomotive contract - shame!
The results are desultory: less than 1% of additional economic growth over the next 7 years.
Job growth will be less than half the number created under the last Labour government, and Treasury says only 6% of that is attributable to Government policy changes.
Overall, the Budget fails tests of fairness and increasing jobs and incomes. Lower and middle-income earners are left behind while the top end reaps a windfall.
The old, the young, the sick and frail are more vulnerable.
The Government is borrowing to favour its mates, once again.
Budget 2010 is a tax swindle, a lost opportunity and another big broken promise.
- David Cunliffe is Labour's finance spokesman.
