Most of the prescription offered by the 2025 task force for catching up with Australia is "too radical" for the government to pick up, says Finance Minister Bill English.

Dr Don Brash's medicine for the New Zealand economy includes slashing government spending by $9 billion a year.



In his just-released report on how New Zealand's average incomes can catch Australia's by 2025, Brash has outlined a radical plan that would see social spending slashed in order to cut tax rates to just 20 percent.



The report proposes either a flat tax rate of 20 percent or 25 percent for wage and salary earners and 12.5 percent for profits, interest and dividends.



It says anyone earning more than $14,000 a year would pay less tax and that would lead to "a surge of enterprise, excitment about the future, and stronger economic growth".



But to pay for the tax cuts and to stimulate the economy, Brash's report proposes cutting government spending to 2005 levels of 29 percent of GDP within three years.



That would see some $9 billion cut from core government operating spending. Proposals for achieving this include:

* "Ambitious" welfare reform including cutting beneficiary numbers, raising age of super eligibility, fewer universal subsidies

* Scrapping Kiwisaver subsidies and axing the Cullen super fund and using the cash to repay debt

* End cheap doctors' visits and scrap prescription subsidies for middle class

* Cut funding for early childhood education

* Scrap interest-free student loans

* Abolish youth minimum wage and cut adult minimum wage

Brash's report also recommends changing labour laws to make it eaiser to sack workers, extend probationary period for new workers from 90 days to a year, and making high income earners subject to contract law rather than employment law.



At the press conference Brash said that unless tax rates and government spending were cut, the Government's goal of catching Australia "cannot be achieved".



He said if the Government ignored the recommendations "there may be some other cunning plan but I'm not aware of it".



Brash denied he was suggesting slashing spending, saying a $9 billion cut was only taking spending back to 2005 levels.



"Some are saying this is Roger Douglas. It's actually more Michael Cullen."



He urged the Government and the public to consider the recommendations rather than dismissing them as too radical.



"It would be a great shame if, instead of a period of conversation and reflection on the whole report and the issues it raises, particular interests launched instead into immediate commendation or condemnation of specific line items."

Prime Minister John Key said during the 1980s and 1990s New Zealand underwent radical economic reform while Australia took a more incremental approach. The trans-Tasman neighbour was now in much better shape.



"In that regard I am not convinced that absolutely radical big bang reform is the right way to go," Mr Key said.



"It would certainly have a dramatic effect on New Zealanders and in the short term it would feel very much like we were pulling the rug out from underneath them."



Mr Key said the Government would also keep its promises.



"We campaigned on some core commitments, like not raising the age of super or putting the interest back on student loans, and we would be breaking those commitments if we went and did that so we are not going to."



The taskforce was set up as part of a support agreement with the ACT Party which has a key policy plank of a flat tax and takes its name from the year that New Zealand aimed to catch up with Australia.

Mr English said the government would "pick it's way" through the report to see what recommendations it could implement. But it already had a significant programme underway to boost the economy and the report made recommendations that the government "certainly won't accept". That would require it to break election promises and it was not going to do that.

"The report is too radical for the government to pick up and just push it through."

He did not accept Dr Brash's insistence, meanwhile, that New Zealand could not catch Australia economically without implementing the proposals.

"There's always more than one way of achieving economic growth."

Dr Brash said cutting back government spending levels to those of five years ago would fund the supposed tax cut programme.



Labour leader Phil Goff questioned the motivation behind the taskforce.



"It makes you wonder why you would set up a committee led by Don Brash who has come up with an entirely predictable and discredited agenda," Mr Goff said.



"Why would you do that other than maybe to frighten the hell out of people, put up a straw man and then say 'look we're only going to go part way toward that agenda' and everybody breaths a sigh of relief because the slashing that occurs isn't quite as extreme as the Brash proposal."

- with TRACY WATKINS, and NZPA