Economic reform Key's aim in 2010

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The prime minister will open Parliament tomorrow pledging a period of major economic reform – which he is promising will deliver Kiwis more jobs and better living standards.

John Key is putting the finishing touches to one of the most important speeches of his political career – his blueprint for action on the economy this year.

Mr Key eschewed a "state of the nation" speech early this year in favour of delivering a major speech at the opening of Parliament, and said yesterday he was planning to give a detailed outlay of the year ahead.

He would use Parliament's opening to confirm a major package of economic reform, beginning with tax changes in this year's Budget.

While he declined to offer specifics, Mr Key said he was "comfortable" with claims by Reserve Bank governor Alan Bollard yesterday that the Government needed to make changes to the top personal income tax rate to bring New Zealand back into line with other Organisation for Economic Co-operation and Development countries.

Mr Key said the details of any changes would not be revealed before the Budget in May, but his speech would spell out the Government's overall economic programme for the year.

"It will clearly show our focus for 2010 is the economy and how to grow it, and we've got a comprehensive set of policies to do that."

Major reform of the economy was not possible last year because of the recession.

"The economy was much more fragile last year, but there has been a mood shift, which has put more robustness around it and that will allow us to make changes without it having a negative impact."

Mr Key said he was not planning a speech full of "platitudes" or one that attacked his political opponents.

"You won't come away confused about what our plans are. We're going for a speech that lays out where we're going this year."

Doing nothing was not an option.

"We were elected under a clear mandate to deliver a step-change in the economy and we intend to do that."

Mr Key is under pressure to stamp his mark on the economy this year, and yesterday Dr Bollard added to that pressure during unusually frank comments on TVNZ's political show Q&A.

In the interview, Dr Bollard said New Zealand's middle classes paid most of the tax, and this was unusual.

"I think we should be learning from other countries in all of this. We don't want to get too much out of line, partly because with mobility New Zealanders can just get up and leave," he said.

The economy remained "vulnerable" and was in a "fragile period of growth".

He argued for a "flatter playing field" for investors through the removal of tax advantages for property – another area the Government is under pressure to address this year.

Dr Bollard also dismissed National's goal of catching up with Australian incomes by 2025, saying New Zealand should instead focus on "crumbs off the Australian table".

But Mr Key said he was not about to abandon the target.

"Notwithstanding the comments from the Reserve Bank governor, we won't be deterred from our goal of catching Australia."