The Prime Minister has dismissed a gloomy Treasury report about the economy.
In its review of economic data released during November, the Treasury says households will continue to struggle as the GST rise pushes annual inflation up to 5% by the middle of next year.
The Treasury says restrained household spending has held back the economy, and it expects that to continue as prices rise and the housing market remains flat.
But John Key does not agree with the Treasury view.
Mr Key says no one is saying times aren't tough but tax cuts and increases in benefits have compensated households for the rise in GST.
He says he's also seen forecasts predicting the economy will grow by 3.5% next year.