The Government is relying on the rebuilding of Christchurch, reasonable growth in Australia and China, and decent export prices to deliver the economic growth that will get its books back in the black, maybe by 2014/15, but more likely the year after.
The Treasury has, yet again, revised down its forecasts for economic growth in the near term.
It has lowered its pick for growth in the year to March 2013 to 2.6 per cent from 2.7 per cent in February's Budget Policy Statement in February, and for the following year to 3.4 per cent from 3.8 per cent.
It is now close to the consensus among economic forecasters.
Finance Minister Bill English said the rebuilding of Christchurch would contribute about 1 percentage point to the growth rate every year for the next four years.
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The forecasts also assumed "reasonable" growth rates in China and Australia, New Zealand's two largest trading partners, he said.
And while export commodity prices had come off their recent highs, the terms of trade was expected to remain above its historical trend.
The offsetting headwinds are an expected continuation of households' newfound providence, with the savings rate remaining positive, and fiscal consolidation by the Government as it gradually withdraws the stimulus put in place after the global financial crisis.
Fiscal policy will be contractionary for the next four years, subtracting 2 per cent from GDP in the 2013/14 year alone, as the deficit shrinks from 4 per cent of gross domestic product this year to a surplus of 0.1 per cent in three years' time.
That surplus, $200 million, is deep within the margin of error for such calculations.
"This is certainly a wafer-thin surplus that could be eroded by minor changes to revenue forecasts, but the Government has reserved some ammunition by maintaining its new spending allowances of $800 million per annum in next year's Budget and $1.2 billion in the following ones," ASB chief economist Nick Tuffley said.
The current forecasts hold out no prospect of resuming contributions to the New Zealand Superannuation Fund.
Superannuation costs are expected to have risen by $3.5 billion by 2015/16 from their level five years earlier.
"The incremental changes made in the latest Budget will do nothing to prevent the risk that an ageing population presents for the New Zealand economy," Infometrics economist Matt Nolan said.
Net government debt is forecast to climb to a peak of $70 billion in three years' time - seven times its level in 2008 - before the curve starts bending down. But it stays in what by international standards is the virtuous zone, less than 30 per cent of GDP.
New Zealand's net foreign liabilities, by contrast, are expected to climb from 72 per cent of GDP now to 81 per cent by 2016 as investment, including the Canterbury rebuild, outstrips national saving.
Standard & Poor's reaffirmed the Government's credit rating reflecting, it said, "our current expectation that the Government will continue to consolidate public finances against the risks associated with the country's high private-sector external debt".
The strength of the Government's finances, and the sound credit profile of New Zealand's major banks, which account for the majority of the external debt, were important mitigating factors to the risks posed by the country's high external debt, it said.
The Budget forecasts assume Europe muddles through its ongoing challenges, but the Treasury also sketches an alternative scenario in which it does not, threatening world trade and the offshore funding markets on which New Zealand banks rely.
"If there was a very major event we would consider allowing the surplus target to slip," English said, "and there is a bit of a buffer in the allowance for new spending [in future Budgets]."
The Reserve Bank and the trading banks had been working on improving their resilience to a closedown of debt markets, and were in "reasonable shape" on that front.By Brian Fallow Email Brian