The government has bet the economy will come right and it doesn't need to significantly cut government spending to get its borrowing under control.
That all makes sense if you believe in GDP growth rates of 1.8 per cent, 4.0 per cent and 3.0 per cent over the next three years.
The trouble is the Treasury has overestimated GDP growth rates since 2008 by around 2-3 percentage points of GDP as households and businesses elected to repay debt.
The government is essentially betting that households and businesses will start borrowing again and stop repaying so much debt.
That's an heroic assumption given household debt to disposable income ratios are still well above anything normal and the sort of growth implied by Treasury's forecasts will be accompanied by floating mortgage rates of close to 8 per cent.
The government has not understood that this time it is different, as Kenneth Rogoff and Carmen Reinhart wrote in their analysis of economic growth and debt levels after the financial crises of the last century. Economic growth is significantly slower for up to a decade after a crisis, particularly when a nation is labouring under heavy debt, as New Zealand is.
All this does is delay the inevitable black budget, forced either by a surge in interest rates or by a knock on the door from New Zealand's real creditors - the Australian banks and the Australian government.
John "Smile and Wave" Key has delivered a "Tweak and Fiddle" budget that will get him re-elected on November 26.
But it hasn't solved the underlying structural deficit in New Zealand's government and its economy.
That will have to be dealt with in 2012 or 2013 when the growth doesn't arrive and both the deficit and the foreign borrowing start rising again.
By then we will be in the same boat as the Portuguese, the Greeks and the Irish. It's a boat steered by the bond market vigilantes and their agents, the credit ratings agencies and the sovereign wealth funds behind them.
Guess who is thought to be the biggest buyer of New Zealand debt right now?
The Chinese government.By Bernard Hickey