Despite the prospect of a decade of deficits, the Budget's forecast that debt will stabilise by the middle of the next decade and then bend down has been enough to avert the risk of a credit rating downgrade.
"The Budget directly targeted the rating agencies and from that point of
view it is mission accomplished," BNZ head of research Stephen Toplis said.
"It was never going to be spectacular. All that could ever be hoped for was that it would be conservative and appealing to the rating agencies and investors. It fits that bill."
It also confirmed that while the economy might be under substantial pressure, and the Crown accounts too, New Zealand's relative position looked extremely positive by international standards, Toplis said.
ANZ National Bank economist Khoon Goh said that going forward the biggest challenge would be living within the allocation of only $1.1 billion a year for new spending - compared with $1.75 billion in previous Budgets. "It will be a very tough ask."
Moody's, which reaffirmed its Aaa rating, said a key consideration after the recession would be whether the debt trajectory looked likely to be maintained at or below the levels now projected. "A return to higher economic growth after the recession would be supportive of the rating, but this remains problematic given New Zealand's small scale and relative lack of diversity compared to larger economies."
