Prime Minister John Key says the Australian housing market is overcooked, and has again pointed to the idea Australia has a two speed economy as its mining sector outperforms other sectors.

Asked if the Australian budget released last week made him wish he lived across the Tasman, Key replied, "not in the slightest," on TVNZ's Breakfast this morning.

Key's government is set to release its third budget this Thursday.

The Australian economy had its fair set of challenges, Key said.

"If you actually have a look, their mining industry is very strong. But once you strip that away, then what you see is retail consumption's actually quite weak. Their housing market's a bit overcooked," he said.

The Australian government's budget deficit was also "quite large this year," Key said.