New Zealand's path to a fiscal surplus over the next three years represents a "pretty moderate adjustment", Finance Minister Bill English says.

"This isn't austerity," he told ANZ's post-Budget breakfast yesterday. "It isn't dramatic. Dramatic is Australia's last Budget, the biggest fiscal contraction they have ever had and one of the biggest in the world."

The surplus was not the be-all and end-all, English said.

It just demonstrated credible management of what has been fast-rising Government debt.


"When you have got grumpy lenders they need to know they will get their money back, because the big issue now, unimaginable 10 years ago, is sovereign solvency," he said.

"You do not want to be one of those governments where they start worrying whether they will get their money back."

ANZ chief economist Cameron Bagrie likes the Government's fiscal trajectory.

"It looks credible, though we expect a year or so of slippage," he said.

"This largely stems from our economic projections which sit below Treasury's on average. We expect growth to average around 2.5 per cent [to the Treasury's 3 per cent]."

A delay of a year or so was not material as far as New Zealand's credit rating was concerned, Bagrie said, adding that Standard & Poor's and Moody's had both given the Budget the big tick.

"[But] the growth side of the equation looks a bit light, initiative-wise, with nothing really new."

Bank of New Zealand head of research Stephen Toplis said the state of Government accounts was great by international standards.

"Barring international disaster, a surplus of some sort looms within the forecast horizon and debt looks as if it can be contained," he said.

The Treasury's forecasts have growth, which was just 1.1 per cent over the past year, accelerating to 2.6 per cent over the year ahead and 3.4 per cent the year after.

"We are a little concerned that Treasury's view of the world is too optimistic," Toplis said.

Its forecasts are predicated on productivity growth of 1.4 per cent per annum.

"We think this assumption is heroic and maintain our view that inflationary pressures will increase at lower levels of growth than has been the case in the recent past."

Former Reserve Bank Governor Don Brash, in a speech to the Institute of Chartered Accountants yesterday, called the productivity assumption wildly optimistic.

"According to figures released by Statistics New Zealand earlier this month, production per hour worked last year was just 1.3 per cent higher than it was in 2005, implying average growth in productivity of just 0.2 per cent per annum over that period.

"That's the sort of productivity growth which Portugal and Italy achieved in the decade prior to the global financial crisis," he said.

Westpac chief economist Dominick Stephens said the Government was right to avoid the temptation to provide more short-term stimulus.

"Slow growth to date does not in itself make a case for more debt-fuelled spending," Stephens said.

"The upcoming Canterbury rebuild, to which the Government is contributing $13 billion, amounts to a huge stimulus for the economy. Ramping up Government spending at the same time as attempting to rebuild Christchurch would drive interest rates higher, possibly increasing the exchange rate and hurting the export sector."

There were some instances of spending money to make money in the year's Budget, such as providing more support to help people off welfare, Stephens said.

"But the desire to appear conservative and sensible in the near-term has meant a reluctance to explore more ambitious measures that may have large up-front costs and uncertain pay-off. That means we're left with a system that still has a deeply unrealistic approach to retirement income [and] a narrowly based tax system that favours land ownership over financial assets."