The Treasury is expecting the Government to take on $5 billion more in debt than it had previously expected over the next four years to help it cover the costs of new spending.

In its half-yearly economic and fiscal update in December, Treasury expected the Government to owe roughly $63.5 billion by the end of the 2023 financial year.

But Treasury figures, released in the 2019 Budget, showed the amount of debt the Government was now expecting to take on over the same period has jumped to just under $68.5 billion.

However, as a proportion of GDP, the Government's debt level is still expected to remain below its self-imposed debt limit of 20 per cent.


According to the Treasury's Budget analysis, the increase in debt "reflects new spending decisions".

The Government increased its spending by $25 billion across the next four years, according to Budget figures.

Big ticket items in this year's Budget include $1.9 billion for mental health and addiction support and $1 billion for KiwiRail.

The surplus for this year was $3 billion but it is expected to fall to $1.3 billion next year.

Independent economist Cameron Bagrie has raised questions around how sustainable the spending increase is.

"If spending continues at the current pace the books will be in the red in two to three years," he said, predicting a return to a deficit.

Speaking at the post-Budget breakfast on Friday, Finance Minister Grant Robertson said although it was lower, it was "still a sustainable surplus".

"I make no apologies for the fact that we have got a lower surplus coming in for next year because we are investing.


"We're doing the very thing that people are asking for, which is to say we need to do some work from a fiscal policy point of view to stimulate the economy."

He also said New Zealand's level of debt is low compared with other countries.

At just over 20 per cent, New Zealand is a long way off the likes of Japan, which has a debt-to-GDP ratio of more than 200 per cent.

Both the US and the UK have a ratio closer to 80 per cent.

As part of its fiscal responsibility rules, the Government agreed to get net Government debt to 20 per cent of GDP by 2022.

Treasury's numbers show it is on track to do this.


But in a pre-Budget speech, Robertson said from 2022 onwards, the Government would shift to a range of around 15 to 25 per cent of the GDP.