Prime Minister John Key suggested yesterday it would take longer than five years to get the Crown accounts back into surplus, but said he thought the Budget would be sound enough to prevent a credit rating downgrade.
However, he thinks New Zealand will be kept on negative watch by the rating agency Standard & Poor's which is in Wellington for Budget week.
S&P put New Zealand on negative watch in January after economic and fiscal forecasts in December showed a dramatic rise in forecast deficits in the order of $6 billion, and rocketing debt.
The global downturn worsened and Finance Minister Bill English said indefinite deficits of $10 billion were forecast without changes to spending.
S&P analyst Kyran Curry said the agency would be looking to see operating surpluses (excluding gains and losses on investments such as the Super Fund) over the next three to five years. Mr Key said yesterday that "in terms of a time scale that is a bit on the light side".
He said beyond that the numbers were very difficult and over the past decade the Treasury had been "unable to to get on top of its forecasting with a great deal of accuracy".
That last comment interests us. There were a couple of occasions in the last term of the Helen Clark government where Treasury cocked the numbers up. John Key is clearly putting Treasury on notice that such accounting and forecasting errors are inexcusable. And that's a good thing.
New Zealand's credit rating may not get taken off "negative watch" in the wake of this week's budget. Realistically, that's the best that we can expect in such uncertain times. A credit rating downgrade would cost EVERY New Zealander dearly, and we fervently hope that Bill English's first budget staves of that prospect.
All will be revealed in around 56 hours!