Finance Minister Bill English said in his Budget speech the fiscal outlook had improved from last year due to the economy returning to growth and the positive impact of last year's Budget decisions.
The projected operating deficit for the next financial year was $8.6 billion, or 4.2% of GDP (gross domestic product).
As a result of that improved outlook, the debt projections had also become more favourable.
Net core Crown debt was now projected to peak at 27% of GDP in 2015 and then decline steadily.
That was both a lower and earlier peak than was projected last year and contrasted strongly with the outlook of ever-rising debt which the Government was presented with in late 2008, he said.
By 2024, net core Crown debt was projected to be back to 14% of GDP, or about the level before the economic crisis struck.
"However, it will require at least a further decade of disciplined fiscal management to deal with the effects of the global financial crisis and the huge lift in government spending during the boom years leading up to that crisis."
Financing new and maturing debt would require the Government to borrow about $240 million every week for the next three years. Debt was projected to reach $68 billion by 2015.
That substantial rise in debt would mean that interest costs more than doubled, Mr English said.
Any "favourable surprises" in the debt outlook would be used for deficit reduction and debt consolidation.
"When the books are balanced and debt has stopped rising, the Government will have more choices about where to invest, spend or reduce taxes," he said.
The Government intended to issue $12.5 billion of bonds in the year to June 30, 2011, which was $2 billion less than signalled in the December half-year update.
The New Zealand Debt Management Office said it was considering reintroducing inflation-indexed bonds as part of its $12.5 billion programme. It was considering the most cost-effective issuance method for these bonds.
Introducing an inflation-indexed bond increased the range of debt instruments available to investors.
A new bond maturity, most likely March 2019, will also be introduced.
Craigs Investment Partners broker Chris Timms said there should be no material surprise to the bond market.
Slightly lower issuance, lower budget deficits and debt profile all pointed to lower interest rates.
The bond market would continue to be focused more on the recovery and the timing of any Reserve Bank rate hike than tax policy, he said.
Ratings agency Standard and Poor's said that its views on New Zealand's sovereign creditworthiness were not immediately affected by the Budget.
Standard and Poor's has New Zealand on an AA plus long-term rating.
New Zealand had sound public finances, a sound financial sector, resilient economy, and open and transparent policy environment, the credit rating company said.
Those strengths offset the country's high level of private-sector external indebtedness at a time of continuing elevated stresses in the global financial system.
FISCAL OUTLOOK
• Surplus reached three years earlier.
• Government borrowing $240 million a week.
• Creditworthiness not affected by Budget.
