Despite a softening economy, economists predict the Government's books are still in good shape; albeit purse strings may be tightened come Thursday's Budget reveal.
Finance Minister Grant Robertson's first ''wellbeing Budget'' will be keenly dissected as analysts consider new and reprioritised spending, with much expectation on topical issues of child poverty and mental health, but also productivity opportunities for business, the regions and iwi high on other lists.
Not all economists agree on the need for and application of the self-imposed net debt target of 20% of gross domestic product, which was shifted to a net debt range of 15%-to-25% last week, starting in 2022.
Consensus on where the
Government's ''wriggle room'' is on borrowing and spending remains clouded.
ASB chief economist Nick Tuffley expects a ''prudent'' second Budget from Mr Robertson, although with the Government continuing to hit its fiscal targets.
''Although with the economy slowing, the Government may have to tighten its purse strings a little,'' he said.
The Budget would reveal more of the Government's thinking and policy priorities, outlining the framework for its wellbeing approach, outlook and policy priority setting, plus spending and investments.
ANZ senior economist Miles Workman also described the Government books as being ''in a healthy position'' and ''persisting'', but he expects the slightly softer economic outlook would drive a deterioration in its fiscal approach.
''Despite the softer economy, there should be enough wriggle room for the Government to still meet its 20% [of GDP] debt objective,'' he said.
The Government books' starting point was ''in good shape'', with the operating balance before gains and losses (Obegal), being the difference between revenue and expenses, ahead of forecast by $329million, and the total surplus at $2.5billion.
Mr Workman noted that as of March, tax revenues were $542million below forecast, two-thirds from softer GST revenues and the remainder from lower corporate tax revenues.
However, he said core Crown expenses at $63.5billion were underspent by $583million, more than offsetting the weaker tax revenues, some of which should reverse in coming months.
''All up, there's nothing in the starting position to suggest urgent and drastic change is required to steer the books towards where the Government wants them to be,'' he said.
Kiwibank chief economist Jarrod Kerr rounded on the 20% net debt target, reiterating he wanted to see ''the slashing and ritualistic burning of the meaningless 20% net debt target''.
He said the ''ill-founded debt target'' meant a worsening infrastructure deficit, while the country's fiscal position was one of the most enviable in the world.
There was no actual basis for a 20% target, noting New Zealand was rated AAA; ''as strong as it gets'', by Moody's and AA+ with a Positive outlook by S&P.
''Rating agencies are more lenient on debt issued to fund infrastructure,'' Mr Kerr said.
He said good infrastructure boosted productivity, and productivity boosted projected revenues.
''Most people fear debt. But when interest rates are below both real and nominal growth rates, debt is not an issue,'' he said.
Investing at record low interest rates now build a better economy, growth improves and the Government's tax base grows, he said.
Westpac senior economist Anne Boniface believes the Government is ''running out of wriggle room'', given the ''lacklustre growth'' had continued into the first half of this year.
''The tightrope the Minister of Finance is walking between revenue [tax take] and spending has gotten a bit thinner since December's half-year economic update,'' she said.
While she, alongside Treasury, expected growth to pick up after 2019, it would not fully offset the weakened starting point.
''The upshot is the Government will have about $6billion less in the kitty over the next five years than they had been thinking at the time of December half-year update.''
Mrs Boniface said it was likely the Government would need to borrow more than previously projected, by about $4billion during the five years.
