Budget 2016: Stephens sceptical about forecasts

Westpac chief economist Dominick Stephens says he expects Treasury forecasts in this week's Budget will be overly optimistic and we won't see debt levels fall to that targeted by Finance Minister Bill English.

English has indicated he wants to drop New Zealand's net government debt from 26 per cent of GDP to 20 per cent by 2020.

The Budget would lay out a timeline of "good government revenue and falling government debt", Stephens said.

But Stephens said he would greet that kind of optimistic outlook with some scepticism.

"I'm not so sure the economy will be that strong later in the decade."

He argues that Treasury has failed to account for the depressing effects the unwind of the Christchurch rebuild will have on the economy.

Even if the forecasts this Thursday were accurate "what you'll probably see is tax cuts delivered, therefore I don't think we'll ever see debt levels fall quite as fast as the Budget will suggest".

On the social policy front Stephens said he expected to see some sort of action on housing in this week's Budget given the intense political focus it has had this year.