Brian Fallow: A dark-grey debt buster, with limitations

It may not be a black Budget but it is definitely a grey one.

It meets the first test of not doing any harm, in that it averts a credit rating downgrade.

Even if we had not had to worry about the rating agencies, the case for getting a grip on a scary projected debt and hauling it down was compelling for its own sake.

But it has come at a price. The Government has had to lock itself into a sort of fiscal chastity belt by slashing the allowance for future spending increases.

Will it be able to resist the temptation to hunt for the key?

The tax cuts we are not now going to get were promised for a reason. It is not smart to have 9 per cent of taxpayers paying 42 per of the income tax, not when we have the sort of income gap we have with Australia - and most other developed countries - and labour is internationally mobile.

And suspending contributions to the New Zealand Superannuation Fund, for perhaps as long as 11 years, is a measure which makes the medium-term Government debt track look a lot better, but increases the unfunded liability by the same amount.

It is liable to send a strong signal to the baby-boomers, the age group best placed to go forth and spend, that they need to increase their saving instead.

From a stimulus point of view, that is a bit of an own goal.

Reducing the superannuation liability requires a national debate about whether the scheme's parameters - the age of eligibility, the link to the average wage and its universality - are affordable long term. It would have been more honest to flag the need for that debate.

But the Budget is honest in recognising the limits to what a Government can do to offset the collapse in private sector demand which the recession has wrought.

Households have been reining in their borrowing and spending for more than a year, and the Treasury expects them to keep on doing that for another three years.

That will make it tough for any business chasing the discretionary dollar.

Exporters have to contend with a world economy that is shrinking for the first time since World War II, and lately with a rising dollar as well.

The Government sector is not big enough to provide more than a partial offset to that.

The Treasury forecasts the number of people employed to fall by 100,000 over the next couple of years and the unemployment rate to climb from 5 per cent now to 8 per cent by September next year - about another 70,000 people.

"We have all been surprised by the ferocious nature of the recession," Finance Minister Bill English said.

But in response to a question about where was the jobs plan, all he could do was point to the $13 billion increase in Government debt this year - to offset falling tax revenue, maintain entitlements and fund infrastructure spending - and invite us to consider how much worse those employment numbers would be without it.

The man has a point.