Budget the most important since 1984

Treasury Secretary John Whitehead says next week's Budget will be the most critical since Labour's effort 25 years ago. Photo / Kenny Rodger

Next week's Budget is one of the most important in over a quarter of a century, says Treasury Secretary John Whitehead.

Mr Whitehead, who has been directly or indirectly associated with Budgets stretching back to the last years of the Muldoon Administration, said next Thursday's was the most critical since Labour's Budget to confront the economic and currency crisis in 1984.

"It's one of the most important two or three Budgets I've been associated with and one of the most difficult given the balance we're trying to achieve."

During a round of meetings with business groups, banks and media in Auckland yesterday, Mr Whitehead emphasised the importance of the Budget's role in retaining the country's credit rating to keep Government and business borrowing costs down.

The Standard & Poor's rating agency already has New Zealand on a negative outlook and has said the Budget will be critical in re-rating the country.

"We're walking a bit of a tightrope - you want to take the edges off the recession by looking after the vulnerable. The other side of the balance here is they are saying have you got that long-term debt under control," Mr Whitehead said.

The Budget would not be so much about winners or losers but taking a longer-term approach to take advantage of opportunities as the global economy improved.

If New Zealand was not dealing with huge levels of debt and productivity improved, the country could emerge from recession able to narrow the gap on many competitors.

"We need to get off our borrowing habit as a country but it may take a while."

While economic growth was forecast to return towards the end of this year, unemployment was not expected to peak until late next year, he said.

The Treasury had three scenarios for unemployment with the main line towards the negative end of the market consensus.