Finance Minister Bill English has set out the priorities for next month's Budget, saying it will focus on containing rising debt, and has cast further doubt on tax cuts in 2010 and 2011.
Mr English painted a bleak picture of Government debt levels in his major pre-Budget speech on Wednesday, saying they are set to hit 45% of the country's gross domestic product by 2013, up from 33% forecast by the Treasury in its December economic and fiscal update.
He told business leaders in Auckland the Budget will not include any significant new fiscal stimulus, but will concentrate on a credible plan for managing Government debt.
"The preliminary forecasts show such a strong increase in debt that we don't think there is room for any significant fiscal stimulus at the moment," he said.
"We need to demonstrate to New Zealanders that we can get on top of that debt."
Mr English says the Budget will help ensure the growth in borrowing is minimised and brought under control.
He said promised tax cuts need to be viewed against the backdrop of a rapid deterioration in the Government's finances and the worsening world economy.
Mr English said the global economy has worsened since then and the Government is borrowing to maintain spending.
He told Checkpoint that Government debt will rise from about $35 billion to $70 billion over the next three years, but must be contained in the long term.
Mr English said tax cuts in 2010 and 2011 would only go ahead if the Government could afford it and a decision would be announced in the Budget on 28 May.
New Zealand risked having its credit rating downgraded unless the Government got on top of rising debt levels, he said.
ANZ economists said the latest forecasts were no surprise and the chances of tax cuts next year and in 2011 were no greater than 50%.
The Labour Party says the Government is planning a 'black budget' and is deliberately painting a bleak picture of the economy to justify breaking its election promise about tax cuts and slashing services.
Leader Phil Goff says National bought the 2008 election by promising more than it could afford.
Mr English told Morning Report there will not be a black budget next month, since the Government will be spending more than has ever been spent on public services such as health and education.