The International Monetary Fund suggests the Government could cut state payments to middle income people to reduce state spending and help bring back budget surpluses.
The Government says New Zealand faces its largest-ever deficit by the end of June of $16 billion.
The IMF says State spending grew by 6% of gross domestic product in six years, excluding the cost of Canterbury's earthquakes.
It says reducing public expenditure relative to GDP could bring back surpluses and reducing state welfare payments to middle income households could help.
IMF New Zealand section head Ray Brooks told Morning Report on Wednesday that people save less if they get welfare payments from the Government.
He said New Zealand's balance sheet is still very strong, with about half of the level of debt of other advanced economies and it's important that strength remains so New Zealand can deal with future shocks.
Mr Brooks said New Zealand's comparatively high levels of private sector debt, are driving the push to return to surpluses.
The Government has already flagged changes to Working for Families in next week's Budget.
