Budget 2020: Next generation will pay price as Government expected to post eye-watering deficits for foreseeable future

The Government is expected to post eye-watering deficits for the foreseeable future following Thursday's Budget announcement.

Forecasts released with the Budget show the country's debt levels will more than double as New Zealand tries to pay its way out of the COVID-19 crisis. 

COVID-19 is expected to saddle the Crown with a deficit of $28 billion this year and get used to it - Treasury thinks New Zealand will stay in deficit until 2028.

"I think that's pie in the sky stuff," economist Cameron Bagre said. "I think the reality here is that we're going to see fiscal deficits for a long time."

This year the country's debt levels will balloon to 30 percent of New Zealand's entire worth. It will keep swelling to more than 50 percent in a few years time - that's about $200 billion to keep people in jobs and businesses afloat.

Just a few months ago New Zealand had one of the lowest debt ratios in the world - now it's in line with Zimbabwe and China.

But a swelling of debt is not necessarily a bad thing - as long as it can be paid back.

"This strong fiscal position, built on the work of Bill English and Sir Michael Cullen, means we are well placed compared to many other countries," Finance Minister Grant Robertson said. 

The Government's biggest source of income - taxes - will take a hit too. So could tax hikes be on the cards?

"I think a future Government of whatever kind might need to think about expanding its tax base somewhat in order to increase the speed of our debt repayment," said PwC tax partner Geof Nightingale. 

The next generation will pay the price - possibly having to work for longer.

"I think it is inevitable that the age of NZ [superannuation] will rise," said Martin Hawes of Summer KiwiSaver.