A leading Sydney economist says both Australia and New Zealand should stick to their plans for returning surpluses even though a global recovery is still uncertain.
Australia plans to return to budget surplus in the next financial year while New Zealand is aiming for 2014-2015.
Finance Minister Bill English has admitted it will not be easy, particularly with ongoing debt problems in Europe reducing forecasts for global growth.
But he says returning to surplus and repaying debt are among the most important things the Government can do to ensure New Zealand can withstand future shocks.
He says it will also help the country build a more competitive economy based on exports and new jobs.
Chief economist at AMP Capital Investors Shane Oliver says there has been a lot of debate about the merits of returning to surplus.
"Obviously with the economy under-performing, particularly in Australia, the last thing we need is additional fiscal austerity.
"The counter argument, though, that if we can't get back to a surplus at a time when commodity prices are high and unemployment is reasonably low, as it still is in Australia, then when will we?"
Mr Oliver said foreign investors might take a dim view if the target for returning to surplus keeps getting delayed.
And that could start to push up the price of borrowing to government.
"Right now, Australia and New Zealand aren't particularly at risk - we've got very low bond yields. But if investors get wind of a lack of fiscal austerity at a time when the world is focussed on high public debt levels, then we could start to feel the wrath of foreign investors."
Mr Oliver says both countries' reserve banks have a big role to play in the direction of the economy.
"We've certainly seen that in New Zealand and I think we need to see a bit more of that in Australia. In other words interest rates in Australia are way too high and they they need to come down. That's the real problem at the moment, not whether we tighten fiscal policy by a few billion dollars."
