Key: surplus coming

01:09, May 24 2012

Prime Minister John Key says the Budget, to be read on Thursday, will show the Government is on track to post a small surplus in 2014/15.

Key said treasury forecasts had factored in a lot of weakness and volatility in Europe.

The Government has already signalled changes in Finance Minister Bill English's fourth Budget, including raising the excise tax on tobacco, and possibly alcohol, to gather more revenue and cut consumption - a key plank of the Maori Party's agenda.

Returning the books to the black has become a touchstone of the Government's economic management, although rating agencies and the International Monetary Fund have signalled a slightly slower return to surplus would not scare the horses.

But despite running so-called "zero Budgets" in 2011 and this year - and maintaining debt at relatively low levels among developed nations - current forecasts have net debt soaring to more than $70 billion over the next four years.

That has been boosted by an $18b deficit last year and a likely $10b-12b deficit in 2011-12, including the $9b-plus cost of the Christchurch earthquakes.

The $70b forecast is a steep rise from the $10b in debt the Key government inherited when it took office in late 2008, although even then the Treasury had forecast a decade of deficits as the global financial crisis started to bite.