Bollard sees delayed surplus

The Government will not return to surplus until two years after Treasury's 2014-15 estimated timeframe, according to Reserve Bank Governor Alan Bollard.

He was appearing before Parliament's finance and expenditure select committee following this morning's monetary policy statement which saw him hold interest rates steady at a record low 2.5 per cent.

In response to a question from Labour MP David Parker, Bollard agreed the delayed return to surplus would see government debt about $10 billion higher than currently forecast.

Bollard also told the committee that the economic outlook in Europe was so unclear it was not worth putting into a model.

"Instead it is the risk in the room," he said.

Announcing the interest rate decision earlier today, Bollard said the Reserve Bank was on high alert for the economic storm clouds in Europe and a weak picture in New Zealand.

The bank said the outlook for the country's trading partners had worsened and there was a small but growing risk that conditions in Europe will deteriorate more than expected.

"New Zealand's economic outlook has weakened a little since the March Monetary Policy Statement," Bollard said, adding that it "remains appropriate" for monetary policy to remain stimulatory with the official cash rate held at 2.5 per cent.

- © Fairfax NZ News