Credit rating agency Moody's has given a friendly warning to the Government about the long-term state of the books.
Moody's currently rated New Zealand "AAA" -- the top rating -- with a stable outlook and told ministers that was safe for the meantime, but long-term debt projections were of concern.
Two other agencies, Fitch Ratings and Standard and Poor's, have recently warned that New Zealand runs the risk of a downgrade due to its deteriorating fiscal outlook.
Any downgrading of credit ratings could push interest rates up not only for the Government, but the New Zealand financial sector and the public.
NZPA understood officials and ministers were briefed about Moody's concerns about the long-term debt track and received reassurances that Finance Minister Bill English had made it clear the "decades of deficit's was not acceptable and would be reduced.
Moody's was told that Treasury's worse-case scenario of the budget deficit growing to 4.5 percent of GDP and government gross debt at 29 percent of GDP over the next three years had become more likely.
If anything the latest figures were pointing to the most pessimistic scenario late last year now looking optimistic.
In Moody's assessment New Zealand's economy lacked diversification and was likely to take more time to adjust and rebound if its economic model was effectively dented.
This meant New Zealand only rated as having a moderate ability to "grow out of debt" and moderate ability to adjust revenue and expenditure.
Others with this rating were Ireland and Spain due to their "questionable competitiveness" and which are at risk of a credit downgrade.
New Zealand escaped those two countries "vulnerable" rating status because unlike them it had a "limited debt challenge".
Ministers were warned that New Zealand's rating remained largely untested because it started from a robust position, but if long-term debt levels became a reality then the rating would be at risk.
NZPA understood Moody's pointed out that previous downgrades had happened when it became clear that was a low likelihood that countries could even stabilise, let alone end a "vicious trajectory of public debt increases within a five- to seven-year timeline.
Mr English has spoken publicly about the need to rein in spending and control debt as he attempted to write this Government's first budget.
Moody's warning was that while there was still some room to move in terms of raising more debt, there had to be signs of long-term improvement.
Treasury mid-term projections tend be based on assumptions that can change dramatically -- for better or worse -- due to changes in factors such as growth and inflation.