Budget will focus on savings and investment - English

This year's budget will focus on savings and investment with none of the usual electioneering sweeteners, Finance Minister Bill English says.

He is due to present the Government's third budget in May, and told NZPA the economy's main vulnerability was overseas debt.

"New Zealand is one of the most indebted countries in the developed world and finance markets are very sensitive now to countries with a lot of debt," he said.

"So we want to achieve a couple of things -- one is to try to lock in the behaviour of households, which is helping the situation by helping us reduce our debt."

Mr English said people had started saving and were being careful with their spending, but that could turn around.

"As the economic recovery picks up, the question is whether we will all go back to what we were doing before -- which is borrowing a lot of money, buying a lot of stuff, buying houses and hoping it will be alright," he said.

"Or can we make policy changes that encourage them to stick to more savings and careful spending? The tax switch we did does some of that job but we want to see if there is more we can do."

Mr English acknowledged the adjustments families were making was happening faster than he had expected and was having an effect on the economy.

"We didn't expect them to tighten up so much," he said.

"But they have, and in the short term that means a more moderate recovery. But in the longer term it means a stronger platform for growth."

He said he wanted that trend to continue, although he thought there would be a loosening up as the economy improved.

"I would hope that neither the Government nor households will go back to where we were in 2007."

Mr English said another thing he wanted to achieve was an improvement in the Government's contribution to national savings.

"One of the reasons our external debt will rise is the Government borrowing a lot of money...if we can reduce that, it will help the country."

So there would be no lolly scramble in the election year budget, and Mr English said he believed the public wasn't expecting one.

"People are getting more pragmatic about changes they see as beneficial," he said.

"The public mood is more accepting, simply because that's what they have had to do with their households and businesses -- and the Government has to do exactly the same thing.

"They don't expect a lolly scramble, if anything there's a rising concern around government debt."

Mr English said he thought the public mood was against an election-year budget spend-up.

"The public mood is for a budget that continues a process that is consistent with stronger economic performance in the future, and making the changes you need to make...to get there."