Finance Minister Nicola Willis has promised the government's much anticipated budget will be free of thrills and frills.

But alongside the headline grabbing tax changes, spending cuts and new/revamped/discontinued policies, there will be some serious scrutiny of the economic and financial numbers.

Willis' maiden budget will need to show a credible path back to budget surpluses driven by a financial discipline that she has accused the former Labour government of lacking, writes RNZ's business editor Gyle Beckford.

Here are some key factors to watch.

The economy

The bulk of the government money comes from taxes on companies, consumers, workers, fuel, alcohol and investment earnings, as well as earnings from state owned enterprises and other crown entities.

A growing economy means better tax income, while a shrinking economy squeezes the tax take as profits fall, consumers spend less, and unemployment rises, meaning less income tax.

But the economy has contracted in four of the past five quarters, and most analysts describe the outlook for the rest of this year as anaemic, tepid and struggling. The forecasts point to economic growth of less than 1 percent this year and it will be lucky to touch 2 percent in 2025, with a gradual recovery in subsequent years.

Expect Treasury forecasts for unemployment to be increased, inflation lowered, but overall the outlook will be downbeat, which will be the backdrop to the government's financial plans.

The books

Willis has painted the state of the government's books as much worse than expected, and the last set of monthly accounts showed a deteriorating picture, with a deficit of $5.04 billion for the nine months ended March, $619 million more than forecast in the December financial update.

Core tax revenue was $88.5b - $1.2b below forecast - with weaker corporate and GST revenue, partly offset by a lift in taxes on investment returns.

Expenses were nearly $1.4b below forecast at $101b, with reduced spending on cyclone recovery costs, housing, and delayed payments of some regional grants.

The half year update forecast a deficit of $9.3b for the 12 months ended June. Deficits were forecast to decline over the next few years to a razor-thin surplus of $100m in 2026/27. That almost certainly will be pushed out to 2027/28 and possibly later.

The way back to sustainable surpluses relies on fiscal consolidation - ongoing reductions in spending and/or raising income.

That involves controlling operational allowances - the amount of discretionary spending for new policies - which last year Labour last year forecast would be $3.5b, but Willis has said she will spend less, although she did not detail by how much in the Budget Policy Statement in March.

The public service cuts will deliver money to be recycled, although already announced budget policies has disclosed increased spending on prisons, police, education, and defence among other areas.

That may force the need for new levies and user pays charge to raise new income.

And government expenses can be demand driven, such as higher superannuation costs as more people turn 65, raising welfare benefits as more people become unemployed. Controlling those is difficult unless the rules of the programmes are changed.

Balancing money in and money out is the name of what looks likely to be a multi-year long and winding road back to surplus.

Debt and borrowing

The March Treasury accounts showed net debt was slightly lower than expected at $173.7b, or 42.9 percent of the value of the economy, with a full year forecast of 43.2 percent.

By international standards that is relatively low, but foreign lenders and ratings agencies look at the level and what is driving the levels. Willis has set a longer term aim to get net debt down to between 20 and 40 percent.

But in the short term at least with deficits expected for years, as well as capital spending on infrastructure and other projects, then more borrowing is in store.

Analysts' forecasts range between $10-$20b extra borrowing over four years.

Those tax cuts

National's bedrock election policy will be kept with modest but meaningful, fully funded cuts, says Willis.

The original policy suggested a 11.5 percent cut as much as $2b relief by moving tax thresholds and National denied all assertions that there was not enough money to pay for them without borrowing.

Expectations are for watered down and phased in tax changes, with changes to thresholds and income assistance through Working For Families.

But tax cuts may make it harder to get back to budget surplus because they reduce government income.

Economists are too diplomatic and sensible make a public judgement on whether the government will be borrowing for tax cuts. But as several have told this reporter off the record, essentially they are being paid for by borrowing.

The question is whether the government would be able to reduce deficits more quickly and borrow less if the tax cuts had not occurred or been delayed.

PS - the Reserve Bank

The RBNZ is more than an interested observer to the budget.

Government spending is the "fiscal friend" that the central bank's monetary policy wants and needs.

The less stimulus the government pumps into the economy through spending is generally welcomed by the RBNZ because it helps to keep the economy in a not-too-hot /not-too-cold balance, and should not stoke the embers of inflation fires, which in turn means interest rates can be kept lower.

So Adrian Orr and the monetary policy committee will sift through the budget to assess whether it makes its inflation fighting job easier or harder, and brings the prospect of interest rate cuts closer.

-RNZ.