OK, so we get a budget surplus in 2015. Then what?

Whatever figures Finance Minister Bill English unveils in his fourth budget on Thursday, the most important thing to remember is that this is the easy bit.

We might still be in for a government surplus by 2014/15, or Mr English might hedge that target with a few more caveats than he has done previously. As Standard and Poors pointed out in an interview with NBR ONLINE earlier in the week, delaying the surplus target data a year or two is not the end of the world.

The problem is returning the government to surplus is the easy bit. The more difficult bit is the country’s long-term indebtedness, mostly in the private sector.

New Zealand has run a current account deficit since the double-whammy crisis of 1973-74, when the combination of an energy crisis, the United Kingdom joining what was then called the European Economic Community; and a slump in meat and wool prices turned a long downturn into a crisis.

Typically, the current account deficit narrows during a recession, simply because there is less economic activity.

It grows again when the economy picks up.

To put it another way, since 1973 New Zealand’s economic growth has been typically funded, mostly, by other people’s savings.

There was a time when this did not seem to matter. Other countries have had long periods of current account deficits – Singapore would be probably the best example.

The difference is though that in those periods the higher debt was being used to build up other assets and income flows.

New Zealand has historically tended to use the periods of high current account deficit to fund spending booms, or to – as in the middle of the last decade – use cheap overseas money to bid up the value of our houses which we then proceeded to sell to each other and kid ourselves we were getting richer.

Things look like being very different from now on. The Treasury’s projections have the current account deficit rising to around 7% of GDP – from the current level of 3% of GDP - as the recovery picks up over the next few years.

That is not quite as high as it got during last decade’s bubble, when the deficit went above the 8% line for the first time.

But 7% is still too high. The latest political and financial spasm in Europe is a reminder that high long-term debt levels of any sort are going to cause wholesale financial markets to become decidedly beady about matters like the risk/return equation.

Put simply, if a little crudely, lenders are now much more risk averse than during the sunnier 2004-07 period.

In the main, New Zealand’s current account deficit has been funded by offshore wholesale markets lending to New Zealand banks who then lent it to households and businesses.

In the post-global financial crisis world, such lenders are either going to demand a higher rate of return for lending to more risky, debt-ridden markets – which will push up retail lending rates – or will simply not lend as much, which will have a similar effect.

If they take sufficient fright and are particularly stringent – which is unlikely, but is much more likely than, say, a decade ago - that is going to constrain New Zealand’s economic growth in future years.

Which brings us, in part, back to the budget surplus. The first step in curbing any blow-out in the current account deficit is to return the government books to surplus.

It is, though, a very small step. And it is much easier than what is to follow.