Finance Minister Nicola Willis says "disciplined spending" is needed on the back of a downgraded economic outlook for New Zealand's economy.
Global credit rating agency Moody's adjusted its outlook for New Zealand to "negative" from "stable".
In the report, Moody's reiterated New Zealand had maintained its AAA rating, due to strong institutions and policy framework.
However, it said a tight monetary policy, higher debt servicing, and weaker growth would add pressure to the economy, along with fuel price increases, inflation pressures, "stubborn" non-tradeable housing costs, utility prices and higher electricity costs.
Willis, reacting to the downgraded outlook, said the was "another warning that we can’t afford to simply spend more and borrow more, or we risk higher interest rates, higher borrowing costs and more pressure on Kiwi families".
"Global economic and geopolitical uncertainty and inflation pressures including fuel price increases have contributed to the revision. While these are outside our control, Moody’s are clear that improving our rating requires disciplined spending, a clear path to balanced books and reducing debt."
Willis said Moody's had warned if deficits remained and debt kept rising, the economic outlook would worsen, which would increase the costs of servicing the debt, squeezing businesses and leaving less funding for public services.
"Debt servicing is now the fourth-largest cost to taxpayers, exceeding the combined costs of the police and defence forces, corrections, customs and the justice system. With global interest rates rising, we must keep our books in order to ensure New Zealand remains strong in a more unstable world.
"The revision also confirms the need for any support delivered in response to the Middle East conflict to be temporary and targeted. If we were to start clocking up the credit card like the previous government, every New Zealander would pay the price – with more of every taxpayer dollar going on interest, instead of hospitals, schools and roads."
Last month, Fitch, another global credit rating agency, also lowered its outlook for New Zealand's economy.
Fitch adjusted the outlook in New Zealand from "stable" to "negative", due to difficulty in reducing debt and delayed fiscal consolidation.
The morning's headlines in 90 seconds, including the kiwi dollar drops against the Aussie, Iran seizes ships, and a car ploughs into a Sydney hair salon. (Source: 1News)
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