Reserve Bank Governor Adrian Orr says he will be watching the Government very closely to see if it actually spends what it said it was planning to over the coming years.
He has also called on the Government to spend even more money and for businesses to take advantage of historically low interest rates.
Speaking to Q&A last night, Orr sent a clear message to lawmakers: "We really need to see the Government spending."
He has been sending a similar message over the past few days after the Reserve Bank cut the official cash rate by half a percentage point to 1 per cent – such a strong cut is usually reserved for times of economic strife.
Orr said that low-interest rates will help stimulate the economy going forward, as will increased Government spending.
Orr told Q&A the Reserve Bank was confident that the Government's expectation is to spend more money.
But he said he would be "watching closely to see whether the impulse is coming through".
"Our challenge is that spending actually gets done because there are lags and delays and challenges around infrastructure spend."
He said a more immediate way to increase consumer spending would be through welfare transfer payments – increasing benefit payments.
Speaking last night, Prime Minister Jacinda Ardern said she was "mindful" of the role the government had to play when it comes to stimulating the economy.
"We're absolutely aware of that and we're trying to get ahead of that with the decisions we have made in the 2019 Budget."
She pointed out the Government had raised the operating allowance (new spending made available at the Budget) to $3.8 billion.
She talked up the Government's planned infrastructure spend, including new money to fix hospitals and build more schools.
"What we're [the Government] particularly mindful of is making sure we're delivering on even the investments we have made now."
She would not directly answer questions as to whether the Government planned to increase its operating allowance at next year's budget.
Meanwhile, Orr said New Zealand's discussion on debt has been "too narrowly defined" by the Government's debt target.
Until recently, the Government's borrowing limit was 20 per cent of GDP.
But Finance Minister Grant Robertson said the Government is moving towards a debt band, rather than a target, of 15–25 per cent of GDP.
Orr appeared to welcome the move towards a band as there "is nothing magic about the net debt of 20 per cent".
"You need to be flexible; low and stable debt to be used sensibly when needed and to be used sensibly on infrastructure and assets that are needed."
When it comes to the agriculture sector, Orr said some of the debt levels were a concern.
Orr said about 80 per cent of the debt is held by roughly 10-15 per cent of farmers.