If New Zealand was a company staring down the barrel of running at a loss for at least the next five years and finding itself needing to borrow $20 billion more than it thought it did just six months ago, it would be lights out, wouldn’t it?

And no amount of creative accounting could change that picture.

Essentially, that’s the state we find ourselves in after yesterday’s fiscal update from the Government. With pretty much the only good news coming out of it being in the housing market, and an expectation that it is going to come back to life the year after next.

Unfortunately, I think Dunedin can kiss goodbye to winning the fight over cutbacks to the new hospital. I think all the noise about the IT cutbacks at Health NZ will fall on deaf ears in the Beehive too.

But I also think that the Government is doing the right thing holding its nerve and I think doing a Ruth Richardson and going harder and faster on the spending cuts would be a disaster.

I was listening to independent tax expert Geoff Nightingale on Newstalk ZB this morning and one of the things he mentioned was how much of a role welfare costs are playing in the Government’s overall financial position.

Which is why I mention Ruth Richardson. It was 1991 and Ruth Richardson was Minister of Finance and delivered what is forever known as the “Mother of all Budgets”. Because it was brutal - especially for beneficiaries and families.

Unemployed people had their dole cut by $14 a week. Anyone on the sickness benefit ended up $25 worse off each week - in fact it was nearly halved, going from $52-a-week to $27-a-week.

Universal payments for family benefits were completely abolished. She also brought-in more user-pays in health and education. Remember that was something Labour’s Roger Douglas stated in the 80s but Ruth Richardson took it further.

And, 30 years later, Labour’s Grant Robertson delivered a budget that he said was increasing benefit payments to “right the wrongs” of Ruth Richardson’s 1991 budget.

Nevertheless, the Finance Minister is saying today that, despite the way things are, we’re not going to see the Government going harder and faster on the spending cuts because it has already made spending commitments to the public.

But she says re-prioritising spending will happen.

So it seems that Nicola Willis isn’t going to channel her inner Ruth Richardson and deliver the Mother of all Budgets Volume 2. Which I think is wise.

Not that I’m saying that the Government isn’t to blame for any of the shambles unveiled in yesterday’s update. As you’d expect, it’s pointing the finger at Labour - accusing it of economic vandalism, and how this just shows how much of a fix-it job it has on its hands.

And don’t get me started on the creative accounting we saw yesterday, which Treasury was against the Government doing in the first place, and which some economists think is a justifiable thing to do but still kind of cheeky.

I’m not going to get bogged down in numbers, but I can’t resist pointing out that part of the problem is the Government’s revenue from taxation being down.

Over four years it’s going to earn $13 billion less. The cost of this year’s income tax changes is going to be $14.5 billion over five years. Just saying. But the tax cuts horse has bolted and there’s no going back from there.

The other reason for the tax take being down is that businesses aren’t earning so much - which, of course, means they’re paying less tax too.

And that’s going to be a key thing for the Government —and Nicola Willis said so this morning— it needs to do what it can to stimulate economic growth. It will say that that’s what things like the fast track legislation will do, all of that stuff.

But it can't fix things with legislation alone, the Government needs to keep investing. Which is why it would be a terrible mistake for it to go all knee-jerk on it.

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