Judith Collins has pulled out of the leadership race and thrown her support behind Bill English to be the new Prime Minister and National leader.

"It is clear to me that 50 percent of the caucus support Bill as leader, and so as far as I'm concerned he has won", Ms Collins says.

And Mr English is not ruling out an early election if he becomes Prime Minister.

Jonathan Coleman isn't bowing out of the race, saying he wants to see the numbers first.

While Mr English looks set to be leader, the battle for deputy is on between Simon Bridges and Paula Bennett.

At today's Budget update, Mr English named Steven Joyce as his successor should he be given the top job.

"If I am elected leader of the National Party, Steven Joyce will be the Finance Minister," he says.

He says Mr Joyce is the most capable person for the job.

The Government's surplus is set to take a hit over the next year but after that it's forecast to keep climbing.

Compared to a surplus of $1.8 billion in 2015/16, the current year sees that shrink to $0.5 billion.

But after that it's set to rise to $8.5 billion over the next three years.

Mr English also has tax cuts on the table.

"When it's affordable the Government would like to lower incomes taxes, with a focus on helping lower and middle income earners obtain greater return from their hard work," he says.

But he added the caveat that responding to earthquakes and reducing debt are the current priority.

Mr English wouldn't be drawn on what a "family package" that John Key has previously hinted at would look like.

He says spending in ACC insurance and health and education are the reason the surplus has taken a hit, and also the one-off costs of the Kaikoura earthquakes.

The earthquakes are estimated to have cost the Treasury about $2 to $3 billion, some of which will be funded by insurance and existing resources.

Secretary to the Treasury Gabriel Makhlouf says most of the costs are transport, and the NZ Transport Agency (NZTA) has reserves that can cover some of the cost.

The Government looks on track to achieving its goal of reducing net core Crown debt to about 20 percent of GDP by 2020, with forecasts expecting it to reach 18.8 percent by 2020/21.

Net debt is forecast to be $59.6 billion in 2020/21.

"Reducing debt is important," says Mr English.

"We've run up debt in bad times, it's critical we reduce it as the economy is stronger."

Mr English says global growth remains low, with the impact of Brexit still unclear, uncertainty in the wake of the US election and China's own financial system raising concern.

"New Zealand continues to make good progress at a time when other countries are grappling with growth."

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