Power Play - After a carefully planned backtrack the Government has now admitted it is going to break its promise of getting its books into surplus this financial year.

Photo: RNZ / Alexander Robertson

For months, going back to last year, Prime Minister John Key and Finance Minister Bill English have been softening the public up for a Budget, which in two weeks' time, will represent failure for what has been a key government pledge since 2011.

Voters in the 2011 election, and then last year, had gone into the polling booths expecting the National Party would deliver on its promise of a surplus.

Cleverly the Government has slowly but surely inched away from the promise so that when the Budget is delivered on 21 May no one will be surprised by a deficit.

It will, however, represent a broken promise no matter which way Mr Key and Mr English dress it up.

That presents a political difficulty for the Government, but from an economic perspective it probably matters little as long as the books continue to strengthen and show that they are still on track to surplus.

More important are the broader questions about the state of the economy and whether it is in as good a shape as macro-economic figures suggest.

That point was argued to a certain extent during the Northland by-election.

New Zealand First leader Winston Peters, who won the seat from National, argued Northland, like other regions around the country, was doing nowhere as well as the broader economic statistics for New Zealand suggested.

Photo: RNZ / Lois Williams

While the economy is growing at 3 percent or more a year Mr Peters argued that people in the regions were not sharing in that growth.

His win in Northland was characterised by some as a victory for that argument and suggested National was in trouble in the wider electorate.

But Colin James' latest 'Poll of Polls' makes it clear that since the Northland by-election there has barely been a blip in support for National.

It is polling pretty much the support it had before the by-election and almost spot on the 47 percent of the party vote it won in last year's general election.

Looking past 21 May

So will arguments over the broken promise on the surplus have a negative impact on National?

Based on what has happened so far it is unlikely. But it does raise questions about the Government's financial management.

National also faces ongoing questions about its economic management, particularly as the Auckland housing crisis - a crisis the government denies - not only prices many people out of the property market there but also threatens the wider economy.

More and more economists are warning house prices in the country's largest city cannot be allowed to continue to rise unabated.

They say that is stopping the Reserve Bank from cutting interest rates, while across the Tasman Australia's official cash rate has been cut to 2 percent.

While the cash rate here remains at 3.5 percent, that is helping to keep the value of the New Zealand dollar higher than it would otherwise be. That means exporters, when they exchange overseas currency for New Zealand dollars, are getting less cash for their goods and services.

At the moment, most of the wealth creation is being picked up by Auckland property owners.

The other criticism is that while New Zealand's economy is growing strongly it is based mainly on the Christchurch rebuild and strong migration flows into the country.

But per capita gross domestic product growth - that is the income earned per person - is not rising anywhere near as strongly.

Just whether those problems will be addressed in Bill English's seventh budget is not clear. He and Mr Key remain adamant that house price rises in Auckland do not represent a crisis.

Both men will also feel vindicated by the opinion polls.

Despite all the talk of a crisis and worries raised about whether everyone, including those in the regions, is benefiting from economic growth it is not affecting National's overall popularity.

Nor, possibly, is it likely to.

If indeed New Zealand is an economy of two halves - with one doing well and the other struggling - then it seems unlikely those growing rich off the back of rising house prices would switch support away from National.

Nor will they worry about a broken promise on the Budget surplus.

But some economists say rising house prices in Auckland are not sustainable. If nothing is done investment will continue to pour into bricks and mortar rather than the productive industries and services upon which the economy and jobs ultimately depend.

Mr English's Budget should be judged on what it does about that, rather than on National breaking its political promise to deliver a surplus.

Follow Brent Edwards on Twitter @rnzgallerybrent