Govt won't face economic reality: Labour

Prime Minister John Key is facing criticism for his "business as usual" reaction to the Reserve Banks's gloomy economic forecasts.

Governor Alan Bollard on Thursday said the government was unlikely to achieve its target of returning to surplus in 2014/15 and the bank's latest economic growth forecasts are lower than those in last month's budget.

Mr Key's response was that the bank was using "slightly more up-to-date data" and he didn't believe it revealed anything that indicated the government should change track.

"There is nothing different we would want to do at this time," he said.

Labour's finance spokesman, David Parker, says the government is in denial.

"John Key is saying nothing needs to change when growth and overseas debt forecasts are deteriorating," he said on Friday.

"The Reserve Bank's forecasts for growth have been reduced to an even smaller fraction of the average growth rates predicted for our 16 major trading partners."

Mr Parker says New Zealand urgently needs pro-growth tax reform, more savings to reduce ballooning overseas liabilities and more support for exporters.

Dr Bollard on Thursday held the official cash rate at its record low 2.5 per cent, saying the economic outlook in Europe was so unclear it wasn't worth putting it into a prediction model.