New Zealand's economy is said to be living on a prayer, in the wake of Covid 19.

Treasury's Pre-election Economic and Fiscal Update shows the Government is $23 billion in the red, with higher than expected deficits in future years.

Former Finance Minister Steven Joyce says the Reserve Bank is running out of wiggle room on monetary policy, with the OCR edging closer to zero percent.

He told Mike Hosking the Government is now running out of fiscal levers too.

"Let’s be hoping and praying there is no big earthquake or any event in the next decade, because there’s not much money left."

Treasury is predicting unemployment to peak at 7.8 percent in March 2022,  and there's expected to be at least 15 years of Government deficits.

Joyce says the impact will hit young people twice as hard as it does adults.

"So whatever figure you see, it’s going to be higher for young people."

Steven Joyce said yesterday's Prefu was "about as bad as everybody expected" and possibly even optimistic, but unless the Government changed its attitude, unemployment and debt would continue to rise.

"They're spending as much as is reasonable - and then some. The impact is going to be particularly strong on young people because of unemployment figures. It hits young people twice as hard."

He said he was looking for signs the Government was going to do things differently.

"Now it's like lemmings and bus driving off the cliff."

Joyce said the Government should "pull the pin" on its first-year fees-free policy and there should be "no more provincial slush fund".

"lt's important that people stop and think about where things are going to be. Things are pretty ugly for the next couple of years."