Top of the list of challenges will be showing a commitment to getting back into surplus in order to allay any concerns held by credit rating agencies.
Fitch already has New Zealand on a negative outlook.
ANZ-National Bank chief economist Cameron Bagrie expected the Treasury to upgrade its economic growth forecast but to downgrade its tax revenue forecasts.
"This leads to a worse near-term fiscal position but marginally better position by 2012-13.
"The persistence and size of fiscal deficits, along with the rate of debt accumulation, will reinforce the need for a sustained period of restrictive fiscal policy."
It was unlikely the Budget policy statement would contain specifics.
But anything that was strong on growth, savings and productivity and a more balanced economy would be a potent sign that material changes were pending, he said.
That could assist monetary policy, although the market would likely require something more substantial.
Mr English faced the challenge of shifting the stance of fiscal policy from expansionary to a contraction mode to allow monetary policy to remain accommodating for longer, with the hope of taking pressure off the currency as well, Mr Bagrie said.
The Finance Minister also needed to deliver or flag policy changes that would help improve the trend rate of growth for the economy and do all of that while keeping promises made to the electorate.
The three things Mr Bagrie would be watching for closely were:Updated forecasts for the fiscal position.
A broad outline of any new fiscal strategy in the Budget policy statement, including flagging any potential tax changes.
Any changes to the Debt Management Office's bond tender programme.
"There is no doubt that next year's Budget is set to be tight, with the Government sticking to its $1.1 billion allocation for new operating spending.
"Even so, keeping to the $1.1 billion will be a challenge itself given cost pressures with the health and education sectors, in particular."
Mr Bagrie expected there would be a further drive for cost savings across the whole public sector, or at least new priorities for some spending.
That would still be "mere tinkering" at the margins and those measures by themselves were not enough to address the deteriorating fiscal situation.
Further structural changes to government spending and tax policy were required, he said.
In that regard, Mr Bagrie was looking for the Budget policy statement to outline any major changes to come at next next year's Budget.
Recommendations from various working groups commissioned by the Government - Taskforce 2025 and the tax working group - had been cited as too radical, but it would be unrealistic to think all the recommendations were completely off the radar.
"There is a fiscal-consolidation imperative.
"Australia is also a moving target to catch on the per capita income stakes and they, too, have an upcoming tax review that could turn up the heat on change on this side of the Tasman."
The Government had already announced a suite of changes to the energy sector, adopting most of the recommendations made by the Ministerial Review into the electricity market, so some reviews were being followed up, he said.
"All up, we suspect the Budget policy statement will still lack substance, but we will be closely reading the spirit of the document."
