Govt 'hamstrung' by its debt promise

The government's promise to cut debt amid a budget emergency means the central bank has to work harder to stimulate the economy, an economist says.

A coalition election promise to slash debt means the federal government's hands are tied when it comes to stimulating the sluggish economy, a leading economist warns.

Goldman Sachs chief economist Tim Toohey says the economy needs government stimulus to lift growth out of the doldrums but election promises to cut debt had left the government hamstrung, meaning the Reserve Bank would be forced to pick up the slack by cutting interest rates to 1.75 per cent this year.

The government would use Tuesday's budget as a stepping stone to change its message that debt is bad and must be removed at all costs, he predicted in a briefing note on Thursday.