The Green Party says figures released today showing a $1 billion worsening of Budget forecasts for 2014/15 is a "damning indictment" on the Government's economic management.
Finance Minister Bill English today revealed the Crown's operating balance was in track for a deficit of $640 million in 2014/15 instead of the $370m surplus forecast in the Budget Policy Statement.
Green Party co-leader Russel Norman said poor Government decisions are to blame for the forecast blowout.
"Once again, the National Government has failed to deliver on its economic promises," he said.
English today signalled there will be cuts to future new spending provisions to help bring the Budget back into surplus, but Norman said that was the wrong response.
"This is a damning indictment on National's economic management but all they see is an excuse to make further cuts to vital public services, which will not fix the problem," Norman said.
"Poor Government decisions are to blame for the poor performance of the economy and the continual downward revisions of the Crown accounts.
"National is borrowing over a billion dollars a year for its 2010 tax changes, which have had no positive effect on the economy.
Any more spending cuts will come on top of the previously-announced plan to dump the $800m earmarked for new spending this year in favour of a near-zero Budget.
"It's important that we return to surplus because New Zealand is one of the most indebted countries in the world as measured by our net international investment position," English told the Wellington Chamber of Commerce today in a pre-Budget scene-setter.
"We need to start rebuilding a buffer for when the next global crisis comes along. Surpluses give us choices we simply don't have while we're running deficits."
Ministers were also looking at the appropriate level of future operating allowances, he said.
Returning to surplus by 2014/15 would be a significant challenge, requiring tight control over spending for the foreseeable future, English said.
Deteriorating forecasts have flowed into lower government revenue expectations with the "Cullen" Superannuation Fund's revenue and State Owned Enterprises profits revised downwards while finance costs and earthquake costs were revised upwards.
Ministers were taking steps to ensure a return to surplus.
* Running very close to a zero Budget, meaning little new net government spending in this Budget out to 2014/15.
* Continuing to reprioritise existing spending into higher priority areas to ensure better public services.
* Considering the appropriate level of future operating allowances, while ensuring better service delivery.
* Continuing with revenue-enhancing measures signalled in Budget 2011 such as fairer tax treatment of employee benefits, new rules for mixed-use assets such as holiday homes, and a new approach for livestock valuation.
* Proceeding with $1 billion of public sector savings over the next three years, as announced in Budget 2011 to ensure chief executives had time to plan.
Those savings begin on July 1.
The Budget will also propose changes in the Public Finance Act so there are more checks and balances on ministers' spending decisions and their long-term effects.
This includes a proposed spending limit to restrict spending increases to population growth and inflation, as set out in the support agreement with ACT, English said.
The limit would exclude spending outside the Government's control, or which would help stabilise the economy in a downturn, such as spending on natural disasters, finance costs, unemployment benefits and asset impairments.
He said the Government would maintain a balanced approach by "keeping up entitlements to welfare and superannuation, and continuing with large programmes like Working for Families and interest-free student loans".
It would also spend more on health and education.