Prime Minister John Key said his Government looks set to drop the hopes it had to return to surplus earlier than 2014-2015.
While that was the target date set out in the May Budget, both Key and Finance Minister Bill English have repeatedly expressed their hope that New Zealand could return to surplus earlier.
But at his post-Cabinet press conference yesterday, Key conceded that the later date might be more realistic with prospects of global growth taking a hit.
"We've quietly been hopeful that we might get there slightly earlier.
"That might now mean that that's not possible and that we're at 14-15 again. In the end we have got to just work through the situation as we find ourselves."
The tough time the United States economy and Europe were in would have an impact on global growth rates.
"In the end the United States is a third of the global economy; Europe is a huge trading powerhouse.
"So if those economies are weaker for longer, it has an impact on New Zealand."
Key had spoken at the weekend to English, who was in Washington for meetings of the World Bank and International Monetary Fund.
"It's fair to say he characterised the mood as very dark," Key said.
"There is genuine fear that both the United States and Europe could be in for a tough time in the next 12 to 24 months."
Key also said he had met Reserve Bank Governor Alan Bollard last week, as he did from time to time, and he had estimated that global growth would be reduced by about half a per cent, from 3.7 per cent to about 3.2 per cent.
"Generally he was saying it would have some impact on New Zealand but at this point it is not significantly material."
The concern about Europe centres on Greece's debt and Key put the odds of Greece defaulting on its debt at "better than 50 per cent".
He said the "lucky part of the story" from New Zealand's perspective was that Asia had been emerging very strongly, and had been "somewhat immune" to what had been happening in the United States and Europe.
If China could remain strong, and continue growth of 8 per cent or more, it would be very good for New Zealand.
The Government had a plan to get the deficit and spending under control and borrowing in the present financial year of $20 billion would fall to $5 billion next year - much of it already pre-funded.
He said when National took office in 2008 - in the midst of the global financial crisis - the pre-election fiscal update forecast neverending deficits and ever-rising debt.
But English believed that unlike late 2008 and early 2009 when there had been "significant stress" in the financial markets and the funding markets effectively closed to most countries, more discernment was being exercised now.
"So it is particular institutions and particular countries that are much more badly affected," Key said.
There was some impact on liquidity but it was not wholesale.
The markets were still open to New Zealand. It had borrowed last week.
New Zealand was in a vastly different position to 2008.
"We are not immune from what is happening in the world, but most countries would trade their position with New Zealand and take our position any day."
English returns home today.By Audrey Young Email Audrey