Government finances have deteriorated by a further $1 billion, leaving ministers scrabbling for hundreds of millions in savings to meet Prime Minister John Key's pledge to get back into surplus by 2014/15.
Finance Minister Bill English yesterday told the Wellington Chamber of Commerce that returning to surplus by 2014/15 was a big challenge that would require tight control over spending for the foreseeable future.
The scale of the challenge was highlighted in preliminary Budget estimates ministers have received.
"They revealed a $1 billion deterioration in preliminary forecasts of the operating balance before gains and losses in 2014/15, compared to the Budget policy statement in February.
"In other words, the preliminary Budget estimates showed a $640 million deficit in 2014/15, compared to the $370 million surplus predicted in the BPS."