Treasury is preparing to further slash its forecasts for New Zealand's economic growth, as the global economic crisis continues.
Treasury secretary John Whitehead says the next update, due mid-December, will be even gloomier than the one given to the new government shortly after the election.
Mr Whitehead says Treasury is on track to cut its forecast for the economy to grow by 0.4%in the year to March 2009, to near zero.
He blames further weakening in the world economy, which he says will push unemployment above 5% of the workforce.
However, Mr Whitehead says low debt means the Government can afford to increase spending to offset the negative economic backdrop.
He also points out that the Reserve Bank has more room than most countries to cut official interest rates as a way of stimulating the economy.
Economists predict the Reserve Bank will cut rates by at least 0.75 percentage points at its next official review on 4 December. The Official Cash Rate is currently 6.5%.