The Government's books are continuing to deteriorate as the cost of the Christchurch earthquake is added to a rising operating deficit.
But the Green Party is warning that cutting spending to bring the books back into surplus could make a bad situation worse.
The Government recorded an operating deficit of $9.2 billion for the first eight months of the financial year - nearly $1.7 billion higher than forecast.
However, after investment gains by the New Zealand Superannuation Fund and ACC are included, the deficit was $2.48 billion.
The Treasury warns the Government's books are going to get worse when the full effects of the Christchurch quake on 22 February become clear.
In its financial statements for the eight months to February, it says the earthquake and tsunami in Japan and unrest in the Middle East and North Africa are also likely to put a dent in the books.
The Treasury says it included an initial $1.5 billion cost of the Christchurch quake in its latest statements.
Finance Minister Bill English says the latest financial statements reinforce the need to bring spending under control and the Government cannot continue to run deficits indefinitely.
But Green Party co-leader Russel Norman believes spending cuts will drive New Zealand deeper into recession.
The Labour Party's finance spokesperson, David Cunliffe, says the latest accounts reflect how bad things are and the Government needs a plan for growth, but does not have one.