The New Zealand Government's books crashed $10.5 billion into the red in the financial year to June as the recession, tax cuts and extra spending ended years of healthy surpluses.
The result represents a $12.9 billion deterioration in the public finances compared with the previous year.
The Government is now borrowing heavily to make up a cash shortfall of $8.6 billion.
Finance Minister Bill English says the Government will have to borrow $250 million a week for at least the next four years to cover future cash deficits. It could then take up to 20 years to repay the debt.
Mr English says current low interest rates will not last and by 2014 the Government will be spending $5 billion a year just to service its debt.
He believes it could be at least 10 years - depending on how strongly the economy grows - before the public finances get back into surplus.
In the last financial year, the Government's tax take fell nearly $3 billion from the previous year, while spending was up $7 billion.
