WELLINGTON - New Zealand's deficit is expected to worsen in the coming year as the economic outlook has deteriorated, finance minister Nicola Willis warned in a speech on Thursday.

Willis, who was speaking to the Employers and Manufacturing Association in Auckland ahead of the release of the government's budget and fiscal forecasts on May 30, said efforts to reduce debt had been made much harder as economic forecasts deteriorated.

Willis said details of how the government plans to return the books to surplus would be released next week, along with operating allowances for future budgets

"But in the words from a Florence + The Machine song I quoted recently, it is darkest before the dawn. The deficit is expected to be larger next year than it is this year, before starting to improve," Willis said.

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In the government's half yearly economic update in December, the 2024-25 operating deficit not including gains and losses was forecast to be NZ$6.14 billion ($3.75 billion), an improvement on the forecast deficit of NZ$9.32 billion for the year ended June 30.

However, since then the economic situation has deteriorated with the country now in a technical recession.

Willis said details of how the government plans to return the books to surplus would be released next week, along with operating allowances for future budgets.

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"These allowances represent the amount available in the next three budgets for discretionary spending and revenue initiatives." .