Wellington - Government accounts were "flowing" with red ink because of the worsening global financial crisis as well as higher inflation, overvalued housing and high personal debt at home, New Zealand's Treasury said Monday.

The Treasury forecast the budget deficit to widen to 3.2 billion New Zealand dollars (2 billion US dollars) in four years, up from 64 million New Zealand dollars in the current fiscal year, which ends in March, the government said at a press conference ahead of a November 8 general election.

The deficit was recorded for the first time since 1994 as tax revenues dropped and government spending rose, the Treasury said.

Last year, the Treasury projected a cash surplus of 2 billion New Zealand dollars, but Monday's figures showed a drastic downward revision to a cash deficit of 5.9 billion New Zealand dollars in this fiscal year and an increase in deficits for the next four years. Gross debt was projected to rise from 17.4 per cent of the gross domestic product to 24.3 per cent by 2013.

The government also expected declines in economic growth, employment, 90-day interest rates and the New Zealand dollar.

Finance Minister Michael Cullen said the report highlighted the nation's vulnerability as a small trading nation.

But the opposition National Party's finance spokesman Bill English said in a press statement that "red ink flowed" throughout the books. He called it an "indictment" of the finance minister's "big spending, low-growth policies."

Council of Trade Unions economist Peter Conway told the nation's TV One television news that he was shocked at the severity of the projections although he expected the trend.

The National Party was due to release its tax policies Wednesday, but the opposition party would not alter its plans even after the release of the government report, English told radio New Zealand. (dpa)