Wellington  - The New Zealand government on Thursday warned of tough times ahead after new Treasury forecasts painted a gloomy picture for an economy that has already been in recession this year.

The Treasury predicted a steep rise in unemployment from 3.7 per cent this year to 6.4 per cent over the next 15 months, economic growth virtually stagnant until 2010-2011 and soaring national debt.

After years of budget surpluses, the Treasury forecast cash deficits rising from 6.6 billion New Zealand dollars (3.8 billion US dollars) this fiscal year to 11.4 billion New Zealand dollars by 2013.

Finance Minister Bill English said the centre-right government that came to power last month would maintain a promised stimulus package to boost the economy but would put a clamp on other state spending and bring down an austerity budget next year.

He said that New Zealand had one of the lowest levels of government debt in the developed world and the administration would not allow it to reach the Treasury's projected levels because of the unfair burden that would place on future generations.

Treasury analysts said gross debt was set to almost double to 33 per cent of gross domestic product by 2012-2013 as unemployment rose and government deficits increased due to a shrinking tax take.

"The government is committed to a range of effective policy responses to ensure the worst-case scenarios for debt and deficits will not happen," English said.

"Cuts to government expenditure in an attempt to balance the books, and which have a substantial impact on demand, would simply push the economy deeper into recession," he said.

"Our current focus is setting in place a plan to manage the New Zealand economy through the global economic turmoil. This will ensure that New Zealanders are as strongly placed as possible to take advantage of better economic times when they come along." (dpa)