The government's financial outlook is expected to deteriorate as a sluggish economy and weaker tax take further delay a return to budget surplus and cause an increase in borrowing.

The Half Year Economic and Fiscal Update (HYEFU) will be released tomorrow with updated financial and economic forecasts for the next few years and comparison against May's budget.

Westpac senior economist Darren Gibbs said he expected a deeper shade of red for the numbers.

"The Government is trying to keep tight control of its spending, but even there spending is running ahead of the budget forecasts."

"They can't do much in the short term to drive the productivity growth to generate the growth in the tax base that's needed to bring the revenue in to get us back to surplus, so it does look like the surplus will be yet again delayed until 2028/29."

Broad expectations are for the budget deficit to push out by more than $1 billion from the budget forecast towards $15b for the year ended June, with increases in subsequent three years.

ASB senior economist Mark Smith said given the pressure on government finances from a softer tax take and higher expenses there was a message of fiscal discipline was to be expected from Finance Minister Nicola Willis.

"We expect the HYEFU to toe a tight fiscal line. Little change, if any, is expected to budget operational allowances of $3.2b in the last budget and then $2.4b for subsequent budgets."

He said the emphasis would be on reduction and further reallocation of existing spending, although the fall in interest rates would offer some reduction in debt servicing costs.

In addition to downgrades to financial forecasts, Treasury is expected to revise lower its near term economic forecasts to reflect the soft end to 2024 and only gradual improvement in 2025.

But with bigger deficits for longer the pressure will go on the government's need to borrow.

"A delay in the forecast return to OBEGAL (budget) surplus ... wider-for-longer cash deficits, a higher debt projection, and more bonds for NZDM (NZ Debt Management) to issue and the somewhat fatigued market to absorb," ANZ senior economist Miles Workman said.

Economists' general view is that the borrowing programme will be lifted by another $6b over the next three to four years.

However, notwithstanding the gloomier outlook and prospect of weaker financial and economic forecast, the government was expected to stick with a familiar message in the accompanying Budget Policy Statement which will outline priorities for next year's budget.

"All up, the HYEFU and accompanying Budget Policy Statement are likely to reconfirm the government's "steady as she goes" approach to fiscal consolidation ... as the minister walks the talk all against a weaker economic backdrop," Workman said.

rnz.co.nz