Finance Minister Bill English says the Government is still on track to return to a budget surplus in the 2015 June financial year, despite the worsening drought.
Mr English says there is no doubt the drought's likely to have a detrimental impact on the economy and the Government's books, making it harder to reach its target.
Some economists are predicting the drought could cost the economy up to a billion dollars.
The Treasury has forecast a small surplus of $66 million in the year to June 2015 but Mr English says the drought will be factored into its forecasts in the May annual budget, although it doesn't think the effect will be large.
Mr English says it's highly unlikely the drought will push the country back into recession.
Prime Minister John Key says the impact on the books will depend on the extent to which the drought deepens.
Mr Key says tax revenue has been strong, leaving the deficit slightly less than expected but the drought, the reconstruction in Christchurch and the Auckland housing market will all have an impact on the surplus target.