Treasury has painted a very ugly economic picture for the incoming National government with cash deficits increasing, growth shrinking, tax revenue diminishing and unemployment rising.

Prime minister designate John Key was briefed by Treasury on Wednesday and told the economic outlook had deteriorated further since the pre-election fiscal update (Prefu).

Key did not go into detail then, but told reporters the scenarios were “a little bit” worse than they had been.

“They are more pessimistic but I wouldn’t describe it as Armageddon,” he said.

On Thursday outgoing finance minister Michael Cullen released a Treasury economic update written on November 7 – the day before the election, but delivered to him on November 10.

Shortly after it was released, the Treasury issued a statement saying the figures were “very preliminary in nature” and were indicative only.

“The figures were produced at a very early stage in the normal forecast process, using high-level approximation to generate fiscal numbers,” the Treasury said.

“The figures are still being worked through. They will be subject to considerable review and revision, and significant changes are possible.”

The National Party suggested Cullen had breached convention by releasing the Treasury document.

“National is the government-in-waiting. Labour is the outgoing government and is subject to the usual caretaker conventions,” finance spokesman Bill English said.

“The actions of the outgoing Labour government … shows that these conventions are not thoroughly understood.”

English said the Treasury update had been labelled `in confidence – very preliminary’.

He said an incoming government should not be bound by decisions or actions of a government that had effectively lost office.

The economic update released by Cullen would have formed the basis of yesterday’s briefing to Key and his incoming finance minister Bill English.

The main finding in the report is that growth levels are likely to be hit even worse by the global financial market turmoil.

The economy would suffer from weaker export demand, lower commodity prices, lower housing values and weaker confidence.

The economy is expected now to sputter along at 1.3 per cent growth in the 2010 March year pushing up unemployment to 5.7 per cent (compared to 5.1 per cent in Prefu).