The Government has posted a record deficit of $10.5 billion as the recession makes itself felt, but an economist is urging it to spend more.

The latest deficit compares with a surplus of $2.4 billion in the year to June 2008. The Government now needs to borrow $250 million a week and Finance Minister Bill English says the impact of the recession on the Government's finances will be felt for many years.

The deficit is more than the Government predicted or budgeted for.

Council of Trade Unions economist Bill Rosenberg says rather than pull back spending, New Zealand needs to borrow more to keep the economy ticking over.

"Making sure that all of us have enough money to spend to keep the economy going, to keep jobs going and make sure the economy doesn't go into a downward spiral."

The Government says tax revenues over the next four years will be about $16 billion less than they would have been if the economy had continued growing at its usual rate.