Treasury secretary John Whitehead said in a report released this week that international data pointed to an improved global outlook, but the recovery looked fragile.
GDP figures for the June quarter surprised on the upside, with positive growth recorded in Australia, Germany, France and Japan.
Forward-looking indicators of manufacturing activity generally increased, with some at expansionary levels.
There were also tentative signs of stabilisation in the US housing market, although risks remained, he said.
"The Chinese economy is playing an important role in supporting global activity and is becoming an increasingly important destination for Australasian exports. However, the recovery remains fragile, with concerns about how sustainable it will prove once monetary and fiscal stimulus begins to be removed."
Such doubts impacted on the Chinese sharemarket in August, with nervousness spreading to other markets in early September, Mr Whitehead said.
A fall in imports, reflecting a weak domestic demand, were a key driver of a narrowing in the annual merchandise trade deficit from $3.1 billion in June to $2.5 billion in July.
The growing importance of China was also apparent in those figures, with Chinese demand helping to support exports. The value of annual exports to China had grown 61% over the past year, with China now New Zealand's third largest export destination.
Continued rises in the exchange rate over August meant the New Zealand dollar over July and August was about 21% higher than in the Budget forecasts, limiting the gains from the recovery in overseas demand, Mr Whitehead said.
There were signs domestic spending might be increasing, with retail sales volumes in June recording their first quarterly increase for seven quarters.
"Together, these factors suggest that imbalances such as the current account deficit and household indebtedness are less likely to unwind significantly."
Finance Minister Bill English said it was too early to be sure about the extent of an economic recovery, and more rapid growth was needed to absorb jobs that had been lost.
Any uplift was good, particularly if it helped preserve jobs, he said.
"Our concern is that in the longer term we need a sustainable recovery - a recovery that is built on more debt and higher prices for houses isn't going to last too long. We're looking for how to make sure we get a sustainable, export-led recovery," he said.
New Zealand Manufacturing Exporters Association chief executive John Walley said with house prices and consumer spending starting to rise again, it was looking increasingly likely another domestic economy bubble would form, much like the one that had just burst.
"This growth profile simply sets New Zealand up for a further economic shock... New Zealand cannot pay its way in the world while the export sector continues to contract."
It was important the Government took steps to encourage investment in the tradeable sector to correct those imbalances, he said.
A more stable exchange rate, and a balanced tax system, were the keys to achieving that goal.
A capital gains tax, taxing all forms of income, with the money going to productive industries, was also needed, Mr Walley said.
