Budget deficit worsens slightly

This year's promised Budget surplus is under renewed pressure with Prime Minister John Key conceding it will be "very tight" and may come in a year late.

New Treasury figures showed the state of the books had worsened slightly in the first three months of the financial year, with the deficit at $725 million - $79m higher than forecast in May

Key said his confidence in reaching the target had gone "back a step" since the election.

The Government still wanted to achieve a surplus this year, and Finance Minister Bill English was working on the numbers. Treasury would update its forecasts on December 16.

But he wouldn't take "a knee-jerk reaction to get there".

"We are on the right trajectory. We've been massively slashing those deficits so in the preferred world we'd get there in 2014/15. If we don't it will be a year later," Key said.

The question was how close the surplus would be and what it would take to achieve it.

The pre-election forecast from Treasury tipped a narrow surplus of $297m for the year.

But Key said there were a number of things weighing against it. Tax revenue was running behind forecast, and inflation was low.

"Ironically it's great for the economy, but it has some impact on our capacity to meet surplus."

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Labour finance spokesman David Parker said the Government was running our of excuses and its struggle to reach surplus was due to poor economic management.

"The drop in GST and the warning of a fall in total tax take shows what happens when the economy is unbalanced – typical New Zealanders can't get ahead."

At the same time the huge salary increases for power companies' chief executives was out of line with the meagre pay rises of most Kiwis.

Finance Minister Bill English said the accounts for the latest three months were broadly consistent with forecasts "but highlight the challenge of returning to surplus".

Expenses at $18.1 billion were 0.7 per cent higher than forecast and core tax revenue of $15.5b was 0.5 per cent above forecast. 

Treasury said both other individuals and corporate tax was better than expected but GST was $175m lower as a result of softer domestic consumption. 

English said tax revenue remained uncertain for the rest of the financial year.

Core crown net debt stood at $62.6b, equal to 27.3 per cent of GDP.

 - Stuff

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