A $1.4 billion haircut on the value of KiwiRail risks knocking the Government off its course to surplus by 2014-15.

Annual crown accounts released yesterday showed the Government had missed its predicted deficit for 2011-12 by $800 million, but Finance Minister Bill English insists the 2014-15 surplus target remains realistic.

Speaking from Germany last night, Mr English said there was "always room to move" in future Budgets in order to meet the Government's surplus target. "In each of the last two or three Budgets, we've each time raised a bit of revenue and shifted expenditure around so that we can contain the growth [in spending] and I'd imagine we'll continue to do so."

A poll of major financial institutions by the Wall Street Journal found only one out of eight - Westpac Bank - felt the Government could reach surplus by 2014-15. Seven others tipped a surplus in 2015-16.

In May, the deficit was projected to come in at $8.4b for the 2011-12 year but it was yesterday confirmed as $9.2b. This was still well down on the $18.4b deficit recorded last year.

Revenue was up by $3.5b on last year and spending down by $1.4b, but the gains were cancelled out by a writedown in the value of KiwiRail.

The state-owned rail company announced a restructure in June, which sliced $8.6b off its value. Some $1.4b of the writedown was loaded onto the deficit, nudging it $800m over what had been expected and raising further questions over the chances of a 2014-15 surplus.

Prime Minister John Key said the surplus was "not an absolute precision science so it can get mucked around a little bit depending on what happens to global growth".

"There are some things that are a bit beyond our control."

But Mr English was more bullish, insisting the surplus target remained realistic.

"These figures show we're on track. We recognise there is global uncertainty and a lot of work to get there but we're sticking to the target," he said.

"If you put aside KiwiRail, Government spending is on track and essentially under control."

Markets were subdued in response to the figures, with little movement in the dollar or interest rates.

BNZ said although the figures were "close to budget", the deficit remained "sizeable" and the Government's 2014-15 surplus target "looks a challenge".

Progress towards a surplus will become clearer in the Half Year Economic and Fiscal Update, expected in December, which will also show the impact of the delay in the partial asset sales programme.

THE DEFICIT

$9.24b total

$7.8b without the writedown of KiwiRail

$7.34b without the cost of the earthquakes

$5.9b without earthquake costs and the writedown of KiwiRail

UPS AND DOWNS

Tax revenue, up $3.5b to $55.1b

Government spending, down $1.4b to $69.1b

Net debt, up $10.54b to $50.67b

Net worth, down $21.23b to $59.35b

- © Fairfax NZ News