Prime Minister John Key says he is confident the Government will get back into surplus, despite new figures showing the deficit was worse than expected in the 11 months to the end of May.
"We are very committed to getting the country back into the black, and we will be taking the the steps necessary to ensure that," Key said.
Treasury reported the Budget deficit was tracking $332 million worse than forecast for the 11 months to the end of May.
The Government has been promising to deliver a Budget surplus, and the May Budget forecast a surplus for the 2014-15 year of $372 million, well ahead of the paper-thin $86m tipped in December.
Today Key said achieving a surplus would require careful economic management, and he would be surprised if the full $1.5 billion set aside for new initiatives or tax cuts would be spent.
But Labour finance spokesman David Parker said the higher deficit suggested the economic recovery may have already passed most New Zealanders by.
"The potentially weaker recovery was today reinforced by plunging business confidence recorded in NZIER's Quarterly Survey of Business Opinion.
"Fewer businesses expect the economy to improve in the next six months, yet 93 per cent expect interest rates to keep rising and the consensus opinion is that inflation will hit 2.5 per cent by the end of 2014."
Below forecast tax revenues from GST, income tax and companies showed that "despite the Government's puffery, Kiwi families are yet to see the benefits".
Finance Minister Bill English said the accounts "confirm that achieving a surplus in 2014/15 requires a determined focus on careful spending and responsible economic management".
"Just as the Government's careful fiscal stewardship has taken New Zealand within sight of fiscal surplus in the coming year, the last thing we need is a return to big government spending programmes that would crowd out private investment and put that surplus in jeopardy," he said.
"New Zealanders should be wary of such approaches from political parties as we head towards the election in September," he said.
"These latest figures cover the first 11 months of the 2013/14 fiscal year and we remain fully committed to achieving a surplus in 2014/15," English said.
LOWER TAX TAKE
Treasury said the budget deficit excluding gains and losses (Obegal) was $1.1 billion against $770m forecast in the May 15 Budget update, due to softer than expected GST and corporate tax returns.
Officials said it was too early to know the likely impact of these results "on the current and future financial years as both downside and upside risks exist".
The Government's financial statements for the 11 months to the end of May, released today, show Core Crown expenses of $64.2 billion were 0.1 per cent less than forecast while tax revenue of $56.5b was 0.8 per cent down on forecast.
However, that was still up $2.5b or 4.6 per cent on the same period in 2013.
"This year-on-year growth reflected positive macroeconomic conditions leading to growth largely in source deductions and GST," Treasury said.
"While tax revenue has increased year-on-year, the result was $459m below forecast with both GST and corporate tax being less than expected ($238m and $120m respectively)."
It said the variance in GST was mainly due to lower than forecast domestic consumption growth, although some of that would likely reverse in June.
The corporate tax shortfall was partly due to lower than expected terminal tax assessments and the timing of provisional tax assessments.
Treasury's next official set of forecasts will be published on August 19 in the Pre-election Economic and Fiscal Update, which will include updated assessments of macro-economic conditions and fiscal forecasts.
The operating balance (including gains and losses) was in surplus by $4.3 billion.
Strong international share markets saw the value of financial investments rise by $4.8b, which was $1.4b ahead of forecast.
These gains were somewhat offset by an increase in ACC's insurance liability due to recent decreases in short-term discount rates.
Core Crown residual cash deficit was $3.8b, $398m more than forecast due to lower than forecast tax receipts. These lower tax receipts also flowed through to core Crown net debt which stood at $59.5b, equal to 26.2 per cent of GDP.
At 31 May, total Crown assets were valued at $251b and liabilities were $174.3b.
Net worth stood at $71.3b.
What do you think of claims Kiwis have been misled about mass surveillance?Related story: US spy base in NZ?