The Budget deficit is running $1.2 billion worse than forecast as tax revenue continues to lag.
Treasury today released the Government's financial statements for the eight months to the end of February showing an operating deficit of $8.8 billion.
The operating deficit before gains and losses was $395m higher than expected at $5.5b.
Core Crown expenditure was $1.4 billion below forecast, partially offset by revenue tracking $1.2 billion below forecast.
The lower-than-expected revenue was mainly due to a shortfall of $825m on tax - an improvement from the $946m variance last month.
However, all three main tax-types remained below forecast.
Source deductions were $200m below forecast as the labour market, employment and wage growth were weaker than expected.
GST was $369m below forecast because earthquake-related insurance refunds continued to be above forecast.
Corporate tax was $193m below forecast as business profitability was weaker than expected.
"February's year-to-date tax revenue result is consistent with expectations that full-year tax revenue will be below PREFU forecasts, as indicated in the Budget Policy Statement released on February 16," Treasury said.
Since the pre-election economic and fiscal update (PREFU) EQC's expenses, net of reinsurance, had increased $500 million after a revision of its estimated liability for the Canterbury earthquakes.
Most of the increase ($450 million) related to the December 23 shake.
Gross debt was running at $76b or 37.2 per cent of gross domestic product and net debt was $49b or 24 per cent of GDP.
Finance Minister Bill English said the higher earthquake costs were outside the Government's control but they reinforced the need to remain focused on things the Government could influence, such as spending.
"So we will have to remain disciplined to meet the challenging goal of getting back to surplus by 2014/15, when we can start repaying debt."
Prime Minister John Key and English this week signalled they would bring own a zero Budget in May, dumping the previous $800m earmarked for new spending.
"These earthquake cost estimates will continue to be updated as more information becomes available," English said. "But I'm encouraged that we've kept core Crown expenses $1.4 billion below forecast at $45.2 billion for the eight months to February.
"As we move towards the Budget in May, this discipline around spending will remain our strong focus."
- © Fairfax NZ News
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