Labour leader and Prime Minister Helen Clark says the Crown is still in a solid financial position, despite its accounts slipping into the red.
In the three months to the end of September the Crown recorded a $757 million operating deficit, as turmoil on world markets hit its investments such as the New Zealand Superannuation Fund and ACC.
The forecast for the quarter had been a surplus of $943m.
But Miss Clark says New Zealand is in a strong position going into the international downturn.
"Fortunately the Crown itself is in a very solid financial position," she says.
"You'll see the Crown debt ratio is still down, at around 17.8%, having been reduced from about 35% when we came into government."
The Treasury says the deficit is largely due to investment losses of $1.8 billion from falling equity markets, plus a $400 million loss arising from a drop in the discount rate use to value workplace accident insurance liabilities.
When investment losses are excluded, the Crown saw an operating surplus of $891 million due to higher corporate and GST tax receipts.
But the Treasury says the higher tax take has been boosted by one-off effects and the financial crisis is starting to effect company tax payments.
The Government's net cash position, which is the difference between all income and spending, is in deficit by $3.2 billion.
Net Government debt was $2.6 billion, or about 1.4% of Gross Domestic Product.