The Government has posted a $2 billion operating deficit for the first three months of the financial year, a bigger deficit than the $1.1 billion forecast in the May Budget.
The Treasury says in the three months to the end of September, tax income was lower than forecast. It expects that to change later in the financial year.
Once gains from investments by the New Zealand Superannuation Fund and ACC are taken into account the deficit was $175 million, much better than the Budget forecast.
The cash deficit - what the Government has to pay for through borrowing - was $3.3 billion, also better than forecast.
Total spending was largely in line with forecasts although benefit payments were $280 million higher than predicted.
Finance Minister Bill English says the operating deficit shows the Government has a tough job to get its finances into shape.
Mr English says while there are early signs of New Zealand moving out of recession, businesses have not been doing well.
The latest Government accounts show company tax down $900 million on what was forecast.
Mr English says businesses appear to have struggled more than forecast and it could be sometime before a recovery leads to a lift in the tax they pay.
Net Government debt stood at $21.25 billion, equivalent to 11.8% of gross domestic product. The figure was $367 million higher than forecast.
