A February surplus of nearly $400 million, along with the $300 million to $350 million special dividend from the sale of Kiwibank, will put the Government in a strong spending position for next year's election.
The Crown accounts, released on Friday, reported an operating balance before gains and losses (obegal) of $398 million, $730 million better than the Treasury forecast.
Finance Minister Bill English said the result had helped reduce debt, which at 25.3% of GDP was more than $1.5 billion lower than expected in the Treasury's forecasts.
The Government announced earlier this week ACC and the New Zealand Superannuation Fund had proposed buying between them a 45% share of Kiwibank.
Essentially, the Government is selling a state-owned asset to two other government-controlled entities.
The sale price was put at $495 million, valuing Kiwibank at $1.1 billion.
The Government expects to receive a special dividend of between $300 million and $350 million from the sale, with the rest helping Kiwibank owner New Zealand Post reduce debt and concentrate on growing its lucrative parcel and overseas operations.
Budget 2016, to be delivered late next month, has $1 billion of new spending allocated, but next year, an election year, the Government planned $2.5 billion of new spending.
Having lower debt and higher income will allow the Government some flexibility on spending.
Core crown revenue at $48.1 billion was $606 million higher than forecast, with higher than expected core tax revenue.
Net losses were $5.3 billion higher than forecast due to higher than expected actuarial losses on the ACC claims liability and higher losses on investments due to unfavourable market conditions.
Those losses pushed the operating balance into a deficit of $5.1 billion, $4.6 billion greater than forecast.
At this time last year, the operating balance was a deficit of $952 million and the obegal was a deficit of $269 million.
Mr English said the monthly results could fluctuate significantly.
The February obegal surplus was $500 million less than in January and the Government did not put too much stock into any particular month's results.
"What is more pleasing is the overall trend in the Government's books. We've moved from an $18.4 billion deficit to around balance, and as long as we remain fiscally prudent, we are on track to reduce net debt to around 20% of GDP in 2020.''
