Finance Minister Bill English still expects the Crown books to return to surplus in 2015.
The operating balance before gains and losses (obegal) fell to a deficit of $3.3 billion for the 11 months ended May, down about $763 million on the forecast deficit of $4 billion.
The operating balance, which includes dividends mainly from Government Superannuation investments, along with investment returns from ACC, was $6.5 billion, compared with a forecast of $3.75 billion, a 72.5% turnaround.
The numbers get more impressive when they are compared with the corresponding period last year.
The obegal was a deficit of nearly $6 billion in 2012 compared to the deficit of $3.3 billion this year and the operating balance was a deficit of nearly $11 billion, compared to a surplus of $6.5 billion this year.
The Treasury chief financial officer Fergus Welsh said all key indicators were better than forecast.
The lower obegal was due largely to higher-than-forecast Crown tax revenue.
At $502 million above forecast, core Crown tax revenue continued the trend from recent months with large positive improvements in corporate tax and tax from other persons, partially offset by a negative variance in GST.
Higher-than-expected profitability, in part owing to the strength in financial markets, contributed positive variances and Mr Welsh expected the differences in core Crown revenue would persist for the rest of the financial year.
Sustained strength in equity markets and reductions in the valuation of long-term liabilities resulted in gains of $9.4 billion so far this financial year, $2 billion ahead of forecast. Gains on the Crown's investment portfolios were $1.7 billion higher than expected, with the New Zealand Superannuation Fund contributing $1.2 billion.
Also, actuarial gains on the ACC outstanding claims liability were $357 million above forecast at $1 billion compared to the year-to-date losses of $800,000 at April 30.
The partial sale of Mighty River Power was in May and was captured in the latest financial statements. Total proceeds from the sale were just below $1.7 billion, compared to the $1.5 billion included in forecasts.
Mr Welsh said the higher-than-forecast cash proceeds from the partial sale, combined with favourable tax receipts and operating payments, contributed to the residual cash deficit being $768 million below forecast. Net debt was $800 million lower than forecast at $768 billion, or 26.4% of GDP.
Mr English said the improving economy suggested the lift in tax revenue was likely to remain through to the end of the financial year.
Compared to May 2012, tax revenue was $3.5 billion higher for the first 11 months of this year.
