Figures released by the Treasury yesterday show that core crown tax revenue was $1.57 billion, or 3.8%, lower than forecast at the Pre-Election Fiscal Update. The gap in revenue widened significantly in the month of March.
Mr English said the Treasury statements were consistent with preliminary Budget forecasts which showed a $1 billion deterioration since the February Budget Policy Statement.
The Government remained committed to returning to surplus in 2014-15 and the Budget on May 24 would confirm that.
"But we shouldn't underestimate the challenge. Returning to surplus will require tight spending control for the foreseeable future," he said.
What Mr English did not note was that core crown expenditure was $1.75 billion, or 3.3%, lower than forecast. Some of the variance was the result of expenditure delays.
The Treasury chief financial officer Fergus Welsh said the assessment was the revenue gap would narrow by about $700 million before the end of the financial year.
"While the economy was generally weaker than expected to March 31, stronger performance by some corporate taxpayers has also been observed during the reporting period.
"Consequently, a boost to tax revenue is expected to make up approximately $400 million of the lost ground in the final quarter of the financial year."
The year-to-date March results also included about $300 million of timing differences in corporate tax that were mostly expected to reverse before June 30, he said.
The three main revenue tax-types continued to be below forecast.
Corporate tax was $659 below forecast.
GST was $569 million below forecast, mainly due to earthquake-related insurance refunds being above forecast.
The Treasury anticipated a temporary component of about $200 million of that would reverse before the end of the financial year.
Source deductions were $236 million below forecast as the labour market and employment and wage growth had been weaker than forecast in the October update.
The operating balance before gains and losses (obegal) was a deficit of $6.13 billion compared with a forecast of a $5.34 deficit. The operating balance was a deficit of nearly $9 billion compared to a forecast deficit of $7.6 billion.
Green Party co-leader Russel Norman blamed the Government's "very expensive" 2010 tax cut package for driving the Government accounts further into the red.
"This revenue crisis is of their own making. The National Government is failing the basic economic task of fiscal prudence, ensuring there is enough revenue to cover government expenditure."
The Treasury figures showed that tax revenue for the year ended March was $39.8 billion, up $1.85 billion, or 4.9%, on the March 2011 revenue.
The obegal for the March year was a deficit of $6.13 billion, down from the $10.2 billion deficit in March 2011, but the operating deficit was up significantly at $8.9 billion, compared with the 2011 deficit of $3.3 billion.
