The Government remains on track to return its accounts to surplus by 2015 and Finance Minister Bill English says the result for the year ended June was considerably better than Treasury forecasts.
In the year ended June, the Government's operating balance, excluding gains and losses (obegal) was a deficit of $4.4 billion, down from the $6.3 billion deficit forecast in the Budget this year and the $7.9 billion deficit forecast in Budget 2012.
The obegal has more than halved from the $9.2 billion deficit reported in June last year and is substantially down on the $18.4 billion deficit reported in June 2011.
The operating balance, which includes the substantial investment gains made by the New Zealand Superannuation Fund, ACC and the Government Superannuation Fund, recorded a surplus of nearly $7 billion, well ahead of the $1.8 billion forecast in May.
The NZ super fund recorded a gain on investments of $4.4 billion and ACC recorded a $1.8 billion gain.
Mr English said the Government had consistently examined how public services were delivered, allowing it to reduce costs.
''The annual accounts confirm we are making good progress in putting the Government's finances on a stronger footing and in getting back to surplus.''
However, Labour Party finance spokesman David Parker said the Government was creating a two-speed economy that was hurting too many New Zealanders.
Property speculators were creaming huge profits while the door was slammed shut on the home-ownership dreams of thousands of first-home buyers.
''We see speculator industries succeed while manufacturers and exporters lay off workers.''
The two-speed economy was also one where neglected regions haemorrhaged jobs and skilled people because the Government's eye was only on Auckland voters and the Christchurch rebuild, Mr Parker said.
Despite the progress being made, Mr English warned there was no room for complacency.
In the past financial year, the Government was still borrowing a net $110 million a week, compared to nearly $260 million a week in 2010-11.
Once surplus was reached, the Government had choices about reducing debt and investing more in priority public services and infrastructure.
The consequences of too much government debt were clear in Europe and the United States, where public services and pensions had been cut and higher taxes implemented, he said.
Treasury's Budget 2013 forecasts showed net core Crown debt was expected to increase from $10.3 billion in June 2008 to more than $70 billion by June 2017.
Mr English said an active approach to managing the Government's finances needed to continue to get debt below 20% of GDP by 2020.
In the year to June, core Crown tax revenue increased by $3.6 billion to $58.7 billion, driven by higher incomes and consumption. Core Crown expenses increased by $1.2 billion to $70.3 billion, in large part due to costs around student loans.
Expenses were about $3.4 billion below Budget 2012 forecasts, partly as a result of lower-than-forecast Canterbury earthquake expenses.
The Crown accounts showed the Government received $1.685 billion from the sale of 48.2% of Mighty River Power.
After the cost of sales ($22 million) and the estimated cost of the bonus share issue were deducted, the net proceeds from the sale were $1.638 billion.
When the proceeds were compared to the interest in the net assets sold, the Crown made a gain on the partial sale of $167 million.
