But he remained confident a surplus was still possible when the government accounts were published in October.
The Treasury yesterday released the Crown accounts for the five months to November which showed the operating balance excluding gains and losses (obegal) was a deficit of $1.5 billion, $121 million better than expected but still a distance from the wafer-thin surplus promised by Mr English.
Tax revenue was $94 million below forecast. GST, source deductions and corporate tax together were collectively $138 million lower than forecast, partly offset by higher-than-forecast customs and excise duties.
Year-on-year growth largely in source deductions, GST and corporate tax meant core Crown tax revenue was $1.6 billion (6.7%) higher than at the corresponding time last year.
Crown expenses were $67 million lower than forecast at $29.9 billion.
Also of note was the operating balance, which includes the gains made by investments from the New Zealand Superannuation Fund and ACC.
The deficit was $466 million worse than forecast at $1.3 billion. At the corresponding time last year, the operating balance was $2.26 billion in surplus.
Usually, the Treasury makes mention of the gains on investments. However, this month only the actuarial losses on the ACC liability were mentioned.
Mr English said continued weakness in tax revenue against forecast again highlighted the challenge of returning to surplus this year.
''The smaller-than-expected obegal deficit reinforces the Government's belief the strong underlying economy and responsible fiscal management can deliver a surplus when the final government accounts are published next October.''
Current economic conditions - stable growth, low inflation, growing employment and low interest rates - were helping New Zealanders get ahead, he said.
But the conditions were also making it more challenging for the Government to achieve its fiscal objectives in a timely manner, Mr English said.
