Finance Minister Nicola Willis. Photo: RNZ / Angus Dreaver
The government books are worsening as the tax take falls, leaving it on course to post a sizable deficit for the financial year.
Treasury figures show a deficit of $5.04 billion for the nine months ended March, $619 million more than forecast in the December financial update.
Core tax revenue was $88.5b, $1.2b below forecast, with weaker corporate and GST revenue, partly offset by a lift in taxes on investment returns.
"This was due to reduced taxable profits on both filed and estimated tax assessments as a result of economic conditions," Treasury said.
However, the tax take was about 6 percent higher than the same time last year, reflecting the strong labour market and income tax returns, although GST returns increased less than the rate of inflation.
"[This is] indicating that consumers have cut back their real spending in response to mortgage interest rate and price increases."
Other revenue was below forecast as the value of carbon trading units were also weaker, and lower returns from crown and state owned enterprises.
Expenses were nearly $1.4b below forecast at $101b, with reduced spending on cyclone recovery costs, housing, and delayed payments of some regional grants.
Net debt was slightly lower than expected at $173.7b, or 42.9 percent of the value of the economy, while gross debt was above forecast as the government borrowed more short-term to meet normal expenses.
The Organisation for Economic Co-operation and Development's (OECD) latest report on New Zealand strongly advised the government to get its books balanced as quickly as possible, and said any tax cuts should be fully funded by spending cuts and increased revenue.
However, Finance Minister Nicola Willis has said tax cuts in the 30 May Budget will be fully funded and will go ahead.