Finance Minister Bill English says there are promising signs in the latest Treasury figures that the public service is keeping tighter control of spending.
Government spending for the eight months to February was $915 million below forecast. At the same time, the underlying tax take was almost $700 million lower than expected.
The Treasury data paints a mixed picture. Corporate and personal tax takes are down on forecasts by well over $200 million each.
The Treasury is pointing the finger at lower-than-expected business profitability as the key driver. But at the same time, GST revenue is up on predictions by 5.3%, or $389 million.
Mr English says control over government spending has helped keep the deficit below the $5.1 billion forecast.
"We're making a bit of progress both with the tax take and government spending, but it's critical we maintain control of government spending - because that is how we will stop our debt rising too fast and make sure we're getting value for money for the taxpayers' funds we are taking in."
The drive to contain Government expenditure appears to be having an effect. In the eight months to February, the Government spent $915 million, or 2.2%, less than it expected to.
"We'll have to wait until we get through to June to see whether government departments have a spend-up before the end of the year," Mr English says.
"But it is a promising sign that the public service understands that money is tight, that they need to make good decisions, and that we need to control spending."
Stricter control on expenditure is also feeding into an improved debt outlook. The Government's gross debt is lower than predicted - at 26.6% of gross domestic product, 1.7% below the Treasury's forecasts.
No reason to slash and burn - Labour
Labour's finance spokesperson David Cunliffe says the data proves once again that Government debt is not the problem.
"We're certainly out of crisis mode, and there's certainly no reason to slash and burn. There's every reason to ensure that all New Zealanders benefit from the recovery that's coming.
"But the Government needs to be very careful in this year's Budget that it delivers the appropriate medicine to fix the problems that the economy's got. And they're pretty obvious - we don't export enough."
Mr Cunliffe says the Government is right to look for value for money, but just trimming away constantly at the Budget is not a long-term plan for the economy.
Mr Cunliffe says the Government is forecasting a very low budget for new operating expenditure of $1.1 billion, which will result in big cuts in health and education that will start to be felt next year.
BNZ senior economist Craig Ebert says the underlying need to contain expenditure will remain for sometime yet.
However, he says the Budget on 20 May could still produce an economic stimulus and the Treasury may well strengthen its forecasts for economic growth.