While continuing to outline what he described as positive achievements for the Government, such as welfare support, maintaining and improving health and education, there was an undertone of fiscal disappointment in his speech.
In the half-year update in December, the Treasury forecast an operating balance excluding gains and losses (obegal) deficit of about $570 million for the 2014-15 year - 0.2% of GDP.
It forecast a similar obegal surplus for 2015-16.
The Treasury was still finalising its forecasts for this year's Budget.
''But it's fair to say that both of those forecasts have deteriorated a little since the half-year update. So we expect the Budget to forecast a slightly bigger deficit for 2014-15 and to forecast a slightly smaller surplus for 2015-16.''
While progress on surpluses was slower than expected, the Government was on track to surplus and repaying debt, Mr English said.
The surplus target was important.
It had imposed a discipline on the Government and on government agencies to work hard on achieving value for money and providing new spending only where the Government could get better results.
The factors reducing government revenue and the surplus track were the same factors underpinning sustainable growth for households and businesses - low inflation and low interest rates, he said.
''A small deficit, should it eventuate this year, isn't a risk to the economy. In fact, the downturn in revenue is due to positive economic conditions - strong growth but low inflation and low interest rates.''
Because the Government was confident about the ongoing improvement in its finances, it would not constrain Budget decision-making, Mr English said.
The latest Fonterra downward revision of its current dairy payout to $4.50 per kg of milk solids was part of the bad news focused on by the finance minister.
The Treasury now expected nominal GDP over the next four years through to 2019 to be about 1.5% lower than forecast in Budget 2014, mainly because of lower inflation.
That was about $15 billion less and more than half of the impact of the global financial crisis.
Those conditions were presenting some ''real challenges'' for the Government's books because it was the nominal economy driving PAYE, company tax and GST receipts, Mr English said.
Although there were more bank deposits, which would ordinarily lead the Government to collect more tax, they were being more than offset by lower interest rates. Consequently, the Government was collecting less tax.
In total, the Treasury now expected the Government would collect $4.5 billion less tax revenue over the next four years that it expected at the last Budget, he said.
Deloitte Dunedin tax partner Peter Truman said low inflation and lower interest rates were generally seen as positive outcomes which encouraged business investment and preserved the long-term value of asset bases of people.
But they also put the Government's tax revenue under strain because incomes were lower than they would be otherwise.
''These outcomes could change quite quickly if there was to be a material fall in the value of the New Zealand dollar. This would have inflationary effects through the increased cost of imported goods and services which would then put pressure on the Reserve Bank to increase interest rates."
All things being equal, that would provide a significant boost to the export-based economy, he said.
Mr Truman noted the Government's signal it was committed to reducing income tax rates or the thresholds at which marginal tax rates were charged as fiscal conditions allowed.
But given the current pressure on Government tax revenue, that was unlikely to be achievable in the next few years.
Indications
• Nominal economic growth for the next four years to be 1.5% lower than forecast in May last year.
• Government expects to collect $4.5 billion less tax revenue over the next four years than it did in last year's Budget.
• Budget will forecast a slightly larger deficit for 2014-15 and a slightly smaller surplus for 2015-16.
• Core Crown expenditure will continue to fall to below 30% of GDP
