Accounts for the three months to September, released yesterday, showed the Government was still spending $725 million more than it earned in the first quarter of the June financial year -- $79 million worse than forecast.
Mr Key told reporters that the Government faced "plenty of challenges". Tax revenue was running generally below forecasts partly because of lower dairy prices, inflation was below forecasts which also hit tax revenue, and financial returns on some assets were below expectations.
He admitted he was less confident of achieving the surplus than he had been before the September 20 election.
"The question is how close is it, and if it's really close, what could we do to make sure we get there," he said.
"I don't think we should go and panic about it. We want to get to surplus, but I don't think we should make a knee-jerk reaction. We are on the right trajectory, we have been massively slashing those deficits.
"So in my preferred world, we'll get there in 2014-15. If we don't it will be a year later."
By Simon Collins of the New Zealand Herald
