For several years, the Government has said the accounts will be back in black in the current financial year.
Mr English and Prime Minister John Key campaigned on getting the accounts into surplus. But, yesterday, the dream of a black line seemed to be evaporating.
The prized operating balance excluding gains and losses (obegal) was a deficit of $725 million in the three months ended September, down from the $1.3 billion deficit at the corresponding time last year but $79 million worse than the forecast of a deficit of $646 million.
The operating balance, which includes gains on the Government's investments, also slipped into a deficit of $831 million, when the forecast was for a surplus of $52 million.
Strong performances by world sharemarkets last year had helped boost the operating balance.
Mr English said the economy was growing but the fiscal position was challenging.
Crown tax revenue was $73 million higher than forecast. Although GST revenue was $175 million, or 4.1% lower than forecast, it was offset by corporate tax being $135 million, or 7.1%, higher than expected. Other individuals tax was also 7.1% higher.
''The accounts illustrate what I've been saying recently. The economy is growing solidly and this is supporting more jobs, allowing wages to rise faster than inflation and keeping interest rates lower for longer.
''But we have an unusual situation with the nominal economy - which is what drives revenue to the Government - increasing more slowly.''
That was partly because falling dairy prices were affecting nominal growth, he said.
It was good for New Zealand families to have low interest rates, low inflation and less debt-driven consumption but it made the Government's fiscal position more challenging.
The accounts reflected only the first three months of the financial year so uncertainty remained regarding the outlook for tax revenue for the rest of the financial year, Mr English said.
What was most important for New Zealanders was continuing job growth, moderate wage rises, elevated levels of confidence, a steadily growing economy and a Government which was committed to carefully managing its own spending, he said.
Labour Party finance spokesman and leadership contender David Parker said the Government's economic credibility was under scrutiny with its search for surplus becoming harder due to an economy far too reliant on the dairy industry.
National promised New Zealand would get into surplus by improving the economy.
''It has been six years in Government and more than three years since the financial crisis ended and they still haven't run a surplus. National is running out of excuses,'' he said.
The accounts released by the Treasury showed a significant improvement in the accounts on an annual basis.
Revenue in the three months ended September rose nearly 6% to $16.9 billion compared with $16 billion in the previous corresponding period.
Crown expenses rose 3.1% in the period to $18 billion, helping to reduce the deficit to $725 million from $1.3 billion in the pcp.
Gross debt rose 6.4% to $85.2 billon and net debt rose 4.4% to $62.6 billion.
The Treasury figures showed continued strength in equity markets resulted in gains on investments of $1.1 billon.
However, the gains were not enough to offset the actuarial losses on the ACC liability of $1.2 billon, resulting from changes in short-term discount rates.
