The public finances have got worse in the first four months of this financial year, as investment returns from government agencies go deeper into the red.
The operating balance for the period recorded a deficit of $3.5 billion.
The situation has been made much worse by the turmoil on international markets.
The result is due to large losses on investments held by the New Zealand Superannuation Fund, the Accident Compensation Corporation and the Earthquake Commission.
If these are excluded, the Government recorded a surplus of $900 million.
The latest figures confirm what was evident in the pre-election economic and fiscal update - that after years of substantial surpluses the Government now faces the prospect of years of deficits.
Finance Minister Bill English says that is the legacy left by the former Labour-led Government, although he acknowledges New Zealand, like other countries, is feeling the impact of the global downturn.
The superannuation fund bled the most, losing $3.5 billion, which the Treasury attributes to the turmoil in global financial markets.
The Treasury says net core Crown debt was $1.9 billion lower than the forecast of $2.2 billion. It says tax revenue, core Crown expenses and the operating balance before gains and losses were broadly in line with the forecast.