Key Points:

Finance Minister Michael Cullen is urging people not to be frightened away from putting money into retirement savings funds, as he watches the Government's own giant superannuation fund put a dent in his coffers.

The Government's operating surplus for the six months to December 31 came in yesterday at $815 million - just a third of the $2.511 billion that was forecast only a few months before.

One of the major factors in the narrower-than-expected surplus was the impact of weak global stock markets on the returns of the NZ Superannuation Fund late last year.

The fund's returns for the six months were minus 1 per cent, and some of the KiwiSaver growth funds that the public have invested in have also had negative returns in the past quarter.

Dr Cullen was quick to respond to questions about the lower surplus by emphasising that people should not overreact to funds suffering short-term volatility.

"The New Zealand Superannuation Fund is a significant component of the Crown balance sheet, and it will continue to grow in size," he said.

"The month-to-month volatility in its valuation will have an increasing impact on the Crown balance sheet."

Dr Cullen said people were learning as KiwiSaver numbers grew that they should not overreact to short-term share-price movements, and he urged them "not be distracted" from building savings.

The Government's latest accounts showed its spending had risen 10 per cent since the same time last year - in line with forecasts - while its revenues over the same period had gone up by a lesser 5.2 per cent.

Dr Cullen has long argued that another figure is the most important when it comes to working out how much money he has to spend. It's the operating balance, which excludes the impact of unrealised gains and losses such as those experienced by the Superannuation Fund.

That figure came in bang on expectations in the latest Government accounts at $2.529 billion.

For that reason the Finance Minister argues he has just as much money to spend as he had before the operating surplus started to shrink.

But Dr Cullen has also been helped in recent years by surprise windfalls in the tax take, with tax revenue consistently outstripping forecasts and giving him more financial flexibility that would be welcome in election year.

National Party finance spokesman Bill English yesterday said that windfall looked as though it wouldn't happen to the same extent this year.

He remained confident, however, that there was room in the Government's books for personal tax cuts.

Prime Minister Helen Clark also said that despite "preliminary evidence" pointing to a lesser tax windfall, the Crown accounts were not cause for undue concern and the Government's books were in "a strong state".

Dr Cullen, meanwhile, has had to cancel a speech today that would have highlighted one of the main planks he will go into battle with National on in the election campaign - Government debt.

A spokesman said the minister was not feeling well and would deliver the address at a later date.