2. CRAIG FOSS (National—Tukituki) Link to this
to the Minister of Finance
How much does the Government expect to spend over the next few years to help rebuild Christchurch in the aftermath of the two earthquakes?
Hon BILL ENGLISH (Minister of Finance) Link to this
At this stage the Government expects to spend about $8.5 billion over the next 4 or 5 years rebuilding Christchurch. The latest estimates put the direct cost to the Government of the two earthquakes at about $5.5 billion. The other $3 billion is the cost to the Earthquake Commission of paying the excess on its insurance. These will be fully provided for in the Budget next month. Of the $5.5 billion, about $3 billion relates to the taxpayers’ share of local government infrastructure, insurance excesses on schools and hospitals, temporary housing, the costs already incurred in supporting businesses and making cash payments, ACC costs, and demolition costs. The remaining $2.5 billion will be allowed for to cover uncertainty and decisions that have not been made yet, particularly around land remediation.
Treasury had estimated that as a result of the two earthquakes and an economy growing more slowly than it had expected, tax revenue would be $3 billion to $5 billion less over the next few years. A small bit of good news is that current forecasts show that the loss of tax revenue will be just a bit less than $3 billion, rather than the higher figure of $5 billion. This will be finalised in the Budget.
How significant are the costs of the two earthquakes, and how will the Government go about paying its share of those costs?
The costs are significant, but they do not fundamentally change the economic situation or the Government’s programme. They need to be put in the context of New Zealand’s annual GDP of about $200 billion a year. So when we are talking about direct costs to the Government of $5.5 billion over the next 4 years, during that time total GDP will be about $800 billion. Meeting the Government’s share will require quite a substantial front-loading of Crown debt in the next year or two, because we need the money now in order to start rebuilding now, and the Budget will clearly set out the Government’s plan to return to surplus.
When Kiwi families are under some pressure, particularly because their wage increases have not been significant, the last thing they need is a new tax. The Green proposal for a relatively small levy would need to stay in place for about a decade to pay for the quake, but particularly at this time, when we are absorbing these unexpected events but need to put them behind us and get on with growing the economy, we do not want to reverse the direction of tax cuts, which were intended to be an incentive for growth.
Hon Clayton Cosgrove Link to this
What advice has he received from Treasury or any other Government agency on the cost of providing income support to earthquake-affected Cantabrians once the Government’s business support package is terminated in the next few weeks; if so, what was that advice?
Really, the only advice we have received about that is the uncertainty of knowing what will happen, particularly when the employment support subsidy winds up. The point of the subsidy was to allow people sufficient time for a transition, during which a number of them will have to make quite difficult personal decisions about whether they can start up their business again or whether there is a job for them. We expect that as the package runs off, more Cantabrians will be applying for benefits.