Adams Amy: Questions for Oral Answer — Questions to Ministers 
Adams Amy: Questions for Oral Answer — Questions to Ministers 
[Volume:670;Page:16966] 
2. 
AMY ADAMS (National—Selwyn) 
 to the  
Minister of Finance 
: What reports has he received on the economic impact of the earthquake in Christchurch on 22 February 2011? 
Hon BILL ENGLISH (Minister of Finance) 
: 
 First of all it is important to acknowledge the impact on the communities and families of Christchurch ahead of the impact on the economy. But there is no doubt that the earthquake will have significant impact on the Canterbury economy and some impact on the wider New Zealand economy. In its latest monthly economic indicators issued over the weekend Treasury estimates that national GDP growth will be about 1.5 percent lower in 2011 solely as a result of the earthquake. It also notes that the rebuilding and reconstruction effort will bring a sizable boost to the economy in 2012 so although in the shorter term for instance there are fewer prospects of a drop in unemployment by 2012 those prospects will be considerably better. 
Amy Adams 
: What is Treasury’s early assessment of the costs of the earthquake? 
Hon BILL ENGLISH 
: Treasury has assessed two different aspects of the costs. The first is the total financial cost of the damage of this earthquake. At the moment those numbers are reasonably vague between $10 billion and $15 billion which is two to three times the estimated cost of the September earthquake. Secondly Treasury has estimated the impact on the wider economy. This estimate takes into account the fact that the economy was growing more slowly before the earthquake occurred and will then be affected by the earthquake. Treasury estimates that that could mean a reduction of about $5 billion in tax revenue for the Government over the next 4 years. 
Hon David Cunliffe 
: Can he confirm that Treasury’s February monthly economic indicators states at page 4: “Over the 2011 to 2015 March years nominal GDP is expected to be a cumulative $15 billion lower than in the Half Year Update … This is mostly related to the weaker outlook we were seeing prior to the February earthquake”? 
Hon BILL ENGLISH 
: Yes I can confirm that. The forecasts of growth either those by Treasury when they are published finally in the Budget or those by the Reserve Bank which will be publishing forecasts this week are likely to reflect the fact that most of the reduction in the growth outlook was occurring before the earthquake. The earthquake has certainly had a negative impact on it. 
Amy Adams 
: What is the potential impact of the earthquake costs on the Government’s finances? 
Hon BILL ENGLISH 
: The Government’s finances will be affected in two ways. Firstly it will face its own direct costs of the earthquake. The costs of the earthquake are shared between private insurers the Government private individuals and businesses. The Government’s share is likely to be around the $3 billion to $5 billion mark. It will also be affected by a drop in revenue some of which was going to occur even without the earthquake. It means the Government will have to keep a pretty close eye on its priorities. It will probably take on some additional debt and then look to see how we can absorb those costs over the next 3 or 4 years. 
Amy Adams 
: How will the Government approach its policy response to the Christchurch earthquake? 
Hon BILL ENGLISH 
: Although the earthquake is a significant setback for the Government’s books and a significant hit on the economy it is something we can handle. The Government will be taking a pretty considered and balanced approach. We are willing to take on more debt in the short term; there is not much choice about that. The costs are being incurred now and the debt for this financial year will be higher than was expected. Over the next 4 or 5 years we have a total Government spend of about $350 billion and within that we should be able to accommodate a cost of $9 billion or $10 billion just by thinking about it a bit harder. The earthquake certainly is not significant enough to knock New Zealand off course with an economy that is gradually rebalancing towards savings investment and exports.