The Finance Minister says the destruction caused by Cyclone Gabrielle will affect the Government's spending plans, but he believes its books are in a "good shape" to respond.
The latest Crown accounts were released on Thursday morning for the six months to the end of December 2022.
It comes as the scale of the carnage caused by the cyclone becomes even clearer, with roads, bridges, communications and energy networks knocked out by the event. Large sections of some towns, like Wairoa, are underwater, while some growers' crops have been swept away.
The books show the Operating Balance before Gains and Losses (OBEGAL) with a deficit of $2.847 billion, slightly above the $2.808 billion forecast in December last year.
Core Crown revenue was $60.5 billion, below the $60.9 forecast, with core Crown tax revenue at $54.5 billion, down from $54.9 billion forecast. Core Crown expenses were $62 billion, above the $61.7 billion predicted. Net debt, as a percentage of GDP, was 21.6 percent, above the 21.3 percent expected.
Finance Minister Grant Robertson said the books are in "good shape" to meet the challenges of both the cost of living crisis and extreme weather events.
He said the Government had already shown its focus on the rising cost of living by extending reductions to the fuel excise duty and to public transport fares.
"The extreme weather that New Zealand has experienced recently is putting families and businesses under even more pressure, with some losing their homes and livelihoods," he said. "We are committed to continuing to support them through these difficult times."
"New Zealand is in a strong financial position to do so thanks to the Government’s careful and prudent management of the books. The impacts of flooding in Auckland in late January and now Cyclone Gabrielle have yet to be fully known and the Treasury is currently accessing the economic and fiscal impact.
"We know that this is a significant event affecting families and businesses as well as the country’s roads, bridges and energy networks and it will have a sizable impact on the economy."
While insurance will cover elements of the recovery, Robertson said the Government "will need to step up with significant resources to fix broken infrastructure".
"This will affect the Government’s operating and capital spending plans in the current year and subsequent years and is being factored into planning for the Budget."
On Wednesday, Treasury chief executive Dr Caralee McLiesh said Cyclone Gabrielle would have "significant" costs.
"The full economic and financial cost will take some time to realise. We know the biggest economic costs are going to be in the form of lost capital and lost economic opportunity."
Christoph Schumacher, Professor of Innovation and Economics at Massey University, told Newshub the hit to the economy could be between $10 to $20 billion.
"This will put more pressure on the prices and I wouldn't be surprised if we see supermarket bills rise even further."
National Party leader Christopher Luxon said he's still keen on tax cuts despite the expected costs from Cyclone Gabrielle.
"What we are talking about is inflation-adjusting tax thresholds which we think is just entirely fair, done in many countries around the world and is a completely reasonable thing to be able to do to give people more of their own money to navigate a cost of living crisis which is the other big challenge we've got."
National has a policy of adjusting tax thresholds to inflation, meaning the brackets would be increased to help with the cost of living. Kiwis would end up paying less in tax but there would be less revenue coming in for Government to spend.
