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Quake reduces government's options

NZ NewswireNZ Newswire 6 days ago
Earthquake damage on State Highway One and the main trunk railway line north of Kaikoura is seen on November 14, 2016 in New Zealand. © Mark Mitchell - Pool/Getty Images Earthquake damage on State Highway One and the main trunk railway line north of Kaikoura is seen on November 14, 2016 in New Zealand.

The magnitude 7.8 earthquake that struck New Zealand nearly two weeks ago has knocked a billion-dollar hole in the government's finances in the short-term and two to three times more beyond that.

The cost of the earthquake to the government is "probably a billion just in the next six months or so", Finance Minister Bill English told TVNZ's Q&A programme on Sunday.

He said the "events of the last couple of weeks" had shown why the government had to be flexible when setting its budget.

The government is in surplus, prompting speculation of tax cuts, though Prime Minister John Key has been signalling a more targeted approach via a family package.

Mr English said two or three weeks ago he had two or three billion dollars' more room to move during the next three years than he had now.

"That's the money the earthquake's going to take out of the system."

Any movement on a package for families or tax reduction had to fit into the context of the need to reduce debt, invest in infrastructure and relieve pressures in parts of public services, he said.

The New Zealand government's accounts were unexpectedly in surplus in the first three months of the 2017 financial year, with the provisional tax take from companies tracking ahead of forecast.

The operating balance before gains and losses was a surplus of $222 million in the three months ended September 30, turning around a deficit of $545 million a year earlier, and ahead of the projected $503 million shortfall in the May budget projections.

The government had a bigger surplus than expected for the 2016 financial year as record inbound migration bolstered it coffers.

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