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Tax cuts still possible despite quake: PM

NZ Newswire logoNZ Newswire 20/11/2016

Prime Minister John Key says tax cuts or a "family package" remain a possibility despite last week's magnitude 7.8 earthquake.

Some economists have cast doubt on whether the government would be able to offer tax cuts following the disaster, while opposition parties have labelled talks "crazy" and "financially irresponsible".

Talking to media in Lima, Peru, where he is attending the APEC summit, Mr Key said the government had been mulling a "tax or family package" for 2017 onwards, but whether it would go ahead in the short-term depended on how much the bill for the Kaikoura earthquake was.

"When we get a better assessment of how much it's going to cost, it will be one factor that has some impact on our capacity to move in the short-term, but probably not in the medium term," he said.

"It's the only factor ... there are a number of moving parts."

Explaining the family package idea, Mr Key said tax cuts were only part of the solution for lifting household incomes.

"Tax is one vehicle for [raising incomes] but it's not always the most effective vehicle for doing that, in particular for low-income families," he said.

He declined to give any further specifics about possible plans.

There were also a number of other upcoming costs, such as $1 billion to increase prison capacity, to be considered, Mr Key said, after it posted a $1.8b surplus for the last financial year which sparked talk of tax cuts in election year.

He said working out the cost of quakes could potentially set back Treasury's half-year report.

"It might take a tiny little bit longer to make sure they can get the best estimates they can," he said, adding the report could be bumped back a week from its December 8 date.

Labour leader Andrew Little has labelled talk of tax cuts "crazy".

"Kaikoura's rebuild alone will cost billions and put pressure on the government's books so for Key to now say there's still room for tax cuts just shows just how out of touch he is," Mr Little said.

Now is the time to talk about round-the-clock staffing for Geonet and the national tsunami warning system instead, he said.

Green Party co-leader James Shaw said the government was still carrying debt from the Christchurch earthquake and the GFC.

As well as the housing crisis and need for investment in water infrastructure, the full cost of the Kaikoura earthquake rebuild isn't yet clear, he said.

"I don't think it's a question of 'is it feasible, but is it a good idea'," he said.

"It seems to me financially irresponsible to talk about tax cuts."

Finance Minister Bill English said the government would play a waiting game ahead of next year's budget and it would be some time before the cost of the earthquake became clear.

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