WELLINGTON, NZ (Reuters) – The New Zealand Government is committed to reducing its spending despite severe weather events that occurred earlier this year causing damage to assets ranging from NZ$9 Billion ($5.51 Billion) to NZ$14.5 Billion. Prime Minister Chris Hipkins stated on Thursday.
In January, flash floods struck Auckland, the largest city in the country. Cyclone Gabrielle ravaged the North Island of New Zealand in February, leaving a path of destruction.
Hipkins stated that there would be no major new taxes introduced in the budget for this year and the cost of repairs will be largely covered by operating and capital budget allowances.
In a separate report published on Thursday, Treasury estimated that approximately half of the damages were to the public infrastructure. Both households and businesses also suffered damage in excess of NZ$2 billion.
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Hipkins, in an address to the Employers and Manufacturers Association, said that the government was committed to reducing its share of expenditures to dampen the demand in the economic.
New Zealand already has a historically high level of inflation, and the central Bank has expressed concern that an increase in government spending would only exacerbate the problem.
Treasury estimates that the increase in inflation between the quarters of March and June will be 0.4% as a result weather events. The output of farms and crops should be lower by NZ$400 to NZ$600 millions during the first half of this year.
Hipkins' goal is to reduce government spending to a low-thirties percentage of GDP.
In the year ending June 2022, the core government expenses are expected to be equivalent to 35 percent of the GDP. This is projected to drop to 32.8% in the current fiscal year.
Hipkins stated that the budget would be orthodox and no frills, focusing on the funding of the most important things to New Zealanders, such as support for the cost-of-living and recovery from cyclones.
He said that infrastructure would be the main focus of the budget, as the country needed to rebuild after the cyclone and also had a need for new schools and hospitals.