Christchurch tax loss not so bad - English

Tax revenue lost because of the Christchurch earthquakes looks likely to be less than previously forecast, says Finance Minister Bill English.

In a lunchtime speech to Wellington business Mr English said the drop in economic activityin the Canterbury region now does not look as bad as previously forecast.

Previous Treasury forecasts were for a revenue drop of between $3-5 billion. Mr English now says the amount looks like being "a little lower" than $3 billion.

He told the Wellington Employers' Chamber of Commerce the government will spend about $8.5 billion over the next few years to rebuild the quake-devastated city.

“The earthquakes do not fundamentally change our economic situation or the government’s programme.  They simply make the task of returning to surplus a little more difficult," Mr English said.

At this stage, he said, the Treasury estimates the direct cost to the Government of the two earthquakes at about $5.5 billion, which will be fully provided for in the May 19 budget.

“About $3 billion of this relates to our share of local government infrastructure, roads, insurance excesses on schools and hospitals, temporary housing and land remediation agreed after the September quake, demolition costs in the CBD, ACC costs and the business support package," Mr English said.

“The remaining $2.5 billion will cover expected costs of decisions we have yet to make – the biggest cost is likely to be remediation of land damage from the February quake. The final cost of land remediation is yet to be determined.

“In addition, the direct cost to EQC of meeting residential property damage of the two quakes will be at least $3 billion, making a total direct cost to Government of around $8.5 billion," he said.

Mr English stressed that the cost of the government’s share of rebuilding Christchurch must be put in context.

“It sounds a lot. But New Zealand’s annual GDP is around $200 billion a year; the government spends around $70 billion a year; and it has assets of over $220 billion.

“Meeting the Government’s share of the immediate earthquake costs will require a quite substantial front loading of Crown debt in the next year or two. That’s because we need to get the rebuild underway quickly and therefore we need the money immediately.

“The budget will clearly set out the Government’s plan to return to surplus, so we can start paying off this debt,” Mr English said.

He will present the budget on May 19.