There was a clear hint from the Prime Minister yesterday that the Government will increase borrowing to pay for the Cyclone Gabrielle recovery.
And National’s leader Christopher Luxon said that he would support that.
On Monday, at the post-Cabinet press conference, Finance Minister Grant Robertson had left open the question of whether increased taxation would pay for the recovery.
But yesterday, Prime Minister Chris Hipkins, in his annual statement to Parliament, emphasized the country’s ability to borrow.
“We know that more financial support is going to be required, but the Government is in a very strong position to contribute to that,” he said.
“We have some of the lowest debt levels on a per capita basis in the world, helped by the prudent financial management of our Minister of Finance during extraordinary times over the last five and half years.
“ We have options and choices ahead of us because of that.
“Even if we borrow more money in order to contribute to this response, we would still have lower debt than our neighbours and mates over in Australia and considerably lower than countries like Canada, the US, and the UK.”
But his statement was a sober affair in which he tried to outline the reality of the consequences of the cyclone.
Northland, Auckland, Waikato, Coromandel, the Bay of Plenty, the Tararuas, Tai Rāwhiti, and Hawke’s Bay account for 30 per cent of New Zealand’s land mass, but they are home to more than half of our population and produce about half of our GDP, he said.
“We don’t yet have a complete assessment of what the cost of that is going to be, but we know it will be significant—a multi-billion dollar price tag is ahead of us,” he said.
“And there is no point in sugar-coating it; we know that there are some tough times ahead for the whole country as we work our way through that.”
Since the weekend, the Prime Minister has been gradually enlarging on the potential consequences of the recovery rebuild.
He suggests that rebuilding the road network will require more funding than is usually available to Waka Kotahi through fuel tax and road user charges.
“Business-as-usual won’t work any more,” he said.
“We have to accept that billions of dollars of additional investment is going to be required, not just to fix up what has been damaged but to build more resilience so that we can better cope with these types of events in the future.
“We cannot fund new roads, though, by cutting the funding for road maintenance.”
That suggests some of the possible borrowing will be directed to Waka Kotahi.
But there was evidence of some of the challenges that the Government will face as it begins the road rebuild, with suggestions that some roads might not be rebuilt at all.
An obvious candidate for non-replacement is the Kopu Hikuai road across the Coromandel peninsula, part of which has completely slipped away.
Coromandel MP Scott Simpson, in the debate that followed Hipkins’s statement, said it had not slipped, “the road is actually lost; it’s gone.”
“Just one look at it is enough to be clear in everyone’s mind that that repair job is going to be an enormously big one,” he said.
“I want to put it on record right now that State Highway 25A across the Coromandel is absolutely in the necessary category and must be repaired as soon as possible because the alternatives add time and cost to everybody on the peninsula.”
National’s leader Christopher Luxon’s response to Hipkins was a low-key speech, repeating much of National’s usual claims that the Government doesn’t deliver, that nothing has really changed with Hipkins taking over the leadership and that the Government’s extravagance has fueled inflation.
But he also emphasized that National wanted to be supportive and constructive and offer constructive solutions.
“We know that this rebuilding effort is about New Zealand; it’s not about politics right now,” he said.
And as evidence of that, he offered immediate support for Government borrowing to pay for the rebuild.
“We know and appreciate that we’ll need to borrow the money to be able to fund a quality, fast, and good recovery,” he said.
“We get that; we understand that.
“But I have to say our concerns are all about delivery, and it’s all about us being quite sceptical of a Government that talks about “building back better.”
“We’ve heard those words before: we heard them during Covid, we heard them over the course of this year. It over-promises, and it under-delivers.”
It was Climate Change Minister James Shaw who raised what turned out to be the dominant question after the Christchurch earthquake; who pays for what in the rebuild.
He indicated the Government was now looking at bringing forward the Climate Change Adaptation Bill, which, as recently as the end of last week, was not expected to make it into law until next year.
“At the moment, there are many New Zealanders who are very worried about the extent to which they understand what their share of the cost or the risk is here—who pays for it and so on,” he said.
“There is currently no clarity about the share of risk and cost that is borne by the householder, their insurance company, their bank, their local authority, or central Government.
“And generally, what that means in that state of clarity is that it all tends to land on central Government.
“And as the Minister of Finance has noted on a number of occasions, there basically isn’t enough money in the world to be able to cover every single cost, and we do need to take a hardship-focused approach to support the people who need it the most, but we also need to make it really clear who bears what portion of what cost, and that is the intention of that bill.
“And there have been calls to accelerate that, and we are looking at what we can do to accelerate that, or portions of that, bill to help us cope with the immediate crisis.”
Shaw said he would take up National’s offer to work with him on the legislation.