Growth on cards for rocking economy
Government should still have room for tax cuts. NZ Institute of Economic Research
The costs of the recent earthquakes are ‘‘highly uncertain’’ but the economy can cope with them relatively easily, an economic think tank says.
Senior Institute of Economic Research economist Christina Leung said in her quarterly outlook report that New Zealand is looking forward to several years of strong annual growth of 3.5 per cent.
Kaikoura took the biggest hit in the earthquakes because of its tourism dependence. Tourists spend $32,000 per resident compared with the national average of $5000.
Estimated earthquake costs will be modest compared with the Christchurch earthquakes and the Government should be able to ‘‘comfortably’’ absorb its share of an estimated $2 billion cost, Leung said.
Fixing Kaikoura’s infrastructure will be about a third of the cost of Christchurch’s damage, with EQC picking up many costs, she said.
Damage to Wellington buildings and business interruption will be offset by engineering work, sales of emergency supplies, and rising construction.
In Auckland, strong concrete sales reflect growth in residential and commercial building driven by high immigration, with construction becoming a main driver of the economy overall, Leung said.
‘‘The government’s books are in good shape because of $1 billion higher than expected tax revenue than previous Budget forecasts,’’ her report said.
‘‘We forecast government revenue to grow on average 3.2 per cent per annum for the next five years ... spending has been tight and if this trend was to continue, core government spending as a proportion of GDP by 2021 would be at its lowest since 1974.’’ the report said.
Leung said this meant means the Government should still have room for tax cuts going into election year.
Businesses were generally optimistic, Leung said.