Quake to add $5 billion to deficit, says English

3:49 pm on 17 March 2011

The Government's deficit in the coming year will be nearly 50% bigger than previously predicted because of the Christchurch earthquake, says Finance Minister Bill English.

In a speech delivered to the ANZ Capital Markets conference in Wellington, Mr English said the Government's operating deficit will likely be more than $16 billion in the year to June.

The figure is $5 billion more than the $11.1 billion deficit predicted in the Treasury's most recent update, in December.

Mr English says the Government will cover the bulk of the costs of the earthquake through increased borrowing rather than spending cuts or a tax.

He says the Government is also pushing back the likely date for getting back into surplus by a year - to the 2015-16 financial year.

Net Crown debt is now predicted to be 30% of GDP by June 2014, more than double the 14% it was in June 2010.

Mr English says the rise in Government debt will push up New Zealand's total net foreign liabilities to about 85% of GDP, a level he describes as extremely high, and which is being closely watched by foreign lenders.