Adrian Orr says there would be precedents for ‘cyclone levy’

There would be international precedents for the Government to introduce a “levy” to help pay for the rebuild from Cyclone Gabrielle, Reserve Bank governor Adrian Orr has told a select committee.

However, he said he was “completely neutral” on the fiscal decisions the Government made, saying they were not in his hands.

Finance Minister Grant Robertson has forecast the cyclone will cost the Government “billions of dollars” and potentially up to nearly $13b at the upper end of the range.

Appearing in front of Parliament’s Finance and Expenditure select committee, Orr reiterated an observation he made during a media conference on Wednesday that there were three ways the Government could meet the cost of the rebuild.

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Those were increasing debt, reprioritising existing spending, and “increased revenues”, he said.

“The Government, from what I have heard, is considering all three options,” he said.

“When I say there are three options, you don’t have to have ‘A or B or C’. There are generally combinations of those depending on the events,” he later clarified.

“And, globally, we’ve seen these happen through levies for particular cyclone events and so on. There are precedents globally for how these are done,” he said.

Orr’s comments are likely to increase speculation some form of tax or other revenue-raising measure may be on the cards to help meet the cost of the rebuild while avoiding a big increase in government debt.

National Party finance spokesperson Nicola Willis said on Wednesday that the Government should rule out new taxes, saying she was “alarmed by the suggestion that the Government could impose a new ‘cyclone’ tax on New Zealanders to fund the rebuild”.

“It is simply irresponsible for ministers to be plotting another tax grab at this difficult time,” she said.

Orr rejected a suggestion the Reserve Bank could have considered cutting the official cash rate on Wednesday in light of uncertainty over the costs and monetary policy implications of Cyclone Gabrielle, suggesting that would have backfired on flood victims.

“All we would be doing is adding inflation to the already miserable situation they are in. So that was our thinking,” he said, commenting on decision to instead raise the OCR to 4.75%.