Cyclone Gabrielle: Christopher Luxon still keen for tax cuts despite expected significant costs of weather damage

National leader Christopher Luxon remains keen for tax cuts for Kiwis despite the cost of rebuilding regions severely damaged by Cyclone Gabrielle expected to be significant. 

The party has a policy of adjusting tax thresholds to inflation, meaning the brackets would be increased to help with the cost of living. Kiwis would end up paying less in tax but there would be less revenue coming in for Government to spend.

With Cyclone Gabrielle causing chaos across the upper North Island, destroying roads, taking out critical communication lines, and flooding towns, the recovery is expected to come with a large dollar figure.

Treasury chief executive Dr Caralee McLiesh told the Finance and Expenditure Select Committee on Wednesday that there would significant costs from the "unprecedented and evolving situation".

“The full economic and financial cost will take some time to realise. We know the biggest economic costs are going to be in the form of lost capital and lost economic opportunity."

A team has been stood up within Treasury to analyse the effects of the cyclone. She said there were already costs from Civil Defence payments and other supports for the affected communities.

Emergency Management Minister Kieran McAnulty on Wednesday said it was unlikely the cost would be known for some time, but "it's not going to be cheap". 

Luxon was later asked if National could still deliver tax cuts considering the expected bills from the cyclone damage. 

"Absolutely," he responded.

"What we are talking about is inflation-adjusting tax thresholds which we think is just entirely fair, done in many countries around the world and is a completely reasonable thing to be able to do to give people more of their own money to navigate a cost of living crisis which is the other big challenge we've got.

"What we have got to make sure is we do a proper assessment of what the damage actually is and what support is really needed and then we make sure we apply those funds with good economic responsibility and we are prudent economic managers because it is taxpayers dollars and most important is we actually get things done."

National leader Christopher Luxon.
National leader Christopher Luxon. Photo credit: Newshub.

Luxon repeatedly said he wanted to see things delivered rather than just talked about. 

"As a former CEO, who is used to spending money and making investments, it is about what you do with that money and how you get a return on that and how you get things done that deliver benefits for New Zealanders."

He said it was too early to estimate the costs of the disaster. 

"The focus has to be on making sure Kiwis are safe, making sure we are supporting them, making sure we start the clean-up, and then obviously making the assessment of what is needed."

Luxon on AM on Wednesday morning said there was a strong need for climate adaptation.

"It's going to be a multi-decade effort starting from tomorrow of recovery and making sure that infrastructure is resilient," he said. "It's going to require bipartisan support because Government is going to come and go over those decades and it's a very complex issue. 

"Who pays for a lot of the investment we're going to need around insurance companies, ratepayers, taxpayers and central Government."

Finance Minister Grant Robertson on Tuesday said this was a "devastating" event and it would take some time to assess what options the Government has got.

"What I want people in affected communities to know is that the Government is here to support them," he said.

Robertson said we can afford it, pointing out that we have "one of the lowest levels of public debt in the world".

"That means that when an emergency comes along we have the ability to find the resources we need. In situations like this, a lot of what happens is covered by insurance. In some cases, that isn't there. In other cases, when we look at things like the roading network for example, there is going to be a significant impact there and the Government no doubt will need to come forward with more resources."

Ever since National unveiled the policy last year, there's been questions about how it would pay for the cuts. It's pointed to some of the Government's big projects that could be dumped. 

In November, Luxon said the party would review its tax policy - other than adjusting tax thresholds - in light of the Reserve Bank warning of continued official cash rate hikes and the threat of recession. That includes reconsidering repealing the 39 percent tax rate.

"We would like to offer people tax relief, but when I look ahead if I think about the 39 percent tax rate in particular that's something I really want to think about because ... in this environment, the situation has changed big time. Big time," he said at the time.

"We've been crystal-clear to say that the economic conditions will determine what we can achieve in our first term in government and so we will take stock of where we sit today and we will revisit where we are."