The Earthquake Commission’s Natural Disaster $6 billion fund has been cleaned out, and the Government’s finances have taken an additional $1.3 billion hit as its bill for repairing Canterbury earthquake damage more than doubled this morning.
Finance Minister Bill English this morning announced the Earthquake Commission has increased its estimated Canterbury earthquake liability by $4 billion to $7.1 billion.
The excess above the Natural Disaster Fund will be met directly by the Government worsening what was already forecast to be New Zealand’s worst-ever operating deficit of $16.7 billion.
This puts English in a horrible position. Either he (a) raises taxes, which the Prime Minister will oppose bitterly, (b) introduces an austerity budget in 2012 with massive spending cuts, probably tipping the country back into recession, or (c) does nothing and the ratings agencies downgrade our credit rating.