Opposition parties piled into Prime Minister John Key yesterday for mentioning tax cuts in the same breath as the Kaikoura Earthquake, but Key was warning that they would be harder to deliver in the short-term because of last week's 7.8-magnitude quake.

Labour leader Andrew Little said talk of tax cuts was "plain crazy" when debt levels were high, superannuation costs were rising and the government had the cost of the disaster to meet.

But Key said the cost of the earthquake and resulting economic conditions could affect the Government's ability to offer tax cuts in the short term "but probably not in the medium term."

That suggests that any "tax or family package" as he termed it, might be promised in the 2017 Budget take effect only if National wins a fourth term.

Advertisement

It is also possible that was what the Government was planning in any event, as a campaign policy for the 2017 election.

Key was answering questions at Apec in Peru about the cost of the earthquake and its affect on income tax cuts.

Little said that to suggest there was still some room for tax cuts show that Key was out of touch.

New Zealand had weathered the global financial crisis and Canterbury earthquakes because the previous Labour Government had resisted National's calls for tax cuts, paid off debt and put the Government's finances on a sound footing.

Greens co-leader James Shaw said any talk of tax cuts was "weird" when the damage was still being assessed.

Prime Minister John Key and Civil Defence Minister Gerry Brownlee meeting with stranded tourists and locals during their flying visit to Kaikoura.Photo/ Mark Mitchell
Prime Minister John Key and Civil Defence Minister Gerry Brownlee meeting with stranded tourists and locals during their flying visit to Kaikoura.Photo/ Mark Mitchell

Key said the Government was waiting to see the latest forecasts in the half-yearly economic and fiscal update which would include an assessment of the earthquake's cost, but it will be in the billions.

He also revealed that the forecast surplus for 2019/2020 was $8 billion to $9b, an advance on the forecast in the May Budget of $6.7b.

The surplus for the last financial year came in at $1.8b, higher than the May forecast of $668 million.

But Finance Minister Bill English has cautioned against expectation of big surpluses in the short-term, telling the Herald that spending pressures have been building well before the earthquake in such areas as the growing prison population, addressing pay equity, and the housing infrastructure fund.

The forecast surplus for the current year of $719m is expected to be increased in the half-yearly economic and fiscal update but with an allowance for new spending of only $1.5b, any tax cuts in the 2017/18 year would be modest.

Much of the earthquake costs would come from capital, rather than operational spending, which could be funded directly or by borrowing, or by deferring projects in the pipeline.

Last month English launched a 10-year Capital Intentions Plan setting out plan for $100b worth of infrastructure projects in the next 10 years, in the private and public sector.

Of the 3824 projects in the pipeline, 219 were for central Government and were valued at $40.5b.