“It’ll have an immediate budgetary effect, but also it’ll have a longer-term effect as well.”
He said regarding infrastructure damage, the Government would be responsible for “somewhere between $4-8 billion dollars.
“Then, of course, you’ve got housing and you’ve got business on top of that.”
The Government was in a “good position” to borrow more, he said, but that would have a “longer-term implication on the Government’s finances”.
This comes after Finance Minister Grant Robertson in February suggested he might be forced to increase new spending for the Budget to fund the flood rebuild over a previously-signalled allowance, alongside reprioritising existing spending.
Hipkins said they had currently identified about $1 billion in savings and would be considering another reprioritisation paper over the next week.
“That’s money that will get fed back into the Budget process so that it can be allocated to other more pressing priorities, including the recovery effort that we’ve now got ahead of us, and cost of living-related issues.
“There’ll be some more announcements on that in the next week.”
On his approach to climate change, Hipkins said the fossil fuel subsidy did not take away from the Government’s commitments.
“We clearly have to continue to work to reduce our greenhouse gas emissions and transport as a huge contributor to that. But forcing people to pay higher prices for fuel that they have no choice but to buy isn’t going to be the way that we’re going to do that.”
Hipkins said he had not sought specific advice on the climate change implications when he this year the policy from March until June.
Officials did however warn in June last year on the first extension of the policy before Hipkins was Prime Minister but was still a Cabinet Minister, that estimated emissions from the 25c fuel tax subsidy and an equivalent reduction in road user charges for diesel vehicles would be “significant over the short time of the proposal”.
The fossil fuel subsidy was introduced in March last year to help tackle the rising costs of living. It was originally meant to last three months but has been extended multiple times since. Hipkins most recently announced it would continue until June this year.
Officials estimated the policy would increase the amount of kilometres travelled by 1-2 per cent - the equivalent of 54,000 to 99,000 tonnes of C02-equivalent greenhouse gas emissions over an initial five-month period. This equates to between about 10,000 to 20,000 C02-e per month.
That assessment did not include the impact of decreasing public transport fares, however, officials said they did not believe that impact would be significant, as most of those taking up public transport would likely be substituting active transport and not private vehicles.
In a separate assessment after the policy was introduced, officials warned that the policy would increase greenhouse gas emissions by “about 3500 tonnes of CO2e per month”, at a cost of $283,500 a month.
They also said it would increase harmful air pollution causing “adverse impacts on human health, including reduced life and life quality, illnesses, hospitalisations and restricted activities”. The cost of this is about $8 million a month.
Hipkins said driving down emissions was not the focus of the policy, and that there were “other ways” to bring down greenhouse gas emissions than simply hiking the price of fuel.
“Our drive to reduce greenhouse gas emissions is undiminished. This is dealing with a very much a here and now challenge right in front of New Zealanders, which is the cost of living crisis.”
He said New Zealand was one of the fastest countries in the world to uptake electric vehicles.
“There’s more that we can do in that area. These are the things that will help to bring our greenhouse gas emissions down.”
The fossil fuel subsidy policy is highly popular among the public.
Hipkins said he did not decide to continue the policy because it was popular and because the election was this year, stating it had only been extended until June. The election is set for October 14.
