THE flooding caused by torrential rain and Cyclone Gabrielle in January and February wiped out about half a billion dollars’ worth of production in the first half of the year, largely in the agriculture and horticulture sectors.
The Treasury estimates lost output of between $400 million and $500m in the first half of the year, most of it from the substantial losses caused by flooding to agricultural and horticultural crops.
Those sectors are expected to continue to suffer with the flooding wiping out capital assets such as orchards, with the Treasury officials predicting a further $100m drag per year as a result.
New Zealand’s agriculture, forestry and fishing industries’ annual production is about $13.65 billion, or roughly 5% of the economy as measured by gross domestic product.
Apple grower Scales Corp was among the listed companies knocked by the cyclone. It said about 5% of its total orchards were affected. Still, given upcoming lease expiries, it will only need to replace less than half those orchards and the company left its earnings guidance for the 2023 calendar year unchanged.
The Treasury said lost production is expected to increase the pace of inflation by about 0.4 percentage points in the March and June quarters, as fresh produce experiences temporary price spikes.
The Treasury released the note after Prime Minister Chris Hipkins said the events wrought $9bn to $14.5bn of damage.
Hipkins ruled out a levy to help pay for the rebuild, instead using existing allowances for increased spending, reprioritising some projects, and increased debt.
Between $4bn and $7.5bn of that estimated cost was to infrastructure such as roads and bridges, with households facing $2bn to $3.5bn of damage and businesses $2bn to $3bn.
The Treasury officials said investment to repair and replace damaged property by households, businesses and the government will add to future demand and the economic outlook over coming years, which will be captured in the upcoming Budget forecasts.