New Zealand's efforts to bring the budget back to black appears to have been washed away by storms.
This outcome reflects my recent statements on the threat to the Australian budget by foreseeable climate risks. Grant Robertson, the NZ Treasurer recently posted an updated financial statement on the worsening fiscal outlook. In the nine months to March, NZ Treasury has recorded a deficit of $3.4 billion, almost $2.5 billion worse than predicted in December. Revenue has fallen away, with a $2.3 billion shortfall in GST revenue and business and income tax.
Reinforcing the message that climate risks are a major consideration in national budgets, the NZ government is still grappling with repairs following two huge weather events over summer: flooding in Auckland and Cyclone Gabrielle and recent heavy rainfall events, which come with a multi-billion dollar price tag.
At the last budgetary update in December, NZ was in touching distance of a surplus, with a projected deficit of just $461 million in 2024. That could be as close as it comes to a surplus, which would have boosted the Government in an election year.
"Clearly, economic activity based on the Treasury statements is slowing. We can see that," Finance Minister Grant Robertson said from Parliament. "We've been forecasting and predicting that for some time. On top of that, we have to deal with the North Island weather events with the cyclone and the and the flooding. All of those will be impacting on the Government's books, but I'll have more to say about that soon."
National leader Christopher Luxon called the crown accounts "alarming", drawing a contrast with the expected $4.2 billion surplus to be booked by Treasurer Jim Chalmers on Tuesday night.
Three people dead after flooding in New Zealand's largest city Auckland - BBC News
Recapping New Zealand’s multiple floods this year. La Nina conditions contributed to a sustained maritime heatwave over the area earlier in the year, with unstable northerly winds, and Cyclone Hale causing frequent heavy rainfall in January. This culminated in widespread catastrophic flooding late into the month and early February, particularly on 27th January when severe flash flooding hit Auckland. Cyclone Hale was a tropical cyclone and the first named storm of the 2022-23 South Pacific cyclone season. The cyclone formed over the Coral Sea on January 4, 2023, and tracked south-east towards New Zealand. It made landfall on the North Island on January 10, 2023. The heaviest rainfall was recorded in the Coromandel Peninsula, where some areas received more than 300mm of rain in 24 hours. The flooding caused widespread damage to roads, bridges, and homes. At least one person was killed in the floods.
Cyclone Gabrielle then devastated the North Island again in mid-February, killing 11 people and causing more than 8 billion dollars in damage, and considered by some the worst storm this century. The heaviest rainfall was recorded in the Bay of Plenty region, where some areas received more than 500mm of rain in 24 hours. This event can also be contributed to La Nina, with tropical cyclones more likely in La Nina events.
However, the flash flooding event that hit the Auckland area and parts of the North Island again on the 9th of May occurred under different climate drivers, with a neutral ENSO pattern, and rapidly moving towards an El Nino. However, very warm sea surface temperatures continue to surround the country right now, which have been known to increase the risk of flooding events (as seen by maritime heatwave conditions in January). Likewise, as also seen in January, strong and moist northerly winds were feeding into a trough, which generated thunderstorms with torrential rainfall and flash flooding as well as landslides, with up to 50mm falling in one hour. A state of emergency was declared.
New Zealand floods: drone footage shows derailed train and landslides.
Climate conditions and weather risk need to be factored into any operational budget. Going forwards, this needs to be reflected in any climate risk reporting, ESG statements and followed by clear mitigation strategies. The Early Warning Network through its unique spatial data set and Climatics platform, provides both government and business with the information they need when measuring and reporting on climate risk.
Author: Kerry Plowright
CEO/Executive Director Aeeris Limited