March 18 (Bloomberg) -- New Zealand’s most widespread drought in at least 30 years may cost NZ$2 billion ($1.7 billion) as dry conditions across the North Island threaten economic growth, the government estimates.
“The latest advice is that somewhere between $1 billion and $2 billion will be knocked off our national income, and as every week goes by, the prospect of it being $2 billion instead of $1 billion grows,” English said in an interview on TVNZ’s Q+A program yesterday. “We’ll be getting updated advice over the next few weeks from the Treasury as we prepare the forecasts for the next budget in the middle of May.”
Finance Minister Bill English warned last week the drought may curb economic expansion in the nation, where dairy exports of NZ$11.4 billion last year made up 25 percent of all merchandise shipments abroad. The central bank held the cash rate at a record low on March 14 and cited concerns the dry conditions may “substantially reduce economic output.”
Economists at Bank of New Zealand Ltd. have reduced projections for first-half economic growth to 1.1 percent from 1.3 percent because of the drought.
Fonterra Cooperative Group Ltd., the world’s biggest dairy exporter that accounts for about 40 percent of the global trade in dairy products, said in a Feb. 27 statement that dry weather conditions in mid-December and January, particularly in the North Island, had resulted in a slowdown in milk supply growth. Drought was declared earlier this month in several North Island regions, including the largest dairying provinces.
Phil Rennie, a spokesman for the Minister for Primary Industries Nathan Guy, has said 2013 is the first time in at least three decades the entire island is suffering from drought.
--Editors: Jim McDonald, Paul Tighe