Borrowing to fix earthquake damage in Christchurch will cost the country millions of dollars in interest, and a levy on higher earners was preferable, the Green Party says.
Finance Minister Bill English said on Friday that the Government would borrow overseas to cover its $10 billion cost to rebuild Christchurch, spreading the burden over time. A levy was considered, but it would make it harder for the economy to recover, Mr English said.
Green Party co-leader Russel Norman said Australia was raising a levy to pay for rebuilding after recent floods, and their government was in a better financial position than New Zealand's.
"The Government is being fiscally irresponsible by putting the country into further debt when it could raise some revenue to help pay for the rebuild instead," Dr Norman said.
Borrowing $5b to cover the uninsured cost of rebuilding Christchurch would cost an extra $255m a year to service.
"On the other hand, a temporary levy on income could raise an additional $1 billion each year to cover quake-related expenditure avoiding costly borrowing," he said.
A levy of 1.5 percent on income between $48,001-$70,000 and a 3 percent levy on income above $70,000, with no change needed to the corporate tax rate of 30 percent, would raise $1.026b a year, according to Green Party estimates.
People earning $50,000 a year would pay an extra 58c a week, and those on $70,000 a year would pay an extra $6.33 a week. People on $100,000 would pay an extra $23.59 a week.
"We don't agree with Bill English who says that a small levy could stifle economic performance. The levy would target those on higher incomes who typically save or invest their additional income rather than spending it," Dr Norman said.
"The fastest, fairest, and most economically sensible way for New Zealand to rebuild the livelihoods of those in Christchurch is to introduce a temporary earthquake levy on those who can most afford it," Dr Norman said.
Funding the cost of about $10b from the earthquakes in September and February would push the Government's operating budget deficit to more than $16b, or 8 percent of gross domestic product (GDP), from the $11.1b forecast.
Mr English said on Friday that net crown debt could exceed 30 percent of GDP by June 2014, up from around 14 percent in June 2010. It would take a year longer than originally hoped to return to a budget surplus, now expected in the 2015/16 financial year.
It was important that crown debt returned to pre-earthquake levels "so we can absorb future economic shocks when they come along - as they surely will", he said.
NZPA