12 Mar 2013

Economy at risk as drought bites deep

11:08 pm on 12 March 2013

Almost all of the North Island could be declared to be in a state of drought by the weekend.

Five regions are now officially suffering from drought; Northland, Auckland, Waikato, Bay of Plenty, and Hawke's Bay.

Requests have gone to the Government to declare a state of drought in Taranaki, Manawatu-Rangitikei, Whanganui-Ruapehu, Gisborne and Wairarapa.

Speaking from Brazil, the Primary Industries Minister, Nathan Guy, says he is seeking advice on the ground conditions in yet to be declared areas.

Mr Guy says other areas such as Manawatu, Rangitikei and the top of the west of the South Island could be added to the list.

The Government warns the drought will have a negative effect on the economy and on the Government's books.

Finance Minister Bill English says it is too early to say how big an impact the drought will have but it is highly unlikely to push the country back into recession.

Some economists are predicting the drought will take between $500 million and $1 billion out of the economy.

Mr English says that the economic effect will have an impact on the 16 May Budget but not a substantial one.

"Where we thought we might get a bit of room to move, that's probably not going to be the case, and it'll be a continued tight Budget."

The drought also means water levels in South Island lakes used to generate hydro electricity are lower.

Energy Minister Simon Bridges says at the moment it is manageable and there is no need to panic.

Mr Bridges is confident about the security of the country's power supply.

Weekend rain offers hope

Mr Guy says he is seeking advice from NIWA and it is possible more areas will be declared drought zones.

Though forecast weekend rain is good news, it is not certain that it will fall on the areas that need it, he says.

The Government's initial $80 million investment in this year's Budget for irrigation projects should help in dry times.

"We haven't got a water shortage issue - rain falls in huge volumes in New Zealand - what we have got is a storage issue," says Mr Guy. "We need to capture and store water more effectively."

The Government plans to invest up to $400 million on irrigation projects.

One in the pipeline, the $230 million Ruataniwha Water Scheme in Central Hawke's Bay would require assistance from the Crown. That scheme is yet to secure resource consents.