Despite rain falling over parts of New Zealand today, the Finance Minister is warning the cost of the drought is soaring and could hit $2 billion.
Finance Minister Bill English revealed the amount, which is double the estimate of just a week ago, to TV ONE's Q and A programme today.
Treasury is watching closely the impact of the drought as it
prepares for the May 16 Budget, and English says they will be
getting updated advice over the next few weeks from the
"But 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," he said.
The Government has declared the North Island a drought zone and it is casting fresh gloom over the economy.
"There's really nothing else that can knock 30% off NZ's growth rate in a year. This underlines for us the importance of our primary production sector," English said.
The 2007-08 drought had a $2.8 billion economic impact, in on-farm and off-farm costs.
The big dry
Climate scientist Professor James Renwick told Q and A that global warming was the only explanation for the drought saying the average around which temperatures vary is changing and will be hotter over time.
"So what we call a very warm year now will be a cold year in 50 or 60 years' time. What we'd call a dry summer now will be getting closer to the normal summer in another 50 to 100 years' time."
Renwick said he thinks there could be more political leadership around the issue.
English said he does not agree with that, as farmers have strong incentives to adapt and there is currently a public discussion about new rules around the use and distribution of water.
He said there is a discussion going on about a national framework for water, about getting the balance right between environmental and economic sustainability.
"And by the end of this year, we'll pretty much have a new framework in place, and I think that's a pretty good demonstration of leadership."
English said he thinks New Zealanders are getting the message.
"I think New Zealanders right now, particularly the farming families who are dealing with the stock welfare issues, the financial issues, the issues of personal stress, they know what's needed.
"What's needed in the first place is rain. But, secondly, they're quite adaptable, and I don't think the government has got much it knows better than they to change the way they run their businesses."
Earlier this week, Finance Minister Bill English said recent financial forecasts had looked better than expected, but the drought would bring this back.
English said he did not believe it would derail the Government's target of reaching a budget surplus by 2014-15.
The news that it could cost the country $2 billion comes as showers fell over parts of Northland, Auckland, Waikato and the western North Island.
But experts say it won't be drought-breaking rain.