Willis says tax cuts won't require borrowing - but cyclone will

National's finance spokesperson Nicola Willis says her party will not borrow to pay for tax cuts, but remains committed to them - and recognises the need to borrow for the cyclone recovery.

National has been pressuring Finance Minister Grant Robertson over his refusal to rule out a new tax or levy to pay for the recovery from Cyclone Gabrielle.

Willis has been particularly vocal in her criticism.

Robertson has argued he is waiting to see the size of the bill before making a move and is merely looking at his options to pay it.

Willis told reporters this afternoon the party was still committed to tax cuts, particularly during a cost of living crisis.

"The cost of living crisis has now become entrenched and prolonged and National remains of the view that New Zealanders who are paying more tax than ever deserve some relief," she said.

"No, we will not be borrowing for tax cuts - we will deliver tax reduction through more disciplined government spending."

Green Party finance spokesperson Julie Anne Genter suggested a levy or tax was precisely the answer the government should be looking at, rather than borrowing.

"At the very least looking at having an excess profits tax," she said.

"We have been saying that it's fair and it's appropriate for the government to look at those sectors that have been making huge profits and big oil in particular globally has had a record year of almost over $200 billion in profit at the same time that we're being hit by catastrophic climate change."

She said National's criticisms at this time were "irresponsible".

"They're trying to force the government to rule out solutions that would be fair and equitable and help us pay for the recovery and they're saying they're just going to put it on future generations.

"Future generations are going to have to deal with even more catastrophic climate change than we are, so I think we should be looking at responsible ways to raise revenue now."

Willis said, with cost of living pressures hitting New Zealanders in the pocket however, the focus should be on cutting costs.

"This is not the time for [Transport Minister] Michael Wood to be turning the sod on a $30b light rail project in Auckland, and this is the time for him to instead be opening up our borders so we can get the workers to fix our bridges and fix our roads.

"We've been really clear that we want less bureaucracy, fewer pet political projects, less money spent on consultancy, less money spent on pet political projects, we don't support corporate welfare - the kind of $650m being paid out to Fonterra and others through the government's climate change schemes."

She rejected the suggestion National's tax cut package was also a pet political project.

"Prices are rising faster than they ever have, households are scrambling to keep up with higher mortgages, we think the right thing for a good government to do is to let Kiwis keep more of their own money," she said.

"National can afford to reduce the tax people pay because we can be more disciplined about government spending."

She pointed to comments from Reserve Bank Governor Adrian Orr to select committee this morning to back that up.

"The Reserve Bank Governor said reprioritisation is necessary. We agree. I disagree that a new tax is needed. Actually the government should start in its own backyard."

Orr had told the committee it was too early to accurately assess the implications of the cyclone and other recent weather events for monetary policy - and the timing, size and nature of government interventions in response were all yet to be determined.

"This is very different to the Covid situation and again I totally understand that government fiscal response and action will need to be on a case-by-case situation as it comes out, and targeted to the best effect ... a very targeted regional response.

"There's three ways of funding this - there's increased debt, there's the ongoing reprioritisation and there is increased revenue. And so the government from what I have heard is considering all three options. They are important to what our role will be around monetary policy because they have quite different impacts on aggregate demand."

Robertson said it was his job to find a balanced way to approach it - but decisions would have to wait until there was more certainty about the total cost.

"We have to respond however to the crisis that is in front of us in terms of the recovery from the cyclone, and I'll look to find a balanced way through that.

"Obviously the total level of borrowing is a factor that the Reserve Bank Governor and others will look at when they are setting monetary policy. It's a balance, we've got to work our way through that. The government obviously borrows money in normal times, in normal circumstances, to do long-term work, long-term infrastructure work for example."

Orr said the cyclone was likely to have an inflationary effect.

"We know that in time the infrastructure and community rebuild will increase the level of activity and that will put upward pressure on inflation than otherwise," he said.

The central bank yesterday lifted the Official Cash Rate to 4.75 percent, a move Orr said was still necessary - despite some signs of easing.

"There are early signs that inflation is yielding but they are early and of course we've had this severe weather crisis hit us since those statistics.

"Core consumer price inflation still remains too high, employment is above its maximum sustainable level, and near-term inflation expectations remain elevated."

The move will have an effect on mortgage holders, with assistant governor Karen Silk saying about half of home loans would be repriced within the next year, lifting the average interest rate from about 4.5 to about 6.5 percent.

She said the average amount of disposable income spent on debt servicing - meeting interest payments - was expected to increase from about 9 percent in December last year to about 22 percent by the end of this year.