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New Zealand Drought May Curb Government Revenues, English Says

Worsening drought across New Zealand’s North Island could curb tax revenues amid the government’s efforts to return to budget surplus in 2015, Finance Minister Bill English said today.

The dry conditions were “bound to have some impact on the economy,” English said in an interview on Radio Live. Drought declarations were extended to most of the North Island last week, including the nation’s biggest milk producing region.

“In the shorter term, it just means less national income,” said English. “When there’s less national income, there’s also less tax.”

New Zealand, the world’s biggest dairy exporter, first declared a drought this year on Feb. 27 in Northland province, at the top of the North Island. Whole-milk powder prices surged the most in two-and-a-half years on March 6, the same day that droughts were declared in other regions, as dry conditions on farms curb the nation’s milk collection.

The government in December narrowed its forecast operating surplus for the year ending June 30, 2015, to NZ$66 million. It hasn’t yet determined whether the drought’s impact will be large enough to derail that plan, English said today. The budget is delivered on May 16.

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