Christchurch earthquake: Govt counts economic cost of rebuild
By Peter Wilson and Dave Williams of NZPA
Monday 28th Feb 2011Highlight the main points
As the Government commits itself to rebuilding earthquake-ravaged Christchurch, it is looking at costs running into tens of billions with an economic impact that will last for years.
Prime Minister John Key said today Treasury's early estimate of the damage caused by last week's 6.3-magnitude quake was between $10 to $15 billion - two to three times the $5b estimated cost of September's 7.1-magnitude quake and 7 to 8 per cent of the GDP, compared to Hurricane Katrina's one per cent impact on the US economy.
The Government will have to pick up about $5b of the combined $20b cost, and there are future costs still to be assessed as revenue falls while the country's second largest city recovers.
"A vibrant city provides jobs for its people and this is a broken city, one that needs to be repaired," Mr Key said today. "There's no getting away from the fact that this has had an enormous impact, beyond our control or expectations." Mr Key had just announced emergency assistance for businesses and workers hardest hit by the earthquake which will cost between $100 million and $120m.
It will last for six weeks while the Government works on its next steps, and a modified assistance scheme is likely to follow. The first payments will be made by Wednesday, with eligible employers receiving $500 gross a week for each full-time employee so they can continue to pay wages.
Mr Key said the aim was to keep businesses connected with their staff, and he also announced support for workers who had lost their jobs because their employers couldn't keep going.
Those full time workers will receive $400 net a week to tide them over while they look for other jobs. "The idea is to put money immediately into people's pockets," Mr Key said. "This isn't means-tested, it's a universal payment.
"Mr Key said the Government's commitment was going to have an impact on its budgets, and was likely to mean it wouldn't return to surplus as soon as it had expected.
Finance Minister Bill English said the economic effects would be felt for years to come. "I'm confident that New Zealand will come through this," he said. "Certainly, the Government will provide the financial resources needed in both the short and longer term." Mr English said loss of output from Canterbury and a delay in reconstruction from the previous earthquake would have an economic impact.
At a national level, economic growth in the first half of this year would be lower than expected. Mr English said the Government had the resources and the commitment "to do what is needed". "Supporting and rebuilding Christchurch will be the most important thing the Government does this year and into the future - we won't be cutting corners," he said. "We will pay for this work by prioritising spending on Canterbury above other areas of government spending and by taking on a bit more debt in the short term."
Mr Key again said the Earthquake Commission levy paid through private insurance would rise, although the Cabinet did not discuss that today. He repeated his belief that the levy could be doubled or even tripled so the fund could recover after paying out on both Christchurch earthquakes.
Labour leader Phil Goff said the assistance announced by Mr Key was a good start but a comprehensive, flexible recovery package was needed to secure Christchurch's future. "In 1931, Napier was rocked by a devastating quake," he said. "Hundreds were killed and injured but a stunning and vibrant city rose very quickly from the rubble... the same can happen in Canterbury."
BusinessNZ welcomed the support for Christchurch businesses and staff. "This will help reduce the uncertainty and disconnection felt in many Christchurch businesses while providing practical funding," said chief executive Phil O'Reilly.
The Council of Trade Unions (CTU) questioned whether the assistance went far enough to meet the needs of workers. CTU secretary Peter Conway said most families lived on full wages each week and costs like mortgages, rents, petrol and food did not decrease because of the earthquake.
- with NZ Herald staff
By Peter Wilson and Dave Williams of NZPA