BUDGET PREVIEW: Christchurch recovery in rebuild mode

It’s official – Christchurch is no longer in recovery and is now in rebuild. Driving around town, it’s hard not to miss the hive of activity that is taking place. 

Construction sites are starting to outnumber demolition areass. The focus is firmly on the future and the economic benefits that the rebuild promises to bring.

Although it has been widely accepted as fact by a number of locals for some time, something else has recently become official – the rebuild is going to cost more than originally anticipated. Much more. Estimated costs of around $30 billion have escalated to nearer $40 billion. 

A number of reasons have been put forward for this. These include improvements in cost estimates as the extent of damage and the need for repair and replacement is reassessed.

Only some of the increase will affect the Crown’s finances. Prime Minister John Key says this year’s Budget will reveal an increase in the estimated net cost of the earthquakes to the government from $13 billion to $15 billion. 

Despite this increased burden, he says this will not affect the government’s important goal of achieving a surplus in 2014-15.

The balance of the rebuild costs will fall on the private sector, mainly insurance companies.

A really positive aspect of the rebuild is that, for a significant part, it is new money that is being introduced to the economy. In that sense, the rebuild is a huge, one-off export. 

While there is no doubt that any circulation of money encourages economic activity, our fortunes as a country only improve when new money comes to town.

Some of it won’t be here to stay. Christchurch’s population is increasing as migrant workers arrive to assist with the rebuild. 

While much of those wages will be spent locally, there will be a certain amount that will be repatriated to Ireland, the Philippines, the Pacific Islands and other providers of labour.

The mood in Christchurch is mixed, and it depends on personal circumstances. There is a general sense of optimism about the renewal that rebuilding will bring. 

These positives include new faces in town, new hospitality offerings, the return of old favourites like the recently reopened New Regent St and the gondola, and innovative new structures. 

This is tempered by a sense of loss for the people and things that have gone, and a sense of frustration on the part of those who feel left behind as the mammoth task of reconstruction and replacement seems to grind on.

Christchurch also continues its tradition of debate. In years gone by, this was often focused on what colour the tiles in Cathedral Square should be. 

The earthquake rebuild has amplified this noise, as it is now the fate of the cathedral itself that is at stake – as well as other issues such as architecture, sports facilities and the one-way system.

Regardless of the outcome of such discussion, the over-riding sense is one of opportunity. Recognition of the increased amount of capital will only increase that.

Geordie Hooft is partner, tax and privately held business, at Grant Thornton New Zealand, chartered accountants and business advisers. Email: geordie.hooft@nz.gt.com