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Canterbury economy bleak after quake but light ahead

Quake-ravaged Christchurch's immediate economic future looks bleak but the $2 billion reconstruction bill will provide a boost next year, an economist says.
Saturday's massive 7.1 earthquake has been a blow to the local economy, with some businesses unab

NZPA
Mon, 06 Sep 2010
Quake-ravaged Christchurch's immediate economic future looks bleak but the $2 billion reconstruction bill will provide a boost next year, an economist says.

Saturday's massive 7.1 earthquake has been a blow to the local economy, with some businesses unable to open and owners are being allowed in the central city only to assess the damage.

But with more than 500 buildings reported damaged, of which 90 are in the centre city, the struggling construction sector is set to get a lift.

ANZ chief economist Cameron Bagrie told NZPA when looking at Canterbury's immediate future, it was negative. "There is going to be an immediate impact on growth for the next few weeks."

Concerned businesses owners and operators have been flooding the phone lines of the Canterbury Chamber of Commerce, chief executive Peter Townsend said.

"We are getting calls this morning from businesses worried about their cashflow, about their ability to pay wages this week. There is a lot things going on."

Mr Townsend plans to send a sheet to about 3000 businesses giving advice on how they should respond.

He said he could not put a number on the loss business faced, but "we do know that if you're not in business and you are not generating cashflow, you have trouble paying your wages".

Mr Bagrie also said it was too early to assess how businesses have been affected.

"We don't know how long they are going to be affected for. We do know it is going to be negative and it is going to be a drag on growth. To what extent and how long it lasts, that would be pure guess work and I don't think that's responsible."

For the next three months, with the collapse of South Canterbury Finance and now the major earthquake, Mr Bagrie said consumer confidence would also take a bend, causing fewer people to get the wallets out of their pockets.

"I think people are going to be pretty conservative over the next three months. What we are seeing at the moment is a growth negative in the near term."

Mr Bagrie said he believed the Reserve Bank would put interest rates on hold this month, but it would be conscious of the reconstruction work set to take place next year.

"That can see this economy hitting capacity constraints pretty easily. At the moment, I think the Reserve Bank will play a very cautious hand."

The $2-billion worth of damage would provide work for Canterbury contractors and tradesmen who have been struggling since the recession.

ASB chief economist Nick Tuffley said overseas experiences suggested national GDP growth could be weak in the third quarter of this year because of the quake.

"However, reconstruction activity will subsequently boost GDP, potentially by 1.5 percentage points."

New Zealand Contractors Federation southern regional manager Ollie Turner yesterday told NZPA that since the economic downturn, Canterbury contractors had been in trouble. And now, "I hate to say it, but it has taken a disaster to create economic action here."

With 400 Contractors Federation members, Mr Turner said there were huge resources available.

"We have the capacity to co-ordinate a lot of the rebuilding, because we know which contractors have the competency and expertise in each particular area."

Mr Bagrie said though the outlook for some industries seems bright, others such as tourism could take a blow.

"If there is a downside or an area to watch pretty closely it would be the impact on tourism.

"I don't think Christchurch is going to be top of the list in terms of people going on holiday for the next sixth or nine months."

Christchurch and Canterbury Tourism chairman Paul Bingham doesn't agree, saying there will be "short-term pain" but the long-term impact is minor.

"A couple of conferences have been cancelled; a few people have had early check-outs but we are not seeing at this stage wide-scale cancellations of people who are booked to come here.

"The hotels are all open; all of the visitor attractions ... are still open; some aren't obviously like the museum. Whilst it's not business as usual, we are not getting any feedback in cancellation."

For the long-term, Mr Bingham said he was working on reassuring international visitors the city was largely intact and what the media portrayed were the bad bits.

"Let's be honest, this is not a positive thing to happen to our a tourism destination, but that said, we've come through quite well.

"I think the impact will be minor, I really do," he said.

 

NZPA
Mon, 06 Sep 2010
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Canterbury economy bleak after quake but light ahead
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