Chch rebuild will fuel building boom 'bigger than 2002-07' – Bollard
The Canterbury rebuild should trigger a construction boom “at least as large” as the 2002-07 boom, Reserve Bank governor tells MPs.
The Canterbury rebuild should trigger a building boom “at least as large” as the 2002-07 boom, Reserve Bank governor Alan Bollard told MPs this afternoon.
That is going to “have its challenges for monetary policy” – that is, it will push up inflation – Dr Bollard told MPs on Parliament’s finance and expenditure select committee.
There is already “short term phenomena – rentals going up, some things like bottled water and other important supplies, and insurance premiums going up,” Dr Bollard said.
However, the largest price impulse will come from a construction boom which is likely to run for several years.
“In the medium term, there’s going to be significant activity, significant bottlenecks – there’s going to be a huge amount of construction.”
The overall rebuild will be “at least as large as the building boom we hade nationwide in 2002-07 but of course this is focused on Christchurch. It dominates our forecasts.”
That boom and those bottlenecks will see price spikes and Dr Bollard signalled the Reserve Bank intends to keep price inflation within the 1-3% target band.
Today’s official cash rate decision to cut the OCR from 3% to 2.5% was widely anticipated but the duration of the cut is unlikely to be long.
The Reserve Bank signalled it would remove what most economists are calling an “emergency” rate cut as soon as the rebuild gets under way.
Rob Hosking
Thu, 10 Mar 2011
Thu, 10 Mar 2011
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Chch rebuild will fuel building boom 'bigger than 2002-07' – Bollard
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