Kaikoura quake to shave 0.1% from NZ's GDP over two years, report shows
The 7.8 magnitude earthquake near Kaikoura last November will trim economic growth by about 0.1 of a percentage point over two years due to increases in the cost of transport to and from Canterbury and disrupted business operations, government-commissioned research shows.
A Market Economics report prepared for the Ministry of Transport estimates the quake will hit gross domestic product by $465 million over two years, rising to $513 million if the reconstruction takes longer than expected. The biggest losses to the economy are in manufacturing, which relies on transport links to ship their products to customers.
The biggest economic impact was probably in the first six months after the quake, including the disruption of services in nearby Wellington and nets out over the two years as the response by the transport sector offsets losses in other sectors.
"With higher transportation costs, NZ consumers can afford to spend less on other goods, and goods produced in NZ become less competitive with overseas goods," dragging on overall GDP, the report said.
The report comes a day after Finance Minister Steven Joyce said the forecast cost of rebuilding the road and rail corridors in and around Kaikoura was reduced to between $1.1 billion and $1.3 billion from a previous estimate of between $1.4 billion and $2 billion. Joyce yesterday earmarked $812 million of new capital spending to rebuild State Highway 1 and said Kiwrail faced a bill of up to $400 million to replace railway lines, much of which would be covered by insurance.
The Market Economics report estimated the rebuilding cost for heavy and civil engineering work in Canterbury to be between $1.96 billion and $2.93 billion, with residential work estimated to be between $66 million and $331 million and non-residential work to be between $58 million and $290 million. For Wellington, the report estimated non-residential building construction work would cost between $712 million and $3.56 billion, whereas residential buildings would cost between $37 million and $183 million and heavy and civil engineering between $16 million and $23 million.
Economic Development and Transport Minister Simon Bridges said the government has committed "significant resources" to getting the affected communities back up and running, including starting construction work on the roads and providing business and staff support packages.