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Budget 2011 Home Page Budget Economic and Fiscal Update 2011

2 Economic and Fiscal Impacts of the Canterbury Earthquakes

Overview

The earthquakes in Canterbury were very destructive, resulting in significant loss of life and turmoil for those involved. They have also had a significant effect on the economy, and will continue to do so for many more years. This, combined with the Government's response, means that the Government's fiscal position has also been significantly affected. This chapter provides a summary of the Treasury's current analysis of these economic and fiscal effects.

Damage Estimates

It is still too early to estimate with confidence the financial cost of the damage caused by the Canterbury earthquakes, and there will always be uncertainty around the exact cost. Nevertheless, information received over the past couple of months suggests that the Treasury's initial assumptions made in late February remain reasonable[7]. Allowing for some double counting for cases where prior damage has been compounded, the Treasury estimates the combined financial cost of the damage caused by the two earthquakes to be around $15 billion - about 8% of GDP and 2.5% of the nation's capital stock. Although there will be a significant boost to economic activity during the rebuild, it is clear that New Zealand's wealth and living standards have suffered as a result of these earthquakes. Resources will be used to rebuild the capital stock rather than grow it.

Table 2.1 - Damage estimates
$ billion Residential Commercial Infrastructure Total
4 September 3.25 0.75 1.0 5.0
22 February 6.0 3.0 3.0 12.0
Total* 9.0 3.0 3.0 15.0

* Totals do not sum to avoid double counting of damage

Source: The Treasury

Notes

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