Quakes' 1.5pc drag on economy
The Canterbury earthquakes were a big drag on the national economy, the Recovery Strategy for Greater Christchurch shows.
The documents released yesterday by the Canterbury Earthquake Recovery Authority said the quakes lowered national GDP by an estimated 1.5 per cent last year.
That implies New Zealand would have had respectable growth of about 2.8 per cent if the earthquakes had not struck, UBS senior economist Robin Clements said.
The Cera strategy document is the first estimate of the impact of the seismic upheaval on the nation's growth last year.
"The cost of the damage in 2010 and 2011 is currently estimated to exceed $20 billion. The earthquakes reduced New Zealand's GDP by an estimated 1.5 per cent in 2011. Financial impacts will continue into the future as resources will be used to rebuild, rather than grow, the capital stock," the document said.
While Canterbury pulled down economic growth last year, its rebuild will boost it in the next few years.
In the Budget last week, Treasury estimated the rebuild would account for about 1 per cent of GDP in each of the next three years.
Clements said the reduction in GDP last year of 1.5 per cent implied the Canterbury economy itself shrank about 10 per cent because Canterbury forms about 15 per cent of the national economy. New Zealanders would have been "rolling in the streets" if 2.8 per cent growth had been achieved considering the economic woes in Europe.
"It would have been a healthy pace," Clements said.
While business activity had continued at a high level, damage had worsened because of continuing aftershocks, the strategy said.
"The rebuild will boost economic activity in greater Christchurch, but as a result of the earthquakes some people have already suffered a drop in wealth and living standards."
New Zealand Institute of Economic Research (NZIER) chief economist Shamubeel Eaqub said the 1.5 per cent reduction in GDP last year was much larger than NZIER's estimate of a 0.6 percentage point loss. The 1.5 per cent was the equivalent of about $3b. New Zealand's GDP was around $200b.
Eaqub said quite a lot of activity shut down by the quakes would have been carried out in Auckland and Wellington instead by organisations with a national reach such as banks.