Christchurch rebuild predicted to run 15 years
Christchurch will be the construction capital of New Zealand for longer than first thought, at least 15 years, says Canterbury business leader Peter Townsend.
The jump in the liabilities of the EQC to $7.1 billion is no surprise, said Townsend, the Canterbury Employers' Chamber of Commerce chief executive who back in February estimated the total damage costs could run to $30b.
The Government announced yesterday that the EQC had increased its estimated Canterbury earthquakes liability by about $4b to $7.1b.
It said the scale of residential damage from the February quake had been worse than initially thought, with more claims, more damage per house and greater land damage than expected.
"The further we get from the disaster the more complex things become and the more we find that every time we lift up one broken brick there are two more broken bricks underneath it," Townsend said.
"We've been saying from day one you can take a rough first estimate of the cost of the disaster of an earthquake and multiply it by 2 1/2 and that is effectively what's playing out now.
"We're going to end up with a cost to this earthquake – which I've been saying since February 23rd – of $30b and that's where it's tracking."
It had been said that Christchurch would be the construction capital of New Zealand for the next 10 years, but now it could probably safely be said to be for the next 15 years, due to the extent of the damage, Townsend said.
But residential rebuild would take place faster than commercial rebuild, he said, as the processes were much simpler.
Townsend said he did not think labour-force requirements would change as a result of the increase in EQC liabilities and considered 30,000 additional full time equivalent employees was still on track.
UBS senior economist Robin Clements agreed the upward revision in the EQC's earthquake liability was no surprise.
He had been forecasting the cost of the rebuild would be higher and would take longer than first estimated.
At the 2011 Budget Treasury had estimated the damage to all property from the quakes at $15b and is now revising that.
"It takes time for all the estimates to come out of the woodwork," Clements said.
Clements said it was likely that with more houses estimated to have suffered more than $100,000 damage – now about 30,000 as opposed to initial estimates of 12,000 – repairs would take longer.
"You can only reach capacity and that's it.
"If you're adding more to the total to be done you're just extending the period over which it will be done," he said.
"But what it does mean is the construction sector is going to be working overtime in Canterbury for longer and that will keep people employed and companies busy."
While the EQC could meet most of the claims costs through its Natural Disaster Fund, which had about $6b before the first quake, the Government would pick up the shortfall, estimated to be $829m at this point.
The increased costs have pushed the projected Government deficit out by another $1.3b to a historic high of $18b.
Clements said the news was unlikely to impact the country's credit ratings, which could push up New Zealand's cost of borrowing overseas.
"In the big scheme of things it's nothing to be worried about," he said.
"The credit agencies have been well aware of the earthquake.
"They probably have people making their own estimates of what it's likely to cost so I don't think there's anything new in that."