EQC guarantee to cost 'billions'

EQC: Government says its guarantee of the Earthquake Commission could run to "a few billion" for the Canterbury earthquake claims.
EQC: Government says its guarantee of the Earthquake Commission could run to "a few billion" for the Canterbury earthquake claims.

The Government says its guarantee of the Earthquake Commission could run to "a few billion" for the Canterbury earthquake claims, much higher than the $800 million estimated in late August last year.

Finance Minister Bill English told a Christchurch business gathering yesterday that while the Government was making a $13 billion commitment towards the earthquake recovery, the region needed to show it was "open for business" to attract required outside investment and new people.

English said the $13b figure was fully funded through budget provisions which included ongoing revenue raising, including bond issues and planned state asset sales.

The figure includes $5.5b in Budget 2011 for the Canterbury Earthquake Recovery Fund and expectations the Earthquake Commission (EQC) will pay out more than $7b in earthquake claims from its natural disaster fund, excluding reinsurance.

English indicated that the "guarantee" commitment to the quake-hit EQC fund could now reach "a few billion" from early estimates of $500 million to $800m.

The Government guarantee ensures that EQC will always be able to meet its obligations.

"Our (total Christchurch) commitment looks like it's going to reach around $13 billion by the time we pay for our share of the infrastructure and other costs, buying the red zone, the guarantee on the EQC (Earthquake Commission) which looks like it could run to a few billion, the cost of the purchase and the ongoing operation of Southern Response Services – the old AMI," he said yesterday.

The city's rebuild would probably account for about half of New Zealand's gross domestic product growth in the next three to four years.

Christchurch's immediate problems were far-reaching, he said, with the tourism sector in his own Clutha/Southland electorate "on its knees".

To rebuild tourism in the south, Christchurch needed hotels rebuilt as soon as possible.

In the future it would be very important that the decision makers and decision processes for the Canterbury rebuild focuses strongly on what it would take to attract investment into the region, both in terms of the household and business sectors.

"In the case of the household sector, having affordable housing in Christchurch will be the single biggest determinant of the population of this city in the next 10 years because housing affordability in New Zealand is way out of line ...

"In Christchurch we have an opportunity to create affordable housing and that will certainly attract people.

"With respect to the business community, the planning processes, in particular up until recently, have lacked a strong focus on who actually rebuilds the city.

"It's not the planners ... what rebuilds cities are investors who will take risks."

Christchurch needed to have a very strong focus on the fact it was "open for business" and it would make it as easy as possible for outsiders to invest.

English said in 20 years as a politician he had "never heard less complaining from Christchurch", and that stoic view had an impact around the whole country, with other regions looking first to the problems within Canterbury before they complained about their own position.

"It's shifted the whole mood of the country, because people here are being practical, they're dealing with their frustrations in ways that are more about problem-solving than just complaining."

Canterbury Earthquake Recovery Minister Gerry Brownlee was exercising his overriding powers over the rebuild with "some subtlety", English said.

"However, the shaping of Christchurch is still essentially in the hands of yourselves and your local decision-making processes."

The minister was speaking at the review of the Deloitte South Island Index, which showed the economic recovery was gaining momentum.

BusinessDay