Wellington still paying the price for Kaikoura quake and the 'big one' could cost $29b
The cost to repair Wellington after a major earthquake could be so high that its days as the capital city could be over.
A quake of a similar magnitude to the one in Christchurch in 2011 would cost New Zealand at least $29 billion, and $26b of that would be in the Wellington region, according to a new report prepared by Deloitte and structural engineering firm Miyamoto.
"The cost of disruption and replacement after a really big earthquake under Wellington could be too much for residents and the nation to bear. Wellington might never fully recover from such an event," Miyamoto International chief executive Kit Miyamoto said.
However, Finance Minister Steven Joyce disagreed with the assessment, and said Wellington "would definitely be rebuilt".
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"If there was a big earthquake in the capital, and it was not possible to run government in Wellington, there is a contingency plan. The prime minister would make the call to temporarily move to Auckland at the Devonport Naval Base, but it would be our intention to return to Wellington."
Deloitte partner Linda Meade said the report was commissioned after the Kaikoura quakes because it was felt that not enough action was being taken in Wellington.
"The view seemed to be that Wellington would return to normal, but it continues to have an impact and still not much seems to be happening.
"I'm not saying a big event would kill Wellington, but it's highly dependant on the behaviour of businesses, and if the Government upped sticks to Auckland, that would have a lasting negative impact."
In December 2011, the Treasury estimated the total cost of the Christchurch earthquakes, including business disruption, and rebuilding to higher standards, at up to $30b.
The Forgotten Impact report says Wellington is still paying the price of the Kaikoura quakes, at about $1.25 million a week, totalling about $30m to date.
Miyamoto said the lasting economic impact was a wakeup call for the capital, which now had a small window to prevent disaster.
"Wellington is the seat of government and decision-making. It's vital for the entire country that Wellington gets back on its feet as quickly as possible following a quake."
If the city was not functioning and shut down for a long time, the Government would obviously move elsewhere, he said.
But Joyce said on Wednesday: "Our experience with the Christchurch earthquakes, and the global financial crisis, shows that New Zealand has the capacity to respond.
"This is why I announced our plan to reduce government debt from 20 per cent of gross domestic product to 10 or 15 per cent by 2025.
"Most New Zealanders will realise that we will get another big event in the near future, and we need to have the capacity to borrow and rebuild."
He said the Government could afford a $29b invoice to fix Wellington, provided "we maintain a strong economy which generates a fiscal surplus, and that we use that surplus to pay down debt so we have the capacity to borrow".
"Of course, not all of the rebuild of Wellington would be the responsibility of the Crown. Some part would be paid for by EQC and insurance.
"Geologically we are a young country, and we are exposed to not just earthquakes, but tsunamis, and volcanoes, and we are a small country that can be exposed to other international risks. We need to have the capacity to borrow and rebuild."
Miyamoto said Wellington City Council's resilience strategy was a good first step, but the onus was on building owners to sort out their buildings and they should not be waiting on central or local government to tell them what to do, he said.
"Workers and residents must ask for buildings that not only stay up, but can continue being used. There are cost-effective ways to achieve this, but people must be prepared to pay for it."
Wellington Mayor Justin Lester said the resilience stance and asking building owners to be proactive was in line with what the council was doing.
"Resilience is a key priority and we want to keep the city safe. Buildings are three times stronger here than Auckland. Rest assured the capital is going nowhere."
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