There is a growing perception the economy is set to
fall into a hole as the Canterbury earthquake-related rebuild
stimulus fades but ANZ chief economist Cameron Bagrie
disagrees. Business editor Dene Mackenzie reports.
Irrigation projects from North Canterbury to North Otago
will help fill any economic downturn when earthquake
rebuild-related activity fades. Photo by Mark Price.
The economy, and particularly the Canterbury region, is being
supported by rebuilding after the earthquakes, ANZ chief
economist Cameron Bagrie says. But he disagrees the economy
is set to fall into a hole as the $40 billion rebuild
The stimulus peak from the rebuild was just below 2% of GDP
but that had been steadily building over four years and the
stimulus would fade gradually from its forecast peak in 2017.
''We suspect the rebuild will take longer. But, irrespective,
people know it will peak in the coming years and this gives
them time to adjust and plan accordingly.''
The rebuild stimulus was being offset by contractional fiscal
policies that would not remain that way indefinitely.
Politicians would not keep their hands off the loot, he said.
The implications of scaling up irrigation-related development
across the Canterbury Plains was not broadly acknowledged. It
was huge, and included projects from North Canterbury to
A host of the Canterbury rebuild-related work was necessary
for replacement demand impetus to occur, with tourism,
education and central business district activity being
Tourism numbers to Christchurch had lifted but remained low
The number of guest nights in Christchurch was 73% of the
level before the earthquakes and the average international
tourist spend was 65% of the pre-earthquake level.
''Of course, a quake-ravaged city is not exactly a tourism
mecca but there was also a lack of capacity with the large
hotels out of action.This is evidenced by the lift in guest
nights in the rest of Canterbury during the period.''
As more hotels opened and the city recovered, guest nights
would continue to rise, he said.
Enrolments at the University of Canterbury, at about 13,000
students in 2011, were about 30% lower than in 2010.
The critical point to note was those sectors were
infrastructure dependent. Get the infrastructure in place,
increase the amenities available, build the housing and the
people would come, Mr Bagrie said.
The rebuild was placing pressure on aggregate demand. The
unemployment rate in Canterbury was 2.8%. Some fading in
momentum was to be expected given supply-side constraints.
Fading momentum was not a downturn.
''Christchurch is chewing up resources that could otherwise
be devoted to other activities. It's natural for resources to
be drawn to a major event. These resources can be
There was no shortage of construction demand across the
economy. The building effort going on in Christchurch was
going head-to-head with growing demand for construction
around the country more generally, he said.
Auckland had immense housing demands to satisfy and the
Government had earmarked significant funds for capital
investment in the wider economy.
Though the waning of the rebuild effort did not spell doom
and gloom for the wider New Zealand economy, there would be
regional specific aspects to manage.
The onus was on local policy makers and businesses to get
alternate drivers of growth in place in a timely fashion and
think more broadly beyond the rebuild itself, Mr Bagrie said.
There would be friction internally as the key drivers of
growth in Christchurch moved away from construction towards
broader sections, including tourism. Resources would need to
adjust and there would be tension as the process panned out.
For Canterbury to flourish after the rebuild, key
microeconomic facets and sectors needed to be firing.
They included: the education sector, two universities or
potentially an amalgamated one; manufacturing, a hub of
non-commodity manufacturing excellence; agriculture,
Canterbury Plains-related development; emerging IT
businesses; tourism, Christchurch Airport v Queenstown and
Auckland airports competing for tourism visitors; and the
port, with major competition likely from Timaru.
Mr Bagrie said there had been some encouraging developments.
New direct air routes between Christchurch and Taiwan were an
example of a small microeconomic facet adding progressive
impetus to growth and backbone beyond the rebuild.