Quake's economic impact signalled

Canterbury's devastating earthquake has massive economic implications for the region and the rest of the country, leading economists say.

However, trying to estimate the economic impact of yesterday's 6.3 magnitude quake at this stage was foolish, BNZ head of research Stephen Toplis said.

"The biggest disservice you can do anybody at the moment is make a stupid estimate of the dollar value of this.

"We're no better placed than anybody else to try and quantify the magnitude," he told NZPA.

However, the economic toll would be far bigger than the impact of September's magnitude 7.1 quake.

"How many businesses in Christchurch, that were just about to get back on their feet again, have now suffered an impact that, in some cases, could be fatal?"

This time, there was also a more severe psychological impact, due to the rising death and injury toll, on top of the more tangible economic implications.

Mr Toplis said the region's full recovery would take years if not decades.

"It has massive implications for the psychology of the place and the economy and we just don't know what it means in a number sense," he said.

Christchurch represented about 15 percent of the nation's economy.

"So, we do know from a numerical sense that 15 percent of the New Zealand economy has now stopped," he said.

Due to New Zealand's small size, the whole country would be affected.

"You're going to have businesses that supply to Christchurch and are supplied by Christchurch, there will be downstream effects there," he said.

Before the latest quake and aftershocks, Christchurch's economy had been fairly diverse with a range of industries including manufacturing, the service sector and agriculture.

Mr Toplis was confident Christchurch's economy would eventually recover and used the example of Kobe, in Japan, which was devastated by a magnitude 6.8 quake in 1995, but was now back up and running.

That quake was estimated to have caused about ten trillion yen in damage or 2.5 percent of Japan's gross domestic product at the time.

ASB chief economist Nick Tuffley told NZPA tourism would also take a big hit, as Christchurch was the gateway to the South Island, with the second biggest international airport in the country.

A second large quake, particularly where people had died including foreign nationals, would undoubtedly make tourists wary.

The Rugby World Cup would have given the region's economy a much-needed boost but whether games would still be held in the city was up in the air.

Damage to commercial buildings and infrastructure including roads, bridges and tunnels was far worse this time.

The Port of Lyttelton was a key pipeline for goods in and out of the Canterbury region and the big question was when that could become operational again, he said.

There was about a 25 percent probability the Reserve Bank would cut the official cash rate, to control the ripple effects in the wider economy, he said.

"It's a possibility but what's more certain is that it will be a lot longer before the Reserve Bank will be contemplating lifting rates back up, cut or no cut."

Fletcher Building's chief executive of infrastructure, Mark Binns, said the company was liaising with the Earthquake Commission and putting together a response team.

Yesterday's earthquake meant earthquake repair and assessment work, following the September 4 quake and aftershocks, would return to square one.

Fletcher would need resources from other parts of the country and possibly off-shore to reevaluate claims and assess damage, he said.

Meanwhile, the Canterbury Employers Chamber of Commerce, Peter Townsend, urged business owners to stay away from the city centre as now was not the time to check quake damage.

The devastation was incredible and the central city was a disaster area, he said.

However, the main arterial routes were still accessible and the key focus was to get water, food and power to people.

"This is a national emergency -- no doubt at all," he said.

 

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