Some gains don’t cancel out overall loss

South Island schools outside Christchurch are reporting increased rolls with pupils transferring from the city.

Demand for accommodation has risen and people with houses or office space to lease see opportunities as people relocate, at least temporarily.

Some businesses also see opportunities either producing goods which are needed to help with the earthquake recovery or which can  no longer be made in Christchurch because of the quake damage.

But nobody should fool themselves that these businesses gains cancel out the overall loss the quake will impose on New Zealand’s economy.

Christchurch is the South Island’s biggest, and the country’s second biggest, city. It has about 10% 50% 35 -40% of the Mainland’s population and contributes more than 10% to the national economy.

It is also the gateway to the South Island and while some tourists who would have gone to Christchurch will now spend more time in other parts of the South, others won’t come at all.

Finance Minister Bill English says:

Treasury estimates the total financial cost of damage  from the earthquake at between $10 billion and $15 billion – two to three times the estimated $5 billion cost of the first earthquake last September. This will be shared between central government, insurers, local government and businesses.

In addition, the wider economic impact of the earthquake, combined with already slower economic growth than forecast in the Half Year Update in December, could leave nominal GDP a cumulative $15 billion lower over the five years to 2015. That is equivalent to about 1.5 per cent of the total value of GDP over this period.
 

“We’re still working through the potential impacts of the earthquake on GDP and the flow-through to tax revenue,” Mr English says. “But based on these early assumptions, the total loss of tax revenue from all of these factors could be in a range of $3 billion to $5 billion over the five years.

“This is manageable in the context of the Government’s revenue base of about $330 billion over the five years.

“It’s clear that the earthquake will have an impact on the Government’s finances – through both increased costs and reduced tax revenue.

“We will work through those issues carefully as we prepare for the Budget over coming months,” Mr English says.

That is the financial cost, there is also the human cost – the people who died or who’ve been injured; the many more who are living in damaged houses without power, water and sewerage; the ones who have lost businesses or jobs.

Even those who weren’t caught up in the most badly damaged areas have been affected. Christchurch friends stayed with us in Wanaka on Friday and even there, well away from the aftershocks, they had a broken night’s sleep.

Christchurch will never be the same again and nor will  its people.

There are opportunities for people and businesses in and outside the city but any gains from that won’t compensate for the losses from the earthquake and the cost of the recovery in both financial and human terms.