Financial commitment to rebuild Canterbury

The Government has reaffirmed its commitment to provide the financial resources necessary to rebuild Christchurch and the Canterbury economy, Finance Minister Bill English says.

“The earthquake has clearly dealt a considerable human and economic blow to Canterbury, and this will have a significant impact on the Government’s finances and the wider New Zealand economy. Its effects will be felt for some years to come.

“But I’m confident that New Zealand will come through this. Certainly, the Government will provide the financial resources needed in both the short and longer term.”

Based on the limited information available at this early stage, the Treasury has provided a preliminary assessment of the earthquake’s cost and economic impact – and it will issue a more detailed analysis later this week.

According to its preliminary assessment, the total cost of the damage from the latest earthquake is likely to be two or three times the $5 billion estimated cost of the quake on 4 September last year, including private insurance and government costs.

There will be additional economic impacts, including:

• A loss of output from the Canterbury region and a delay in the reconstruction effort from the previous earthquake.
• At a national level, economic growth in the first half of 2011 will be lower than forecast previously.
• As growth slows, Government tax revenue will be lower than expected previously.
• The Government will bear extra costs to support Christchurch and rebuild the city and its infrastructure.

“Financially, New Zealand is well covered for disasters by world standards – through the Earthquake Commission disaster fund, the Government’s own finances and ability to borrow, and through insurance companies and their own global reinsurance arrangements,” Mr English says.

“The Government has the resources and commitment to do what is needed. Supporting and rebuilding Christchurch will be the most important thing the Government does this year and into the future. We won’t be cutting corners.

“Most of this spending will be on essential infrastructure such as roads, water and sewerage systems.

“We will pay for this work by prioritising spending on Canterbury above other areas of government spending, and by taking on a bit more debt in the short term.”

Mr English says the earthquake has made it more important that the Government presses ahead with policies to build a faster growing economy based on savings and exports – and, over the next few years, to reduce New Zealand’s reliance on borrowing from foreign lenders.

“In particular, it’s essential that we continue working to get the Government’s finances in order, so money is freed up for Canterbury and so that we don’t build up debt that is a drag on growth and is a burden future generations.

“Ministers will work on the next steps in that programme over coming weeks, as we prepare for the Budget on 19 May.”