Article – BusinessDesk
Feb. 22 (BusinessDesk) – Canterbury’s rebuilding has been “pushed back till further notice,” but the overall economic impact of the second major quake to hit the South Island’s largest city will depend on the quality of the response from …
Quake’s economic impact depends most on govt response: economists
By Pattrick Smellie
Feb. 22 (BusinessDesk) – Canterbury’s rebuilding has been “pushed back till further notice,” but the overall economic impact of the second major quake to hit the South Island’s largest city will depend on the quality of the response from the government and insurance industry, economists say.
The quake is expected to knock as much as 0.2% off economic growth, as the Sept. 4 earthquake is believed to have done, but the effect is likely to be localised, says ASB’s Nick Tuffley.
“It’s another kick in the teeth when we don’t need it,” he said. “The best thing that can help Canterbury is the support measures and government assistance.”
However, the quake is also likely to raise the prospect of an interest rate cut by the Reserve Bank of New Zealand, which has already been assessing the ongoing weakness of the New Zealand economy as a whole and signalling no return to higher interest rates until late this year at the earliest.
“We were at about 10% chance of a rate cut before this,” said Tuffley. “We’re at about 20% to 25% now.”
But the New Zealand Institute of Economic Research’s principal economist Shamubeel Eaqub said monetary policy was not the answer.
“This isn’t about interest rates,” said Eaqub. “It’s a natural disaster and we already have a civil defence and recovery plan that will kick in. The question is how we make sure the clean-up is well-executed.”
Chief among fears for the regional economy is the potential for businesses already struggling after the Sept. 4 quake to fail, and for people traumatised by the day-time, working hours disaster to move from Christchurch.
“I don’t think this will have a major impact on the national economy,” said Eaqub. “There will be a delay in Canterbury, but that doesn’t mean the country is going to stop.
“My fear is the job losses, business failures, people leaving. That could have a real hollowing out effect.”
Cantabrians had already been becoming increasingly dissatisfied with the pace of insurance industry claim processing and reconstruction before the latest quake, which will lead inevitably to a wave of new and additional claims.
The 6.3 magnitude earthquake that rocked the just before 1 p.m. today, and multiple fatalities are now confirmed, and television reports are showing injured citizens being rescued from collapsed buildings, including the Pyne Gould Corp. building, a multi-storey modern office block.
“It’s early days to know much the hit will be (to the economy),” said the Bank of New Zealand’s Doug Steel. “But any rebuild from September has been delayed and the economic activity expected from that is pushed back until further notice.”