NZ economy on two-speeds because of earthquake

NZPA

Monday 21st March 2011 3 Comments

New Zealand's economy will run on two speeds for some time with much of the country experiencing growth but quake-stricken Christchurch in a weak and contracting position, Prime Minister John Key says.

GDP data for the December quarter will be released on Thursday.

Key said during the period September's earthquake had been a setback, the housing market had been faltering and consumers were being careful about spending money.

"I thought we were starting to look a lot more positive coming into this year, and that generally numbers were supporting that, lower exchange rate, lower interest rates helping us, higher commodity prices," he told Breakfast on TV One.

"So a lot of reasons actually to be optimistic but obviously Christchurch has meant that effectively we are now going to have effectively a two speed economy, you are going to have growth around the country, particularly in the rural part of New Zealand, but a very weak and contracting position in Christchurch."

Over the weekend Key said the Government was going to cut back the $800 million of new spending it initially intended to put in the May budget.

He said more would be spent on health and education but spending in other areas would need to reduce.

Today Key said the pain would be shared: "It's not going to be a savage attack on one particular thing."

But the reality was savings had to be found.

"You either tax New Zealanders more or the Government spends a little bit less because eventually we've got to pay that debt back."

Key has previously ruled out a taxpayer levy to rebuild Christchurch and instead said more borrowing was needed.

About $5 billion is the estimated cost for the Government to cover the uninsured cost of rebuilding Christchurch.

The Greens have argued for a levy but Key this morning told Breakfast such a levy would have to be imposed on anyone earning over 40,000 to gather enough money and that could hamper economic growth further.

Comments from our readers

On 21 March 2011 at 10:56 am Antoni said:

Why do we have to cover the cover the costs of the uninsured parasites? I have insurance and pay a fortune for it so why do i now have to pay for the rest that have been freeloading? The EQC is another worry. If its taxes/levies rise, why should I pay for it through my house insurance. It will only encourage more people to stop taking insurance and fewer of us will have to fund the shortfall. Why not add it to the rates bill so EVERYONE pays and each pays a smaller amount? Might encourage those that arent insured to get insured because it will be cheaper.

On 22 March 2011 at 8:36 am Shane said:

The $5 billion is for infrastructure (ie damaged roads, etc) so isn't paying for the uninsured homeowners (apart from the AMI stadium turf that is...)

On 22 March 2011 at 11:23 pm Lou said:

My understanding is to be eligible for an EQC payment you have to be an insured owner of residential property. ie No insurance / no EQC payment.