Quake leaves NZ worse off: RBNZ

Thursday 16th September 2010

The Reserve Bank says New Zealand is "worse off" as a result of the 7.1 magnitude earthquake in Christchurch, repeating the Treasury's warning over earthquake-related growth.

The natural disaster will add inflationary pressures in construction and private rents in the Canterbury region, as well as causing $4 billion worth of damage to residential, commercial and government property, the central bank said in a special commentary for its September monetary policy statement.

Retail and business services, along with water and waste infrastructure were the hardest hit, though farming is at risk if damage to irrigation affects agricultural production over the summer season, the bank said.

The Reserve Bank expects September GDP to be about 0.3% lower because of the earthquake, with a 0.5% to 1% gain from reconstruction in the March 2012 year.

"While GDP is likely to be higher than otherwise during the reconstruction period, it is important to stress that in aggregate New Zealand is worse off, not better off as a result of the earthquake," the bank said.

"While GDP is higher as a result of the earthquake, this extra activity reflects repairs to the capital stock, not a net improvement in the wealth of New Zealanders."

That echoes Treasury's message earlier this week that the earthquake destroyed a great amount of wealth.

Treasury expects September gross domestic product to shrink 0.4%, its best pick out of a range of contractions between 0.2% and 0.8%, followed by seven quarters of extra growth.

The recovery phase is forecast to lift GDP 0.5% over the June 2011 year, and 0.3% in 2012.

Businesswire.co.nz

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