Finance Minister Bill English has warned the Government will spend about NZ$8.5 billion over the next few years to help rebuild Christchurch.
“The earthquakes do not fundamentally change our economic situation or the Government’s programme,” English said in a speech to the Wellington Employers’ Chamber of Commerce.
“They simply make the task of returning to surplus a little more difficult.”
English said Treasury estimated the direct cost to the Government of the two earthquakes at about NZ$5.5 billion, which would be fully provided for in the Budget on 19 May.
“About NZ$3 billion of this relates to our share of local government infrastructure, roads, insurance excesses on schools and hospitals, temporary housing and land remediation agreed after the September quake, demolition costs in the CBD, ACC costs and the business support package," English said.
“The remaining NZ$2.5 billion will cover expected costs of decisions we have yet to make – the biggest cost is likely to be remediation of land damage from the February quake. The final cost of land remediation is yet to be determined," he said.
“In addition, the direct cost to EQC of meeting residential property damage of the two quakes will be at least NZ$3 billion, making a total direct cost to Government of around NZ$8.5 billion.”
English said Treasury had previously estimated the Government’s loss of tax revenue as a result of the earthquakes and lower economic growth could be between NZ$3 billion and NZ$5 billion over the next five years.
“However, the good news is that on current forecasts this loss of tax revenue is likely to be a bit less than NZ$3 billion, though we still await final Budget forecasts,” English said.
The cost of the Government’s share of rebuilding Christchurch needed to be put in context, he said.
“It sounds a lot. But New Zealand’s annual GDP is around NZ$200 billion a year; the Government spends around NZ$70 billion a year; and it has assets of over NZ$220 billion," he said.
“Meeting the Government’s share of the immediate earthquake costs will require a quite substantial front loading of Crown debt in the next year or two. That’s because we need to get the rebuild underway quickly and therefore we need the money immediately. The Budget will clearly set out the Government’s plan to return to surplus, so we can start paying off this debt."
Earlier the NZ Debt Management Office announced a NZ$1.5 billion increase in the government's borrowing programme for 2010/11 to NZ$16.5 billion. It has increased the programme by NZ$3 billion in 5 weeks. See our article here.
1 Comments
OK, so that $8.5b doesn't include any EQC costs beyond what their reinsurance amounts - good luck there. It doesn't include AMI's bailout (that'll be over the $1b they expect too).
More worringly, it does include demolition costs in the city. Why?
Private owners all have insurance, so why is the crown picking up the tab? Because the Civil Defence dictatorship wants to bulldoze everything so that there is no option of saving any heritage buildings - they think this will speed the rebuild.
I can tell you, that handing owners clear sites does not encourage recovery - it encourages disillusionment, discontent and discourages rebuilding. I for one have no intention of spending any of our $5m that we will likely get in insurance payouts on building in ChCh. We will simply repay the debt and sit on our hands.
Why also include temporary housing costs?
There is NO need for temporary housing. We have perfectly good houses for rent in the city and there are no takers. Everyone has left or are comfortable with their own arrangements. Spending money on temporary housing is the most stupid idea I have ever heard. There are thousands of houses that are perfectly habitable which currently sit vacant in need of minor repairs. Repairs that wouldn't put them to an insurance standard but ones that would get them to a perfectly comfortable level much better than campervans in the A & P grounds which by the way - are they even in use??
The Governement don't know what to do in ChCh and as a result no one has any confidence and businesses are in widespread shutdown mode.
Take for instance supermarkets. Eight are still shut in the south east, yet the two of the biggest ones which are open and closest on Moorhouse Ave report less trading than before the quake. Obviously there must have been a mass exodus for this to be the case.
If decisions and spending started to make some sense then confidence might return, but without that recovery is only a distant dream.
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