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PM John Key says Treasury has increased estimated cost of Christchurch rebuild to NZ$40 billion but govt still on track for 2014/15 return to surplus

PM John Key says Treasury has increased estimated cost of Christchurch rebuild to NZ$40 billion but govt still on track for 2014/15 return to surplus

Prime Minister John Key says next month's Budget will show the rebuild of Christchurch is going to cost NZ$40 billion, NZ$10 billion more than previously estimated. However, Key says the Government remains on track for a return to surplus in the 2014/15 year.

Key says the estimated cost to taxpayers has increased by NZ$2 billion since Treasury's half-year fiscal update last December, to around NZ$15 billion.

“Treasury has revised upwards its estimate of the total capital cost of the rebuild from NZ$30 billion - the number in last December’s half-year fiscal update - to NZ$40 billion," says Key. "This will be contained in next month’s Budget."

The increase is mainly due to more precise information becoming available about what the actual costs are across a range of areas, Key says, from housing and social investment to infrastructure and commercial development.

“These estimates will continue to be updated from time to time, but they do not change the Government’s commitment to Christchurch and Canterbury," says Key. "“We will do what it takes to rebuild our second largest city, and that commitment will be unwavering.”

He says the estimate includes capital costs "incurred by entities, such as commercial entities," plus the Crown.

“The Budget will also show that the estimated net fiscal cost of the earthquakes to the Crown will rise from around NZ$13 billion at the half-year fiscal update last December, to around NZ$15 billion. Despite this, the Budget will still show the Government is on track to a surplus in 2014/15," says Key.

Meanwhile, Key says considerable progress was being made on the rebuild with the Government spending money on core public facilities and services.

“We want to focus taxpayers’ money in social assets rather than putting that money into competition with private sector players."

Given the Christchurch rebuild is the largest and most complex single economic project in New Zealand’s history, it was always going to be difficult to get "an exact handle" on the total estimated cost "straight away," Key says.

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7 Comments

I am not surprised at this latest announcement regarding the cost of the Christchurch rebuild and I have no doubt it won't be the last upward revision.  I lived in ChCh prior to the earthquakes but re-located to the North Island shortly after.  It was obvious that the damage was major and all the early estimates were ridiculously underestimating the actual re-build costs.  Anybody receiving their latest buildings insurance will no doubt know that they are all paying for the ChCh rebuild via their insurance premiums.  
 
If the true costs had been known earlier would the decision to re-build in the same place been taken?  
 
 

Treasury couldn't estimate the value of a $10 note...

And I'll put a $10 on that they will further revise their figures.

The cost to rebuild what we HAD may be $40 or $50 billion, but the amount of actual dollars spent on construction is likely to to be not even a third of that...
 
I reckon 90% of commercial owners and residential landlords are negotiating out of rebuilding.  Probably 70% of homeowners too.  Ask the insurers how many completed rebuilds they've done then count the demolitions and red zoning...
 
10,000 buildings demolished or red zoned so far say, and perhaps 500 built?  Maybe a further 1500 out of those demolished or red zoned planned to be rebuilt?  That's more like the reality...
 
...lots of destruction and no construction...

They may not build, but someone will - homes or commercial. no-one wants to own an empty peice of land.
Don't know when it will be, but it will be built on

No they won't!!  Many will just hang onto the land and do nothing (after having received many times what they paid from the insurer ie the land has a negative cost), others will build smaller than beforehand and of course 7000 red zoned houses will be gone for good.
In 50 years time these sites still won't be built on.  Look at history, many sites demolished in the 1980s boom were still vacant in 2010 (and still now of course!), others demolished in the 1960s remained unsealed carparks for half a century (I'm thinking the old Choral Hall site in Gloucester St demoed in 1966 and the sites around that, and also the sites around Cashel St east of Madras etc).

Good comments so far, from afar, but ya needs ter to be a Local to get a rounded picture.
 

  • The 'Christchurch' rebuild needs to be decomposed into Residential, Commercial, Industrial, Government and Other, to be more than a sound bite.
  • Residential rebuilds are happening, just not all (or even majority?  need data.) within City boundaries.  Waimakariri, Selwyn, Ashburton and Hurunui District Councils have all benefitted:  less fuss, quicker consents, more agile councils generally.
  • There has been some absolute depopulation.  Many cannot deal with things as they are, so have left.  There will be a minor influx of workers but that depends totally on ther timing and scale of the rebuilds.  Till now, the scale is modest and the timing is lengtheing as we speak.
  • A lot of the Govt increase is horizontal infrastructure related, which was and remains hard to accurately assess.  Plus there is continuing damgae via e.g. tree roots, which get into formerly OK clay pipes and wreak havoc.  It's been a great two and a bit years to be a Tree...a lot of the old infrastructure near the centre of the city goes back 130+ years (brick barrel sewers...) and thus has had a long and honourable life anyway.
  • Commercial rebuild is only for e.g. niche and top end retail plus the continued exit from high costs/high risks.  Everything else has premises, is either working. sold up, shifted or out of the game.  That's the thing about Commerce - it's sell stuff or Die.
  • Industrial rebuild similar.  A lot of movement to lower cost jurisdictions (sick of the grasping and incompetent City Council), a lot of re-homing in places like iZone (Rolleston), the Airport mini-city, and Ashburton (open spaces and good land deals).
  • Government will be the prime new-CBD inhabitant:  Justice, Health, Education, IRD.  Only they will be able to afford the ground rents, by and large.  Bob Jones predicted exactly this 2 1/2 years ago...As they exist on OPM, costs don't really matter.

For the rest of us, living in undamaged houses (85-90% of the city, and not counting a few hairline cracks in exterior coatings or interior Gib), life proceeds exactly as per normal.  The damage can be routed around in most cases (I haven't been walking around in the old CBD for months), the suburban services are all running, commute times are if anything less as we've all discovered rat-runs, and Gaia-munching B-trains still distribute goods to supermarkets.,
 
Life is good...