Earthquake Minister Gerry Brownlee's comment that he did not expect any rebuilding in Christchurch to happen for 12 months has done little to dent economists' expectations for the Reserve Bank of New Zealand to raise the Official Cash Rate either in December or the first quarter or 2012.
Meanwhile details of the government's plan for about 5,000 of the worst affected home-owners in Christchurch were leaked last night, with the government today going to offer to buy those homes for their 2007 valuations if the homeowner has insurance.
Brownlee made the rebuilding comment to Parliament's Finance and Expenditure Committee yesterday, ahead of today's announcement where the government will offer to buy about 5,000 homes from the worst-hit Christchurch residents.
"No one is going to be building anything in the city, in my opinion, in the next 12 months," Brownlee said yesterday.
Economists are picking the RBNZ will hike the OCR either late this year or early next year in efforts to stem inflation pressures.
The Reserve Bank's own 90-day bill track suggests a hike in December. Governor Alan Bollard has said the central bank will be closely watching for any inflation pressures flowing through from rebuilding in Christchurch which would affect the timing of rate hikes.
BNZ economist Doug Steel said the 12 month figure for rebuilding was broadly in line with BNZ's forecasts, and that the rebuild was not the only pressure on inflation at the moment. BNZ is picking the RBNZ to raise the OCR before the end of 2011.
"I think from a Reserve Bank and inflationary pressure point of view, while the rebuild of Canterbury is part of it, it’s certainly not all off the story," Steel said.
"I think the labour market is probably tightening – it’s not particularly loose already – and probably tightening as we speak," he said.
"Without the rebuild there’s certainly plenty of other things going on – the commodity boom one of them, obviously the Rugby World Cup another big one on the horizon.”
Twelve months wasn’t some new surprising time frame.
“That’s not too far away from where we’ve got it,” Steel said.
“Our view, at least in terms of our forecasts, doesn’t have any rebuilding kicking in until next year. So it’s certainly still a long way away - certainly any pick-up in earnest is still a long way away in our view," he said.
ASB chief economist Nick Tuffley said it had taken a view that rebuilding in Christchurch would be more gradual and be a bit later than the Reserve Bank and Treasury were expecting. ASB is expecting the first OCR hike in January 2012.
“We have a less rapid pick-up in the economy over next year anyway, and it’s one reason why we think interest rates are more likely to go up early next year rather than late this year, which is what the Reserve Bank seems to be signalling,” Tuffley said.
“But we do think though that there is a risk that once the reconstruction does start that the inflation pressures it generates will be a little bit stronger than what the Reserve Bank is assuming," he said.
The Reserve Bank’s forecasts, particularly for residential building had things starting to pick up before the end of this year, and noticeably more in the second half of next year, Tuffley said.
“But anybody at the moment is just really making basically assumptions about when it will restart, because it is just so hard to know right now when it will occur,” he said.
ASB was expecting the main lift in residential rebuilding to start to come through in the first half of next year.
The government will offer about 5,000 Christchurch households the chance to sell their home to the state at 2007 government valuations when it announces an aid package at 1:30 today.
Leaked details last night on the plan say acceptance of the package would be voluntary for those households with insurance. Those without insurance will miss out.
Christchurch areas of Bexley, Avonside, Avondale, Dallington and Horseshoe Lake are expected to be eligible for the initial package, with those in Port Hills and Lyttelton having to wait for homes to be assesed for damage from the June 13 aftershocks.
After paying out the affected households at 2007 values, the government would work to receive pending insurance payouts in order to try and recoup some costs, the NZ Herald reports.
The Dominion Post estimates the initial package for 5,000 homes may cost about NZ$1.5 billion.
The official announcement will be made in Christchurch at 1:30pm today.
(Updated with govt plans for those 5,000 worst-affected homes.)