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A building which has lost its facade in Victoria St, Carlton Corner - Source: Kate Wright -
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The immediate economic future of Christchurch looks bleak, but the $2 billion reconstruction bill will provide a boost next year and is expected to create a regional building boom.
Saturday's massive 7.1 earthquake has been a blow on the local economy, with some businesses unable to open and owners allowed into the central city only to assess the damage.
With more than 500 buildings reported damaged, including 90 in the centre city, the struggling construction sector is set to get a lift, creating a mini-boom for Canterbury and greater growth for the whole country.
But ANZ chief economist Cameron Bagrie said Canterbury's immediate future looks negative and "there is going to be an immediate impact on growth for the next few weeks".
Concerned business owners and operators have been flooding the phone lines of the Canterbury Chamber of Commerce, chief executive Peter Townsend said.
"We are getting calls this morning from businesses worried about their cash flow, about their ability to pay wages this week. There is a lot things going on."
Townsend plans to send a sheet to about 3000 businesses giving advice on how they should respond.
He said he could not put a number on the loss business faced, but "we do know that if you're not in business and you are not generating cash flow, you have trouble paying your wages".
Bagrie also said it was too early to assess how businesses have been impacted.
"We don't know how long they are going to be impacted for. We do know it is going to be negative and it is going to be a drag on growth. To what extent and how long it lasts, that would be pure guess work and I don't think that's responsible."
For the next three months, with the collapse of South Canterbury Finance and now the major earthquake, Bagrie said consumer confidence would also take a bend, causing fewer people to get the wallets out.
"I think people are going to be pretty conservative over the next three months. What we are seeing at the moment is a growth negative in the near term."
Companies contributing
But other companies have been lining up to show Cantabrians and the rest of the nation that they are good corporate citizens with million dollar donations.
And Fletcher Building's share price jumped 5% this morning as investors took stock in a business bound to be at the centre of rebuilding efforts
However the company doubts it will see any rush to rebuild Canterbury, based on its experiences following Victoria's devastating bushfires.
"It takes a long time by the time you work out insurance and then consents and the various planning processes, getting the finance in order," said Fletcher Building's CEO Jonathan Ling.
Economists said in the short term those affected by the quake will need a break from the Reserve Bank.
Bagrie said he believed the Reserve Bank would put interest rates on hold this month, but it would be conscious of the reconstruction work set to take place next year.
"That can see this economy hitting capacity constraints pretty easily. At the moment, I think the Reserve Bank will play a very cautious hand."
"I don't think there's a very strong case at all for raising interest rates in September. They need to be mindful of that confidence channel, take a little bit of a leadership stance themselves."
The money spent rebuilding could boost national economic growth by more than 1% over the next year as people try to replace what they have lost.
The estimated $2 billion damage will provide work for Canterbury contractors and tradesmen who have been struggling since the recession.
ASB chief economist Nick Tuffley said overseas experiences suggested national GDP growth could be weak in the third quarter of this year because of the quake.
"However, reconstruction activity will subsequently boost GDP, potentially by 1.5 percentage points."
New Zealand Contractors Federation southern regional manager Ollie Turner yesterday said that since the economic downturn, Canterbury contractors had been in trouble. "I hate to say it, but it has taken a disaster to create economic action here."
With 400 Contractors Federation members, Turner said there were huge resources available.
"We have the capacity to co-ordinate a lot of the rebuilding, because we know which contractors have the competency and expertise in each particular area."
Blow for tourism?
Bagrie said while the outlook for some industries seems bright, others such as tourism could take a blow.
"If there is a downside or an area to watch pretty closely it would be the impact on tourism.
"I don't think Christchurch is going to be top of the list in terms of people going on holiday for the next six or nine months."
Christchurch and Canterbury Tourism chairman Paul Bingham doesn't agree, saying there will be "short-term pain," but the long-term impact is minor.
"A couple of conferences have been cancelled; a few people have had early check-outs, but we are not seeing at this stage wide-scale cancellations of people who are booked to come here.
"The hotels are all open; all of the visitor attractions are still open; some aren't obviously like the museum...whilst it's not business as usual, we are not getting any feedback in cancellation."
For the long-term, Bingham said he was working on reassuring international visitors the city was largely intact and what the media portrayed were the bad bits.
"Let's be honest, this is not a positive thing to happen to a tourism destination, but that said, we've come through quite well.
"I think the impact will be minor, I really do," he said.
Add a Comment:
Post new commentgordy said on 2010-09-09 @ 13:59 NZDT: Report abusive post
Im my 51 years on this earth I have never felt so pertrified..my first thoughts was we had been hit by a nuclear bomb and it was Armageddon. Never ever want to experience it again
schicken said on 2010-09-08 @ 19:15 NZDT: Report abusive post
I thought the same thing initially. However, another quake big enough to close or shift the cracks further is likely to be heard first and all the kids will most likely be fine. If a child does get swallowed up, I'm probably not going to have huge empathy for the media coverage or their parents, but until then, let the region have a little bit of fun. Education about health risks regarding contaminated water may be a good idea for all. :)
thinkaboutit said on 2010-09-06 @ 23:06 NZDT: Report abusive post
More great coverage tonight TVNZ especially highlighting the situation at individual community levels where people reported they felt abandoned. All credit to those organising themselves into community working groups at this level despite this. Arguably the recovery process would be greatly enhanced if these community groups were psychologically and practically supported by establishing official coordination centres at individual community levels.
Madeleine Ware said on 2010-09-06 @ 17:31 NZDT: Report abusive post
You're making some good points here. Perhaps some of the donations could be towards purchasing and setting up storage of these sorts of things. Individuals are also responsible for making their own preparations. I clean and keep old 3L juice bottles filled with water. Every now and then I water my house plants with one and refill it to refresh it.
Madeleine Ware said on 2010-09-06 @ 17:25 NZDT: Report abusive post
Why are they buying water? Aren't there several tankers about the city giving it away?