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Source: ONE News
An economist says while the estimated $4 billion cost for the Canterbury quake seems daunting, much of it will be covered by insurance.
ASB's chief economist Nick Tuffley said the Earthquake Commission (EQC) is well placed to pick up about $2 billion of the ultimate cost through household cover.
Tuffley told TVNZ's Breakfast that a levy on household insurance has gone into a bucket which currently has $5.6 billion in it, and the EQC can easily meet their liability. And he said some of that cost will be picked up offshore as it is standard practice to offset some of the risk elsewhere.
Tuffley did not know whether household premiums would increase to top up the EQC kitty as a precaution against another disaster, but he said there will still be a lot of money left.
The rest of the $4 billion is likely to be split between private insurers covering house and business properties with a "reasonable chunk" coming from offshore through re-insurance.
And Tuffley said the government has indicated it will pick up lot of rest, footing the bill for infrastructure costs and already signalling packages to help businesses recover.
While an earthquake is never good, Tuffley said once people get through the disruption stage, money will be put into circulation.
"We are going to see very strong construction and more retail spending as people replace broken or lost items."
For business, Tuffley said the key is to get infrastructure working quickly so companies that haven't been too badly affected can get back up and running.
He said this is largely happening with electricity, water and sewerage working, and the transport system still largely operating.
Much of the short term risk is around confidence, Tuffley believes and he said while property values may be affected there could be pressure on house prices and rents because of a shortage of homes.
