The pre-Christmas aftershocks will delay the rebuilding of Christchurch by a few months, the Reserve Bank believes.

Governor Alan Bollard, in a speech to the Canterbury Employers Chamber of Commerce yesterday, said the bank expected a gradual lift in activity over 2012, including demolition and repairs to housing and infrastructure, but that it would be next year before reconstruction got under way in earnest. By 2014 and 2015 it will be boosting economic activity by more than 1.5 per cent a year, the bank forecasts.

Along with strong commodity prices, it would be the major driver of economic growth over the next few years, and a major factor in monetary policy decisions.

"Reconstruction is projected to eventually provide a boost to demand similar to the mid-2000s housing boom. Residential and non-residential investment will lift growth sharply. Spare capacity and labour will be absorbed rapidly, and inflation pressures will pick up from current low levels," Bollard said.

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The bank estimates the total cost of claims from the earthquakes could be around $30 billion.

"With the risk of ongoing damage from aftershocks and still high levels of uncertainty, insurers are not currently increasing their overall exposure to Canterbury and some insurance holders are having difficulties getting cover for new risks or increased limits."

But the longer the delays to rebuilding, the greater the risk of leakage of businesses and residents from Christchurch.

"Delays could also mean the rebuild is done more quickly, albeit starting later, so exacerbating inflationary pressures," Bollard said. He expects the rebuilding process to take at least five years but said New Zealand was well-placed, in that insurance would fund the majority of the costs, and most of the funding was from offshore reinsurers.

The other shock to have hit the economy was the "slow burn" of the European sovereign debt crisis.

"The outlook for the eurozone remains very uncertain, partly because the outcome will in large part be determined by political considerations rather than purely economic ones," Bollard said. "What may be economically optimal, for example risk-sharing among eurozone countries or moves towards fiscal union, may not be politically optimal. Many of the proposed solutions would involve some surrender of national policy sovereignty, which would not be palatable for member states."

Despite the problems facing Greece, and the markets factoring in a rising risk of default, the most likely outcome was the eurozone would stay intact, given the costs to a country leaving the system and the damage to its banking system and those in the rest of the eurozone.

Though progress had been made in providing liquidity to banks and rollover funding to Governments, the euro is forecast to be in recession this year.

New Zealand's trade with Asia and Australia is three times bigger than its trade with the European Union and United States combined. But though our increasing reliance on Asia had helped growth, it could not shield us from a slowdown in world demand, or the drying up of financing. "Spillovers from a recession in Europe could spark a slowdown in Asia, pushing down commodity prices, and having a marked impact on Australia and New Zealand."

And international markets are an important source of funding for New Zealand banks. "Although they are currently well funded, bank funding costs are likely to increase to some degree over the coming year. This is likely to put some upward pressure on retail interest rates relative to the official cash rate." Monetary policy would need to take account of such pressures, he said.