Some creative thinking will be needed on the Government's part to deal with the challenges of rebuilding Christchurch, ANZ chief economist Cameron Bagrie says.
A back-of-the-envelope calculation suggested the damage from Tuesday's earthquake could be in the region of $11 billion, on top of the $5 billion toll of last September's quake, he said.
And more than the ordinary workings of commerce would be needed to marshal the resources of the construction sector for a rebuilding task which would now get under way later - and take years.
Bagrie said it was not always easy for tradesmen from outside Canterbury, especially those in two-income families with children at school, to move there for even an extended period of rebuilding work.
"It's a big ask to uproot families."
And if they were in a position to relocate, there was potential competition for their skills from flood-ravaged Queensland.
"The Government is going to have to think outside the square in how they respond to this.
It is not just about providing cash. We are going to have to have some fundamentally different thinking to make sure we have the resources to match the rebuild requirement," he said.
"Maybe the Air Force should fly people in on a Monday and fly them back on a Friday. It would still be hard on families but easier than some other alternatives."
Right now there was plenty of spare capacity in the construction sector, he said.
"Residential building consents issued last year totalled only 15,500, and the pipeline for non-residential work is relatively short," Bagrie said.
"But the story gets trickier beyond one year. That rate of building consent issuance is opening up supply-demand imbalances, particularly in Auckland. The construction sector was stretched six years ago dealing with 30,000 residential consents a year.
"Assuming a base level of demand of 20,000 for the core housing stock, a modest improvement from current levels, this leaves only 10,000 a year of rebuild capacity - not taking into account that capacity is quite possibly not what it was six years ago." It was a similar story for non-residential construction, Bagrie said. And the earthquake itself might exacerbate skill shortages.
"Not only has the second quake caused more devastation but it has come at a time when Australia is looking to rebuild after floods. Christchurch was already calling on tradesmen and the like from other regions around the country. Having suffered a second significant quake, migrant workers and indeed some locals may be less willing to stick around, preferring to head to Australia instead," Bagrie said.
"We favour greater incentives to encourage people into skills-based training such as core trades. There is certainly a large pool of idle labour - typically of younger age cohorts - that should be mobilised into meeting rebuild demands via apprenticeships and the like."
At the macro-economic level Bagrie believes the Reserve Bank should cut the official cash rate at the March 10 review.
And if a higher Government borrowing requirement and a later return to surplus triggers a credit rating downgrade, "Who cares? The Government's priority has to be to support the economy."By Brian Fallow Email Brian