Christchurch earthquake: Damage could treble commission levies

Prime Minister John Key. Photo / Jason Dorday

Prime Minister John Key indicated last night that Earthquake Commission levies could triple because of the damage caused by the Christchurch earthquake.

Mr Key said the Treasury was doing detailed work on the implications of the earthquake and options for funding recovery.

He warned that the central business district could be closed for months.

The Government is set to announce today temporary subsidies for Christchurch-based businesses that will run into the hundreds of millions of dollars.

Mr Key said the rebuilding of Christchurch could take between five and 10 years and would cost more than $14 billion.

His preference at present was to increase the Earthquake Commission levies paid from household insurance rather than setting a general temporary disaster levy as the Australians had recently done.

But that could see the EQC component of premiums treble from an average $60 a year to $180.

"The main reason our initial thinking is for an increase in the EQC levy as opposed to an additional levy is because we already have in place that provisioning system, which Australia doesn't."

The EQC reserves held $6.4 billion before the first earthquake.

It was likely the first $3 billion to $4 billion in costs from the two quakes would come from the EQC, $5 billion from reinsurers and at least a further $5 billion from private insurance.

On current rates it would take until 2025 to get the reserves back to $6.4 billion. "If we triple it we get there in nine years," the Prime Minister said.

Asked if it would alter the plan to get the Government back to surplus in the 2014-15 year - a year ahead of what had been scheduled in December - Mr Key said that was possible.

"It's too early to tell but the earthquake is of such economic significance that it may challenge that proposition."

Major infrastructure projects are being reprioritised - though Auckland's Waterview roading project was not in jeopardy, he said.

In the short-term some businesses will be given help to relocate to other parts of Christchurch. And rules around the subsidies given to businesses after the September 4 quake are expected to be relaxed.

Generally they were a $350 a week gross wage subsidy for small businesses with fewer than 20 employees.

Mr Key told the Herald that the subsidies being announced would be for a month and that in that time officials would look at designing other support packages.

Mr Key said the Crown accounts would take a hit in the May Budget - revenues would be down because of the reduced economic activity.