Stock Takes: Cyclone Gabrielle with January floods will run into billions of dollars

Cyclone Gabrielle comes on top of the Auckland floods. Photo / George Heard

The cost of Cyclone Gabrielle coming on top of January’s Auckland floods is likely to add up to more than a billion dollars in repairs, Infometrics principal economist Brad Olsen says.

Speaking to Stock Takes on Tuesday afternoon as the cyclone headed further south and just hours after a State of National Emergency was declared, Olsen said the flooding alone was likely to cost $500 million for building repairs and vehicle replacements.

“That’s before we look at all the infrastructure costs. If you look at how Cyclone Gabrielle has ripped through the country ... [and] the fact that you’ve got so much of Northland that’s cut off, our transport infrastructure has been hammered.

“I’d expect you’ll see something even worse than that across a number of parts of the North Island through the cyclone. We are getting up there ... very big numbers.”

And that came at a time when the economy was already stretched.

Olsen said it would also mean greater investment was required by local government into water infrastructure and roading repairs for central government.

“You’re going to have to work out how much is left over in Waka Kotahi’s emergency works budget. I’m pretty sure that was just about gone anyway, about two years ahead of schedule. All of these repairs are going to be huge.”

He said it would likely require the Government to tighten its belt and have an even sharper focus on reprioritising its spending.

“Spending to support the weather event recovery will be critical. It has to happen quickly. Other stuff might well have to go on the back-burner,” he predicted.

In the short-term, the rebuilding work would cause an inflationary bump or might slow how quickly the Reserve Bank could rein in inflation.

“If I’m the Reserve Bank, I know that this is a one-off. I’m certainly hoping that we don’t have storms every second weekend. But that’s still coming at a time when inflation is under pressure. So, although the Reserve Bank should be looking through some of those inflationary effects, I think they’ve gotta be worried that the level of inflation that could generate from the storms could make the inflation battle last for longer.”

Listen to the full podcast for more from Brad on the economic impact of the storm, the impact of inflation and the cost of living, and reporting season, which is under way now.

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