Christchurch Earthquake: Government says can absorb cost of quake

Government can absorb cost of quakeThe Government can absorb the cost of Canterbury's devastating earthquake, Finance Minister Bill English says.
``It is a setback but we can handle it. These are bigger costs, but we are in a sound enough position to handle it,'' Mr English said.
The Government may have to borrow more money to cover the costs, but did not expect the country's credit rating to be downgraded, Mr English said.
``Our economy is fundamentally sound. This is another knock, but we can take it,'' he said.
The Government would not give details on how much the damage from yesterday's 6.3 magnitude earthquake could cost, but Prime Minister John Key would not rule out estimates as high as $16 billion -- more than twice as much as the September quake.
No one was in a position to assess the cost, Mr Key warned.
He said the Earthquake Commission (EQC) would treat yesterday's quake as a separate event to the September 4 one, and he expected the commission to receive another 100,000 claims.
EQC would pay out the first $1.5b to cover the cost of claims for damage to residential properties. The next $2.5b would be covered by ``reinsurance'' overseas and the outstanding balance would be covered by private insurance companies or the Government.
``Obviously that is a significant dent in both the resources of EQC, and a significant impact on the reinsurers to the tune of $5b,'' Mr Key said.
BNZ head of research Stephen Toplis said trying to estimate the economic impact of quake at this stage was foolish.
``The biggest disservice you can do anybody at the moment is make a stupid estimate of the dollar value of this.
``We're no better placed than anybody else to try and quantify the magnitude,'' he told NZPA.
However, the economic toll would be far bigger than the impact of September's magnitude 7.1 quake.
``How many businesses in Christchurch, that were just about to get back on their feet again, have now suffered an impact that, in some cases, could be fatal?''
This time, there was also a more severe psychological impact, due to the rising death and injury toll, on top of the more tangible economic implications.
Mr Toplis said the region's full recovery would take years if not decades.
Christchurch represented about 15 percent of the nation's economy.
``So, we do know from a numerical sense that 15 percent of the New Zealand economy has now stopped,'' he said.
Due to New Zealand's small size, the whole country would be affected.
ASB chief economist Nick Tuffley told NZPA tourism would also take a big hit, as Christchurch was the gateway to the South Island, with the second biggest international airport in the country.
The Rugby World Cup would have given the region's economy a much-needed boost but whether games would still be held in the city was up in the air.
Damage to commercial buildings and infrastructure including roads, bridges and tunnels was far worse this time.
The Port of Lyttelton was a key pipeline for goods in and out of the Canterbury region and the big question was when that could become operational again, he said.
There was about a 25 percent probability the Reserve Bank would cut the official cash rate, to control the ripple effects in the wider economy, he said.
``It's a possibility but what's more certain is that it will be a lot longer before the Reserve Bank will be contemplating lifting rates back up, cut or no cut.''