The Earthquake Commission's Natural Disaster $6 billion fund has been cleaned out, and the Government's finances have taken an additional $1.3 billion hit as its bill for repairing Canterbury earthquake damage more than doubled this morning.
Finance Minister Bill English this morning announced the Earthquake Commission has increased its estimated Canterbury earthquake liability by $4 billion to $7.1 billion.
The excess above the Natural Disaster Fund will be met directly by the Government worsening what was already forecast to be New Zealand's worst-ever operating deficit of $16.7 billion.
"Combined these factors are likely to push the operating deficit before gains and losses up to about $18 billion - $1.3 billion higher than the Budget forecast'', Mr English said.
The total cost of repairing damage across the government and private sectors which had been $15 billion is now likely to approach or exceed $20 billion.
The new cost figure was based on on available field assessments of damage claims.
The updated figure includes $2.17 billion bill from the February 22 earthquake and an extra $1.42 billion from the 13 June earthquakes and other aftershocks.
Most of the extra costs would be met through the Natural Disaster Fund, which held about $6 billion before the first earthquake in September, Mr English said.
The Government would meet any shortfall through its guarantee under the Earthquake Commission Act, he said.
"The Government is committed to rebuilding Christchurch and supporting the people of Canterbury. Today's announcement will not affect homeowners' claims, which EQC will continue to pay in full.
"And it will not delay rebuilding in Christchurch."
Mr English said the massive cost increases were the result of a larger than expected damage from the February 22 earthquake.
He said it was initially thought 12,000 houses would have more than $100,000 in damage, but that number was now estimated to be about 30,000 houses, he said.
The cost of repairing land damage had risen from an estimated $300 to $600 million to $1.8 billion, he said.
"Quite clearly the scale of residential damage from the 22 February earthquake has been worse than initially thought, with more claims, more damage on a house-by-house basis and greater land damage than expected."
Canterbury Earthquake Recovery Minister Gerry Brownlee said Cantabrians could still expect to have their damage claims settled in full.
"EQC's fund is government guaranteed to protect claimants' interests," Mr Brownlee said.
"EQC contents, building and land claims in Canterbury will continue to progress at pace, as will EQC's full inspection programme - claims will continue to be paid out."
The country could still cope with another major disaster, as EQC had renewed its reinsurance earlier this year, Mr Brownlee said.
However Mr English confirmed that with the Natural Disaster fund now wiped out the Government would have to meet any initial EQC liabilities before reinsurance cover kicks in.
Mr English said Government had asked Treasury to revise its estimated total earthquake bill in the wake of today's announcement.
At the time of the Budget, Treasury put the total earthquake damage bill - to all property owners and insurers - at $15 billion, or about 8 per cent of GDP.
That made making it the most costly natural disaster in recent memory to hit a developed nation, relative to the size of its economy.
Cost of the quakes:
Estimated net claims cost in Budget 2011: $3.05 billion
June 13 earthquakes and other aftershocks: $1.42 billion
February 22 earthquake increase: $2.17 billion
Post-earthquakes re-evaluation of ongoing costs: $350 million
September 4 earthquake increase: $20 million
Other: $60 million
Mean estimate of net EQC claims cost: $7.07 billion