Dr Ganesh Nana - Chief Economist

Canterbury got hurt and, as a result, Canterbury changed last Saturday. Consequently, people’s behaviour will have been changed by the events of last Saturday morning. And as behaviour has been affected, there will be an economic impact. The economic impact occurs because economics is about people.

The economic impact is less about the dollar cost, or the boost to construction sector GDP, but more about the way people’s lives, livelihoods and opportunities will have forever been twisted, derailed and then reformed by Saturday’s events. To get these lives, livelihoods and opportunities back to any semblance of normality will take a lengthy period. Yes, the ‘business as usual’ scenario for Canterbury was changed by the events of 04 September 2010.

Thankfully, no lives were lost. But the people, individuals, families, and, yes, the Canterbury community, lost many precious and valued possessions on Saturday – their houses, the places where lives were started, lives were lived, futures were drawn, planned, pursued, and discovered. Not to mention their sense of security and peace of mind.

Beyond Canterbury the impact on New Zealand is undeniable. Although some will continue to pretend little has changed for them, most will take a look at their own preparedness. Others will also consider and, perhaps, realise the fragility of their own wealth and prosperity.

And this is the true economic impact of the earthquakes. We could quantify it in monetary terms if you want. But why would you? The costs and impacts on people’s lives are clear for all to see, without the need for dollars to enter the equation. There are people with jobs, businesses, livelihoods, opportunities and dreams – all wondering which (or how much) of those jobs, businesses livelihoods, opportunities and dreams are left. And they will also be thinking just what the new ‘business as usual’ scenario now looks like?

This is why I applaud, without reservation, the efforts of the local government sector. The contribution of this much-maligned sector is barely visible in many ‘business as usual’ scenarios. Disaster planning, emergency response, building regulations, inspections, and infrastructure provision are things we tend to undervalue. But, their true value is now clear to most. I also applaud the establishment of a seamless relationship between the various local and central government agencies and their responses.

Yes, not all things have worked instantaneously – inspections remain to be undertaken, water provision is still to be restored – the task is immense. But without the efforts of this sector – and the preparatory work undertaken long beforehand – the impact on jobs, businesses, livelihoods, opportunities and dreams would be much larger.

For those needing a dollar perspective, I did a rough calculation in my head on Saturday afternoon following the news of the EQC expectation of about 100,000 claims. Multiplied by an average $10,000 per claim (just to make the arithmetic easy) I got a cost of $1bn for residential property. Multiply that figure by two (again to make the arithmetic easy) to capture commercial, industrial and business damage, and I came up with $2bn as a starting point for the cost. On top of this figure, the cost to rectify the damage to the water, drainage, sewerage, and transport networks has to be added. But I have no idea how big that bill is likely to be.

But, remember, these calculations are just the ‘costs’ of the quake. The ‘economic impact’ on people’s lives and their dreams is much more. No doubt, life will continue and Canterbury and its people will thrive and prosper again. But, even then, the economic impact will linger as ‘business as usual’ will be just that little bit different.