- Damage to public infrastructure and commercial and residential property because of Canterbury earthquakes in 2010 and 2011 was substantial.
- Canterbury economy proved to be resilient to the disruption caused.
- Nominal GDP growth witnessed a rise from 3% in the year ended March 2010 to 10.5% four years later.
In the history of New Zealand, there have been only two times the Government has declared State of National Emergency. The most recently was at the time of Alert Level 4. And the first one was declared on 23rd February 2011. Can you guess why it was declared?
Well, the first State of National Emergency was declared when the country faced an earthquake of 6.3 magnitude in Christchurch. The damage caused by the earthquake was substantial.
So, to understand the impact of an earthquake with a magnitude of 6.3, we went through a report published by Reserve Bank of New Zealand. In this article, we will try to explain the various implication an earthquake of 2011 caused on the economy of New Zealand.
Scale of the rebuild
The Reserve Bank of New Zealand estimated about $40 billion in 2015 dollars to fully reconstruct the damage caused by the earthquake. Over the time span of rebuild, total construction work to be completed was estimated to be $40 Bn (approximately) (in 2015 dollars).
This $40 billion was mainly consisted of two parts: 1) About $7 billion for infrastructure, and 2) Around $16 billion each for commercial and residential construction.
Estimated profile of the Canterbury rebuild (Source: Reserve Bank of New Zealand)
About 170,000 properties were damaged in the earthquakes, which accounts for approximately three quarters of Canterbury’s housing stock; the proportion was even higher within Christchurch City. Due to the unavailability of housing, there was a sharp rise in the house prices in the city of Christchurch. The prices of house were over 40 per cent higher as compared to pre-quake levels. Because of the shortage in houses, the rents also increased significantly.
House Price Index (Source: RBNZ)
Population and The Labour Market
The population of Canterbury decreased by about 2 per cent or 12,000 people according to the population estimates based on the 2013 census. The majority of that decline in population was due to the decrease in the population of Christchurch City. The neighbouring districts in Canterbury witnessed an increase in the population, partly because of the movement of population out of the city.
Notably, Waimakariri and Selwyn encountered biggest population increase, up six per cent and eight per cent, respectively.
The Consumer price inflation of items that were housing-related witnessed a rise in Canterbury when compared to rest of country. A proxy for construction cost inflation increased significantly as compared to the rest of the country, topping at above 12 per cent at the beginning of 2013 in Canterbury, while staying below 2 per cent in the rest of the country. While other components of CPI (like footwear, clothing and recreation) were higher initially, the relative price differentials disappeared in the recent years.
The export numbers from Canterbury airports as well as seaports were not materially impacted as a result of earthquakes. The volumes improved soon after the earthquakes. However, the import volumes into Canterbury increased. This was witnessed because rebuild-related materials as well as replacement goods were brought in.
Despite resilience of much of the economy of Canterbury, there were 2 sectors which were impacted. There were tertiary education and tourism. The earthquakes adversely affected the accommodation available in Canterbury and destroyed over half of the hotel capacity.
Shaky Start To The Week In The North Island
On 25th of May 2020, the country experienced a strong M5.8 earthquake. It occurred 30 km north-west of Levin. This was followed by M5.2 aftershock on May 26, 2020.
The New Zealand country is prone to the earthquakes and Christchurch was not the first city to be destroyed by an earthquake. It is necessary to learn from the difficulties and achievements faced in the reconstruction of Canterbury to enhance future resilience in the country to face these types of events.