Christchurch earthquake a 0.5% drag on economy, Whitehead says

By Paul McBeth

Sept. 8 (BusinessDesk) – The 7.1 magnitude earthquake in Christchurch will wipe about 0.5% from third-quarter gross domestic product, according to the Treasury Secretary John Whitehead.

“In broad terms, in the September quarter there will be a relative reduction in GDP of 0.5%,” though there is a lot of uncertainty around the actual figure, Whitehead told a media conference in Wellington. “That loss will probably completely reverse, maybe even be a little more, in June.”

Colin Lynch, Deputy Secretary macroeconomic and fiscal environment, said the total cost of damage caused by the earthquake was in the ball-park of $4 billion, though they are still assessing the impact on production and the replacement of assets.

The $2 billion estimate was the liability facing the Earthquake Commission, the State-owned agency which insures against earthquakes up to certain amount.

Fitch Ratings expects the earthquake will push up the reinsurance costs for major local insurers Suncorp-Metway Ltd. and Insurance Australia Group. Suncorp expects the disaster will cost it a net $60 million, while IAG says the impact is negligible.

Treasury has a team of four working specifically on costing the earthquake, though more information is being fed into unit from the wider department.

(BusinessDesk)

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