Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Public Policy Implications Of The Christchurch Quake

Some Public Policy Implications Of The Christchurch Earthquake

The tragic events in Christchurch will have implications for the government and councils in the region for years to come. Public policies could help or hinder the recovery process.

The earthquake has highlighted the risks in the government’s strategy of reacting to the global financial crisis in a gradual fashion. Unexpected events like droughts, biosecurity threats, oil price shocks and other crises are a routine part of economic life.

Policy needs to be framed so as to be able to cope with such events, not to assume a continuation of the status quo. In particular, the current high level of central government spending and borrowing – the latter amounting to a massive $300 million a week – is not a good starting point for dealing with reconstruction.

On the other hand, it makes sense for monetary policy to be eased if inflation threats have receded, as it did after the GFC. Yesterday’s cut in the official cash rate will help support activity, if only modestly.

It is also pleasing that the government is reviewing its spending plans. It should reprioritise its spending just like a household that has to cope with a major setback.

A large amount of government spending is wasteful or poorly targeted.

Interest-free student loans and Working for Families were politically motivated, not based on sound public policy analysis.

Such reductions should also take priority over tax increases to fund reconstruction. These would dampen economic activity at a time when the economy may again be in recession.

Capital expenditure programmes should also be revisited. Investment in rebuilding infrastructure in Christchurch may well yield higher returns than, say, rail projects in Auckland, Transmission Gully or broadband.

The government’s plans to sell down its shareholding in several stateowned enterprises make even more sense in present circumstances. It does not need to be involved in commercial activities whereas basic infrastructure is a core government function.

The same argument applies to the assets of the Christchurch City Council.

Reducing its shareholding in its port, airport and electricity companies would free up cash for repairs to local infrastructure without imposing new burdens on ratepayers.

Other policy innovations could be triggered by the earthquake. With some schools likely to be closed for long periods, other schools will have to cope with expanded intakes. There is no reason to rely only on state schools to take up the slack. Some non-government schools might also be able to do so if they were funded on the same per-student basis as state schools.

Emergency legislation is allowing much faster responses than are usually possible. Orion is reported as building an electricity line across Christchurch in a matter of days whereas it might normally take two years merely to get a resource consent for such a project. Housing may require similar fast-track approval.

Experience with such projects may point to the benefits of wider reforms of the Resource Management Act. The strategy of some councils, including Christchurch, of focusing development on central business districts and imposing metropolitan urban limits may also be called into question.

Auckland has been called a ‘city of villages’ but there are clearly riskspreading advantages in allowing decentralised development.

There may be lessons here from the experience of Houston after Hurricane Katrina. Its light-handed land use regulation enabled the city to absorb thousands of New Orleans ‘refugees’ without putting pressure on house prices. Walmart’s organisational capabilities also made a major contribution to the recovery effort.

A broader issue is the relative role of top-down and bottom-up strategies in rebuilding Christchurch. Clearly the devastation is too vast for a detailed centrally planned strategy to be viable. Central and local government need to concentrate on their vital roles and let markets work.

Since the September 4 earthquake there have already been stories of trades people being idle while they wait for decisions by central authorities.

Maximum freedom needs to be given to businesses and communities to use their ingenuity to solve local problems. The spontaneous efforts to date are hugely impressive.

Similarly, the amazing contributions of voluntary organisations, students, farmers, families and individuals remind us of the vital role of private initiative in welfare relative to the capabilities of state agencies.

There is talk of a 10-15 year timeframe for rebuilding Christchurch. This seems unacceptably long. Devastated European cities after the last world war were rebuilt in much faster time.

The reconstruction cost of the earthquake, currently put at around $10-15 billion (with some of it being covered by reinsurance) needs to be kept in perspective. The self-inflicted economic cost of the Muldoon government’s Think Big projects was of the order of $14 billion in current dollars.

These were an example of very poor public policies. Good public policies, focused above all on economic flexibility and growth, could greatly alleviate the hardship that Christchurch faces and promote a speedier recovery.

Roger Kerr is the executive director of the New Zealand Business Roundtable. Check out his blog on www.nzbr.org.nz


ENDS

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Cosmetics & Pollution: Proposal To Ban Microbeads

Cosmetic products containing microbeads will be banned under a proposal announced by the Minister for the Environment today. Marine scientists have been advocating for a ban on the microplastics, which have been found to quickly enter waterways and harm marine life. More>>

ALSO:

NIWA: 2016 New Zealand’s Warmest Year On Record

Annual temperatures were above average (0.51°C to 1.20°C above the annual average) throughout the country, with very few locations observing near average temperatures (within 0.5°C of the annual average) or lower. The year 2016 was the warmest on record for New Zealand, based on NIWA’s seven-station series which begins in 1909. More>>

ALSO:

Farewell 2016: NZ Economy Flies Through 2016's Political Curveballs

Dec. 23 (BusinessDesk) - New Zealand's economy batted away some curly political curveballs of 2016 to end the year on a high note, with its twin planks of a booming construction sector and rampant tourism soon to be joined by a resurgent dairy industry. More>>

ALSO:


NZ Economy: More Growth Than Expected In 3rd Qtr

Dec. 22 (BusinessDesk) - New Zealand's economy grew at a faster pace than expected in the September quarter as a booming construction sector continued to underpin activity, spilling over into related building services, and was bolstered by tourism and transport ... More>>

  • NZ Govt - Solid growth for NZ despite fragile world economy
  • NZ Council of Trade Unions - Government needs to ensure economy raises living standards
  • KiwiRail Goes Deisel: Cans electric trains on partially electrified North Island trunkline

    Dec. 21 (BusinessDesk) – KiwiRail, the state-owned rail and freight operator, said a small fleet of electric trains on New Zealand’s North Island would be phased out over the next two years and replaced with diesel locomotives. More>>

  • KiwiRail - KiwiRail announces fleet decision on North Island line
  • Greens - Ditching electric trains massive step backwards
  • Labour - Bill English turns ‘Think Big’ into ‘Think Backwards’
  • First Union - Train drivers condemn KiwiRail’s return to “dirty diesel”
  • NZ First - KiwiRail Going Backwards for Xmas
  • NIWA: The Year's Top Science Findings

    Since 1972 NIWA has operated a Clean Air Monitoring Station at Baring Head, near Wellington... In June, Baring Head’s carbon dioxide readings officially passed 400 parts per million (ppm), a level last reached more than three million years ago. More>>

    ALSO:

    Get More From Scoop

     
     
     
     
     
     
     
     
    Business
    Search Scoop  
     
     
    Powered by Vodafone
    NZ independent news