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

 


Analyses Show Major Flaws in Earthquake Strengthening Regime

Analysis Shows Major Flaws in Earthquake Strengthening Regime

2 April 2014

A report released today by a Wellington risk consultancy, Tailrisk Economics, finds that there are serious flaws in the way earthquake prone buildings are designated, which will have hugely detrimental effects on New Zealand’s economy, communities and individuals.

The report’s author, Ian Harrison, states that the critical ‘earthquake prone’ building trigger point of 34 percent of new building code was decided arbitrarily and has no supporting analysis or sufficient regard for costs and benefits.

“No other country applies across the board national earthquake strengthening standards because it is economically illogical to do so,” Mr Harrison says. New Zealand’s attempt will cost over $10 billion, but produce benefits of under $100 million. The current framework values an Aucklander’s life at about 3,000 times higher than a Wellingtonian’s”.

“Applying a sensible cost benefit analysis and internationally recognised life safety standards would likely show that only a small proportion of the buildings currently designated as ‘earthquake prone’ would be excessively risky”, he says.

The report also finds that policy decisions were effectively made by industry groups, rather than the Government, and that ministers were not properly or accurately informed of the process.

Ian Harrison is a specialist in low probability, high impact events such as financial crises and natural disasters. He has worked for the Reserve Bank of New Zealand, the World Bank and the International Monetary Fund.

The report is available online at www.tailrisk.co.nz/documents/ErrorProneBureaucracy.pdf

Questions and Answers

Who are Tailrisk Economics?
Tailrisk Economics are a Wellington economics consultancy, specialising in low probability high impact events such as financial crises and natural disasters. Tailrisk economics also provide consulting services on general economics, financial regulations and financial modelling.

Who is Ian Harrison?
Ian Harrison is the principal of Tailrisk Economics. He has a Bachelor of Commerce and Administration (Honours) from Victoria University Wellington, and a Master of Public Policy from the School of Advanced International Studies at Johns Hopkins University. Before setting up Tailrisk Economics, he worked with the Reserve Bank of New Zealand, the World Bank, the International Monetary Fund and the Bank for International Settlements.

What was the reason for investigating and reporting on this issue? Who funded this report?
This report was a personal project of Ian Harrison. It was not commissioned by a client or any other person. Mr Harrison chose to write this report due to his extensive knowledge of the economics of low probability, high impact events. This provides him with the ability to conduct comprehensive analysis of earthquakes and their associated economic effects; particularly the economic impact of deeming buildings as ‘earthquake prone’.

Are your source materials, such as the emails between government officials referred to in the report available?
Due to the large number of documents and evidence collated from various sources which the basis of the report’s conclusions, it is not viable to publish it all. Relevant material is available on request.

How did these problems with earthquake strengthening policies arise?
The critical ‘earthquake prone’ building trigger point of 34 percent of the new building code was developed arbitrarily with little supporting analysis or costs and benefit consideration.

What is the key recommendation from this report?
The report recommends that earthquake strengthening legislation be amended to ensure standards are evidence based, and to provide New Zealanders with useful and practicable knowledge of earthquake risk. The Government should targeting its resources to fix the localised risk hot spot now, rather than taking up to 20 years to do so and wasting money on low risk areas.

How does New Zealand’s approach to earthquake safety compare to other countries? Considering our seismic activity, are we getting value for money?
No other country applies across the board national earthquake strengthening standards to existing buildings, and it is economically illogical to do so. New Zealand’s attempt to do this will cost over $10 billion but will produce benefits of under $100 million. For example, in Auckland, the current framework is expected to cost well over $3 billion but will take 4,000 years to save a single life. This is not value for money, for example if the same amount were spent improving road safety or healthcare, thousands more lives could be saved. The Government’s analysis also values an Aucklander’s life at about 3,000 times higher than a Wellingtonian’s.

The largest possible earthquake used in New Zealand’s framework, applicable to low risk areas such as Auckland, is similar in magnitude to the largest possible earthquake that could occur in the United Kingdom. If the British were to apply the New Zealand test they would have hundreds of thousands of ‘earthquake prone’ buildings, which would cost hundreds of billions of pounds to strengthen for almost no gain. Fortunately for the British they have more sense.

ENDS

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

BusinessDesk: APN's NZME Sees Future In Paywalls, Growth In Digital Sales

APN News & Media has touted a single newsroom concept for its NZME unit in New Zealand, similar to what Germany's Die Welt uses, saying an 'integrated sales proposition' is helping it win market share, including ... More>>

Labour Party: Global Milk Prices Now Lowest In 6 Years

The latest fall in the global dairy price has brought it to the lowest level in six years and shows there must be meaningful action in tomorrow’s Budget to diversify the economy, says Labour’s Finance spokesperson Grant Robertson. “Dairy prices ... More>>

BusinessDesk: NZ Inflation Expectations Creep Higher In June Survey

May 19 (BusinessDesk) - New Zealand businesses lifted their expectations for inflation over the next two years, sapping any immediate pressure on the Reserve Bank to cut interest rates, and prompting the kiwi dollar to jump higher. More>>

BusinessDesk: Lower Fuel Costs Drive Down NZ Producer Input, Output Prices

May 19 - Producer input and output prices fell in the first quarter, mainly reflecting lower fuel costs and weakness in prices of meat and dairy products. More>>

Media: Fairfax Media NZ Announces Senior Editorial Team

Fairfax Media New Zealand has today confirmed its new editorial leadership team, as part of a transformation of its newsrooms aimed at enhancing local and national journalism across digital and print. More>>

Science: Flavonoids Reduce Cold And Cough Risk

Flavonoids reduce cold and cough risk Research from the University of Auckland shows eating flavonoids – found in green tea, apples, blueberries, cocoa, red wine and onions – can significantly reduce the risk of catching colds and coughs. The research, ... More>>


BusinessDesk: RBNZ House Alert Speech The Catalyst For Government Action

Prime Minister John Key all but conceded that pressure from the Reserve Bank of New Zealand for concerted action on rampant Auckland house prices was one of the main catalysts for the government's weekend announcements about tightly ... More>>

BusinessDesk: How To Fall Foul Of The New Housing Tax Rules: Tips From IRD

Just because you rented out your investment property doesn't absolve you from paying tax, says the Inland Revenue Department in a summary of commonly made mistakes by non-professional property investors when it comes to their tax liability.More>>

Legal: Superdiversity Law, Policy And Business Stocktake Announced

Mai Chen, Managing Partner at Chen Palmer New Zealand Public and Employment Law Specialists and Adjunct Professor of Law at the University of Auckland, today announced the establishment ... More>>

Housing: More House Price Gains Expected

House price expectations remain high, with a net 56% of respondents expecting house prices will increase. Fears of higher interest rates are fading, consistent with the RBNZ’s signals this year. Affordability and a lack of houses for ... More>>

TDDA: State-Of-The-Art Drug Testing Laboratory To Open In Auckland

World leading drug testing agencies, The Drug Detection Agency (TDDA) and Omega Laboratories, open New Zealand laboratory More>>

Network: Bigpipe Launches Ultra-Fast Broadband Into Wellington

Bigpipe Launches Ultra-Fast Broadband into Wellington Naked broadband provider Bigpipe has extended its national reach, announcing today, the launch of its unlimited UFB offering into Wellington. The Spark Venture business is giving Wellingtonians the ... More>>

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news