Quake-Hit Christchurch's Rebuilding Seen Boosting Economy

Ross Dale, a manager for equipment leasing company Hirepool Ltd., is outlining efforts to clean up Christchurch after the 7.0 earthquake that struck New Zealand’s second-largest city on Sept. 4, when the ground shakes again.

“We just got a bit of a wobble,” said Dale, interrupted by a 4.4 aftershock, one of 24 recorded on Sept. 6 according to GNS Science, which monitors New Zealand’s tremors. “We’ve been doing long hours, with crews working through the night.”

With more than 100,000 homes damaged and water and sewage lines severed, Dale said he has about 800 portable toilets in the city and is bringing in more, along with pumps, tarpaulins and earthmovers from around the country. The yard at Hirepool’s Moorhouse Avenue branch, near the city center, is empty aside from a few diggers that will be serviced and go out the next day.

The rebuilding effort after New Zealand’s worst quake in 80 years will help spur an economic rebound over the next 12 months, economists forecast, citing experiences from disasters in Japan and the U.S. While the disruption will wipe 0.6 percentage points off gross domestic product this quarter, reconstruction will boost growth by 1.5 percent over the next year, said Nick Tuffley, chief economist at ASB Bank Ltd. in Auckland.

New Zealand’s government today doubled its estimate of the cleanup and damage bill, saying it could exceed NZ$4 billion ($2.9 billion). The biggest winners may be building companies that were facing slower demand for new homes after the central bank raised borrowing costs in July for a second straight month.

Stocks Gain

The NZX 50 Index of stocks rose 1.7 percent in the past three days. Steel & Tube Holdings Ltd., a distributor of roofing iron and reinforcing steel, jumped 10 percent in the period, while Fletcher Building Ltd., the nation’s largest building products supplier, surged 5.3 percent.

“It’ll create tens of thousands of jobs” in the construction industry, “most of which will have to be sourced from outside of Christchurch,” said Helen Kevans, a senior economist at JPMorgan Chase & Co. in Sydney. “It should give a pretty big lift to household spending, and should have some knock-on effects throughout the economy.”

While no deaths were reported from the Christchurch quake, its magnitude was bigger than the 6.8 earthquake that hit Kobe in 1995 that killed more than 6,000 people, or the 1989 Loma Prieta quake in San Francisco that registered 6.9.

Christchurch and the surrounding Canterbury province account for about 15 percent of national GDP, “so the affected area is proportionately more critical to the New Zealand economy than the Kobe and San Fransciso areas were to their respective national economies,” said ASB’s Tuffley.

Immediate Impact

Every week that the Canterbury economy operates at half its capacity will cut the equivalent of 0.14 percentage points off GDP, he added. If demand holds at that rate for four weeks, as was the case after the U.S. earthquake, GDP will be reduced by 0.6 percentage points.

Evidence of damage is everywhere. Cranes and trucks work in residential streets removing broken chimneys, re-roofing and repairing buckled streets. Walls and shop verandas slump over suburban footpaths surrounded by emergency tape. More than 30 streets remain without water.

In the city center, most shops are closed and cafes sit empty. While the central business district is progressively opening, many areas remain cordoned off.

The iconic cathedral stands intact in the city’s heart thanks to earthquake strengthening it received over the years. Its bells rang out for several minutes after the initial jolt, witnesses said.

Rugby Host

Nearby a neon sign counts down the 52 weeks until the start of the Rugby World Cup, which New Zealand cities including Christchurch will host. The tournament may be under way before all the city’s homes are repaired, Prime Minister John Key said this week, according to the Dominion Post newspaper.

About 4 kilometers north of the city center, in the suburb of St Albans, a block of two-story, brick shops was razed after engineers said it was too dangerous and beyond repair. An aftershock around noon on Sept. 6 further stressed damaged buildings.

Greg Miller, a landscape contractor, said he and his partner’s first thoughts as the quake struck on Sept. 4 were of their 18-month old daughter. Remembering lessons drilled in school days, the family sheltered in a doorway and had to hold on as the house heaved.

“The noise went on and on,” he said. “First the quake, then the house shaking, then things falling. The place looked like a war zone.”

Chimney Risk

It could have been worse. Their 5 meter-high brick chimney remained intact. Two doors away a similar stack tumbled onto a driveway while another fell the other way, caving in a roof.

Further east in the city, toward the coast, some homes are off their foundations, and meter-deep cracks have appeared in streets and yards. Some 430 homes will need to be demolished, the New Zealand Herald reported.

About 80 percent of 550 central city buildings have been approved as safe after the quake, City Council Rescue Manager Steve McCarthy said in a statement. For about 16 percent, such as the Colombo Street office of insurer AMI, there is a cautionary yellow sticker on the door, saying there may be structural problems and advising staff to take care if they enter.

For 5 percent, red stickers mean the building has been deemed unsafe, needing major repairs or demolition.

Rated on Hold

“Some of the red stickered buildings are heritage buildings and we want to manage carefully what happen with these,” said McCarthy. The ones most badly affected were built prior to 1940 and included a number of six- and seven-storey structures, he said.

Economists said Reserve Bank of New Zealand Governor Alan Bollard will probably be prompted to keep borrowing costs unchanged for the rest of this year to cushion the economy from the quake’s initial drag on growth, even though prices may rise.

“Earthquakes tend to be inflationary,” said Brendan O’Donovan, a Wellington-based chief economist at Westpac Banking Corp. The fallout is “likely to cause inflation in the Canterbury region, particularly in construction costs.”

Hirepool’s Dale said the company has flown in extra staff to help with transporting equipment to sites all over the city and will bring in more staff, equipment, and toilets as the city council and health services seek a temporary solution to sewer breakages and uninhabitable houses.

“We are really in an assessment phase, working to get critical services up and running,” he said.

To contact the reporters for this story: Jacob Greber in Sydney at jgreber@bloomberg.net; Tracy Withers in Auckland or twithers@bloomberg.net

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