When modelling for economic growth it is difficult to compensate for your second largest city suddenly dropping off the balance sheet. Yet that is exactly what happened for New Zealand in 2011 following the second Christchurch earthquake. Importantly, Christchurch wasn’t just an economic hub in its own right, but the gateway to the South Island.
The Christchurch recovery process is now officially at an end with the expiry of the Canterbury Earthquake Recovery Act, and the transfer to local leadership. The final major tranche of Government expenditure on the rebuild was announced; the Government’s commitment in the 2016 Budget aggregating to $17billion in total since the earthquakes, some $700m more than originally forecast. The Government has signalled its intention to enter a new phase in the recovery process to one of renewal with Minister Gerry Brownlee’s portfolio title changing to “Minister supporting Greater Christchurch Regeneration”.
The return of Christchurch to a mood of prosperity is encouraging. Statistics New Zealand says that in the year ended March 2014, Canterbury’s contribution to total GDP grew to 13.1 per cent, narrowly behind Wellington (13.2 per cent). By the year ended March 2015, Canterbury was once again the country’s second largest economy at 13.6 per cent, ahead of Wellington (13.5 per cent). Not surprisingly, Statistics New Zealand notes these improvements are driven by agriculture and, of course, by the ongoing Canterbury rebuild. In addition to the Government’s financial package of $17billion, insurance money has boosted the financial stimulus to the economy to $40billion.
However, Christchurch and New Zealand can’t rely on rebuild stimulated growth forever. Westpac chief economist Dominick Stephens estimates that the rebuild is about 50% complete. Sooner or later the growth generated by the rebuild effort will need to be replaced by the Christchurch economy shifting back into a higher gear. Marking the exact point when that happens will be difficult, but we need to determine if that is happening yet, or whether this new surge of growth remains in front of us. Critically, taking the foot off the pedal of economic development by simply handing back the reigns of control to local leadership won’t be sufficient to ensure Canterbury’s ongoing financial contribution to New Zealand as a whole. Best intentions won’t be good enough.
Importantly in 2015, the Canterbury Development Corporation confirmed that underlying economic activity was slowly taking over from rebuild outputs as the key impetus in the growth of Christchurch GDP, noting that only 11% of Christchurch GDP related to construction activities.
The Government recognises the importance of Canterbury to New Zealand and says, “the new regeneration phase is not just about rebuilding Christchurch, but also fulfilling the long-held potential of one of New Zealand’s largest cities.” Regardless of how or when it is achieved, the country needs the Canterbury economy back online.