Kaikoura Earthquake to cost Govt up to $3b, says Treasury

Treasury says that despite the significant regional impact of the Kaikoura quake and its aftershocks, it was not expected to have a national impact economically. Photo / NZDF

The Kaikoura Earthquake will cost the Government up to $3 billion, the Treasury says.

Treasury secretary Gabriel Makhlouf said this morning the Magnitude 7.8 quake on November had "definitely had an effect on the economy and the Government's fiscal position".

There was some uncertainty about the scale of timing of the costs, but the Treasury's early estimates put the direct fiscal costs at between $2b and $3 billion, he said.

However, some of this total would be covered by insurance or existing resources.

Despite the significant regional impact of the quake and its aftershocks, they were not expected to have a national impact economically.

The areas worst affected by the quakes, in Kaikoura and Hurunui, made up 0.4 per cent of New Zealand's households.

"For comparison purposes, the areas hit hardest by the Canterbury earthquakes accounted for around 10 per cent of all households," Makhlouf said.

And while Kaikoura was a popular tourist destination, the region accounted for only 1 per cent of tourist spending in New Zealand.

Damage to key infrastructure meant tourism and primary industries were the sectors most likely to be hurt by the quake, the Treasury said.

The disruption of road and rail through Kaikoura would also add costs to freight and travel.

Makhlouf said there could be a wider impact on tourism if visitors cancelled or redirected trips within New Zealand because of the disruption or the risk of more earthquakes.

"Nevertheless, at this stage this effect is through to be relatively small and the overall impact on tourism will be less than the Canterbury quakes."

The negative impacts of the quake will be offset by construction ramping up as part of the recovery. However, this could draw construction workers away from other areas.