Spending to help Wellington cope with 'the big one' being considered as part of Budget

A building in Molesworth St, Wellington is demolished after the November 14 earthquake. Photo / Mark Mitchell

New spending to help Wellington and the lower North Island cope with a large earthquake is being considered as part of next month's Budget.

In the wake of the Kaikoura earthquake last November the Prime Minister and senior ministers received a special report on how the lower North Island would cope if "the big one" struck.

That briefing led to a further "resilience stocktake" including of key transport routes and building safety.

The work has already resulted in the Government using emergency powers to require unreinforced masonry facades and parapets on about 300 buildings in Wellington, Lower Hutt and Blenheim to be upgraded within a year. Those improvements will be subsidised by a $3m fund.

Treasury and Department of Prime Minister and Cabinet (DPMC) documents released under the Official Information Act show more action is being considered, with details covering 2017 and beyond redacted.

Finance Minister Steven Joyce told the Herald ministers were working through the stocktake results, but most of the work to improve safety and resilience in the event of a large earthquake would be carried out by local councils and authorities.

Further Government spending as part of the wider work was being looked at as part of the May 25 Budget, Joyce said.

"But I wouldn't overstate it in terms of numbers, it is more a case I think of the Wellington councils prioritising some of the things they know need to be done particularly in the areas of water and so on.

"There are a number of potential weaknesses...that councils know about and they have known about, frankly, for many, many years. And I think it's about them putting some effort into some of the shorter term fixes while they deal with the longer-term issues."

Joyce said Wellington was well placed to get through a large earthquake but its geography was challenging, particularly in regards to transport corridors.

"You have seen what has happened on [SH1] in Kaikoura and you can see how similar that is to some of the highways around Wellington. The good news is Transmission Gully will add to that resilience but of course that is not there yet."

Joyce said the aim was still to repair SH1 and the rail corridor north of Kaikoura by the end of the year. The Budget will include an updated estimate of the cost to the Crown of that work.

Decision on EQC funding close

Another issue on the near horizon is the possibility the Earthquake Commission (EQC) will exhaust its cash assets as a result of the Kaikoura earthquakes.

EQC has access to $4.69 billion of reinsurance protection but also has a Government guarantee to meet any future claims.

A December Treasury report on that guarantee presents three options to meet the potential asset deficiency - an operating grant that would not be repaid, an advance that would be repaid from future operating surpluses, and a capital grant that would facilitate the purchase of EQC share capital.

The advice favoured an operating grant or capital grant. It also noted a guarantee fee paid by EQC to the Crown has not changed since 1998 "despite significant changes in the Crown's fiscal position, Crown risk tolerance and EQC's balance sheet".

Joyce said the Government would by next month's Budget have a "much firmer understanding of EQC's position".

"Whether we do any actual amount remains to be determined but we would obviously signal what we would be doing at that point."

Joyce said there was still work being done on the final liabilities resulting from the Christchurch earthquakes and it was still too early to say whether EQC would need additional funding and what amount that could be.