[Originally published 20 August 2012]
Someone mentioned to me yesterday that macroeconomic policy has relied on the promise of the Christchurch rebuild for nearly two years. My colleague Shamubeel Eaqub, ever the realist, called it the ‘one crutch’ recovery, and suggests that it will be slow. I suggested a while back that it was crucial to the overall economy. Since we counted on the rebuild and it has been slow, New Zealand has flatlined.
Now that we have a better picture of what the recovery will entail — 10 years, maybe more, of on-going work — the $20 billion or so rebuilding cost doesn’t seem as much of an economic stimulus. Given the national economy of around $200 billion per year, it’s only about a 1% increase.
Of course, that’s only if and when it gets spent. That’s where the micro picture is important. The $20 billion is going to be spent by people in houses and businesses arranging for the work to get done. If they can’t or won’t make the decisions, the money will just sit there. Eaqub has talked about businesses holding off on capital investments, waiting for signals that it is worth investing. I’m more familiar with the residential rebuild.
By coincidence, we also made arrangements yesterday to postpone the repairs on our house. Timing is everything, as they say. We couldn’t get the sign-off from EQC in time to get the builder to repair the house in time for a new tenant. So, we just cancelled the repairs for the moment. Better to get new tenants in and sort out the paperwork on someone else’s schedule.
On the other hand, that’s $80,000 to $100,000 (possibly more) that won’t get done this year. From what I hear, our situation is not unusual.
And so we wait…