Too soon for celebration, say economists

Posted 18 Jul 2012 by MediaStuff Popular
Posted in Rebuild , Media
This item was posted on the Stuff.co.nz website - click here to view the original

 

Everyone is waiting for Christchurch's rebuild-fuelled boom to set the local economy alight. There are plenty of signs that things are warming up, but it's still too early to say the good times have arrived. Joelle Dally investigates.

Christchurch is spending money and hiring people like it's a boom town.

Canterbury growth, based on factors including jobs, spending and consents, in the past three months was up 8.6 per cent on the same period last year, according to the National Bank composite index on regional economic activity - this is growth not seen since the 1990s.

Venture out at night and it is clear that anything open in the hospitality sector is doing well.

June's Paymark figures show Canterbury spending rose 6.8 per cent on the same month a year ago to $404 million.

Trade Me figures show our job market continues to grow, leaving the rest of the country behind, particularly in architecture (up 148 per cent compared with this time last year) and office and administration roles (up 118 per cent).

Building consent applications are going through the roof across the board.

Christchurch City Council said its applications more than doubled between April and May and it was now issuing about 30 a day. Waimakariri and Selwyn councils report similar numbers.

But despite all this, economists say it's too soon to bring out the party balloons. Instead, it may be more a case that we had hit rock-bottom and there is nowhere to go but up.

The harsh reality, despite the promising figures, is that we are still far behind where we would be if the earthquakes had never happened. People may be more willing to open their wallets than a year ago, but it's not translating into a flood of hospitality and accommodation jobs.

Fletcher EQR is repairing about 100 homes a day but still has 80 per cent of the work to do. Smalltime builders say they are struggling to get by while they wait for residential rebuild work to get going.

The CBD cordon will remain in place until at least early next year, however the Canterbury Earthquake Recovery Authority says this could change if more buildings were added to the demolition list.

The business community is pinning its hopes on the Central City Development Unit's (CCDU) blueprint for the central city, due out at the end of the month. It will undoubtedly provide more certainty for investors and lead to greater job opportunities, but it won't happen overnight.

Then the big question mark is whether the worst of our seismic activity is actually over. Geologists are also predicting a 10 per cent chance of another magnitude 6 or above earthquake in the region in the next year.

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Acting Labour earthquake recovery spokesman Clayton Cosgrove said there was no denying there were positive signs, but it depended on the industry. "If you're a pub, you're going really well, the drainlayer is going gangbusters, the builder was but isn't now. Fletchers are doing well because they have the monopoly.

"We are going to have a world-class city eventually. We are almost two years down the track, you've got to ask yourself . . . when is the gun going to go off?"

Canterbury Employers' Chamber of Commerce chief executive Peter Townsend said the region was on the cusp.

The CCDU announcement at the end of this month would provide more certainty for commercial investors, then things would get into high gear in three to six months, he said.

Christchurch Mayor Bob Parker said it was never going to be "a gun going off"', but the framework was falling into place. "We always thought that last winter was going to be the hardest of our lives. But in fact, it wasn't. This has been the hardest winter.

"We are so much closer to the process ramping up in a way that is apparent. I'm more positive than ever now."

Earthquake Recovery Minister Gerry Brownlee said it was important not to lose sight of the enormity of the job. He was regularly updated with "the numbers" from the various government-accountable organisations and said the general overview showed Canterbury was doing well.

Individual problems often detracted from the big picture, he said. The work by Fletcher EQR would become more consistent as its capacity increased.

"I've always maintained it would be a gradual ramp-up. We are on the initial steps on that ramp," he said. "We are only seeing the earliest signs that we are going to have a very buoyant economy in the near future".

Shamubeel Eaqub, principal economist for New Zealand Institute of Economic Research, said the worst was over, but the rebound to date was still "very low level".

The rebuild would drive economic growth, but it would need offices, stores and other buildings to be back before normal economic activity could resume. There was also the question of where the workers would live.

"It's not just the rebuild. It's the return to life as usual. It will take some time before we are back to the earthquake level," he said. "The politicians will be trying to do something specific like rebuilding the CBD. In reality, most businesses will go elsewhere and do alternative things. They can't wait 10 years for the CBD to be rebuilt."

Robin Clements, a senior economist for UBS, said the one thing we could be sure of was that things were not getting worse.

The council building consent numbers were a positive sign, but it would take those numbers to reach "historical levels" to say the "ramp-up" was truly under way.

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