Post-quake economic boost expected by Treasury

7:18 am on 14 September 2010

The Treasury says fixing the earthquake damage in Canterbury will boost economic growth over the next couple of years and put upward pressure on inflation.

But that growth will come at the expense of lost production as companies and farms suffer the immediate impact of broken plant and machinery, roads and infrastructure.

The Treasury's best guess is the magnitude 7.1 earthquake on 4 September and subsequent aftershocks caused $4 billion worth of damage, though the full cost won't be known until all insurance claims have been assessed.

It estimates the earthquake will shave about 0.4% off Gross Domestic Product in the September quarter, though it expects the economy will still expand in that period.

The subsequent boost from rebuilding work will add 0.5% in the year to June 2011, and another 0.3% the year after.

But the Treasury notes this is simply a matter of replacing wealth lost as a result of the earthquake.

Meanwhile, the department says there's also likely to be a small upward boost to inflation because of increased pressure on resources, particularly in Canterbury.