Saturday, February 18, 2023

Eric Crampton: Re-prioritising

It has been a terrible couple of weeks. Assessing and costing cyclone damage from Northland to Wairarapa, but especially in Hawke’s Bay, will take months. Tens of thousands of homes and businesses are likely to need substantial remediation or rebuilding. Critical infrastructure will need to be rebuilt and strengthened.

A fortnight ago, it was obvious that the incoming Prime Minister needed to focus government’s attention on reducing living costs.

Today, it is just as obvious that the government will need to spend much of the rest of the year focused on recovering and rebuilding.

A few policy moves might be worth considering.

Building materials will again be in short supply unless regulatory and consenting barriers to using quality imported materials are eased.

The government has asked the Australian government for help during the immediate disaster recovery. The net could yet be cast more broadly.

During the Christchurch rebuild, Irish accents almost outnumbered Kiwi accents among construction workers – at least on the University of Canterbury’s campus. The government had set a temporary Canterbury Skill Shortage List to let more skilled workers assist.

The Prime Minister should make clear that the doors are wide open to anyone who can help – and that Immigration New Zealand will rapidly approve visas.

The massive bill to be paid should mean that Budget 2023 will reorient away from what might otherwise have been election priorities.

Central government will have to cover the $1.5 billion difference between EQC’s depleted Disaster Recovery Fund and the excess on EQC’s reinsurance.

Rebuilding roads and bridges will be expensive. Road users should repay the debt that funds that rebuild, over time. But the holiday on road user charges will have to end.

It may also be worth rethinking how EQC premiums are set.

Currently, EQC premiums do not vary with the riskiness of different properties. If the government wants to avoid subsidising rebuilding on precarious but scenic Auckland clifftops, it could ask EQC to let premiums reflect risk – and let owners decide whether to cash-settle and rebuild elsewhere. Remember that 2018 work by Motu showed higher-income neighbourhoods tend to benefit most from EQC’s coverage for landslips, storms and floods.

We hope the weather clears, the floods subside, the missing persons are found well, and the recovery gets underway quickly.

And that the year ahead brings no more horrible surprises.

Dr Eric Crampton is Chief Economist at the New Zealand Initiative. This article was first published HERE


Ray S said...

Agree totally.
Politics are yet to be played around the disaster.
All parties will have a slant on where, why and how. Mostly labour, they will probably succumb to pressure from Maori to push through 3 waters ASAP with the promise that things will get better under their control.
Using taxpayer funds of course plus revenue from sales of water.

Cara said...

Dr Crampton has drawn attention to the economic fallout from Cyclone Gabrielle. Opposition parties need to remind voters that the country would be in much better shape to cope with natural disasters had the government not exacerbated the economic fallout from Covid by needlessly prolonging immigration restrictions.

Robert Arthur said...

Remedy will be obstructed by the need to purchse consultation frrm maori. The Hawkes Bay riverbeds should be mined and the metal used for strong stopbanks. But it will now have to be purchased so state houses predominantly for maori can be protected. The transfer of money would likely have proceeded more rapidly (and expenisvely) under Three Waters.

Anonymous said...

Please don’t forget the other New Zealanders desperately waiting for help. The Marlborough Sounds for example. Whilst the North Island situation is horrific it has happened for others too with resources being diverted to ‘more important’ things.

Anonymous said...

Will the enormously wealthy (tax payer funded) various Maori corporations ( charitable status do not tax paying) fund up for their own?