An earth quake of a 7.1 magnitude hit New Zealand’s second biggest city keeping it running slow this Monday. Many businesses in the South Island city of Christchurch remain closed as a state of emergency was extended until Wednesday after the country’s most damaging earthquake in 80 years tore up roads, smashed water and sewers and severely damaged many buildings. Financial markets have mostly shrugged off the quake as the long-term economic impact is seen limited.
New Zealand’s dollar eased slightly while government debt fell on fears of increased bond issuance but stocks were higher as the estimated NZ$2 billion (£936 m / €1.1bn) damage bill was seen relatively light and could not derail a rally fuelled from overseas markets.
Economists predicted the quake could eat into New Zealand’s economic growth this year and keep interest rates on hold until there is more clarity on the impact. “Overall there will be a negative impact on economic activity, with Christchurch accounting for about 15 percent of GDP,” ANZ-National Bank senior economist Khoon Goh said. HE added that the exact impact could not be quantified yet and that the Reserve Bank of New Zealand will most likely be on hold in September.
But some predicted the quake, which claimed no lives and resulted in only two serious injuries, could add to growth in 2011 as rebuilding efforts ramp up.
“We’ve got to move to the rebuilding and refocusing stages, how we get Christchurch up and running again,” said Prime Minister John Key on Television New Zealand.
Shares of New Zealand’s largest listed company, construction and building materials firm Fletcher Building Ltd jumped more than 4 percent on opening and last traded up 4.5 percent NZ$8.10. Insurance and financial company AMP Ltd fell 4.6 percent in early trade to NZ$6.30. The government’s state-disaster fund, the Earthquake Commission, is expected to be able to cover the damage repairing costs. The epicentre of the quake was 20 kilometres (12 miles) west of Christchurch (population of 350,000) which supports the agricultural-based economy of New Zealand’s South Island.
The Christchurch City Council estimates that 500 buildings have been damaged, with hundreds spending the first two nights in emergency shelters. It is the most damaging quake in New Zealand since the North Island city of Napier was devastated in 1931. The last fatal quake was in 1968, a magnitude of 7.1 that caused the death of three people on the South Island’s West Coast.
