Quake costs double

Andrea Vance at Stuff reports:

The cost of the Canterbury earthquakes to the Government has more than doubled to $7.1 billion.

Finance Minister Bill English this morning said the Earthquake Commission has increased its liability by about $4 billion to $7.1 billion.

He said the announcement would not affect homeowners claims.

The cost blowout includes an increase of $2.17 billion from the 22 February earthquake and $1.42 billion from the 13 June earthquakes and other aftershocks, which were not previously included.

At a press conference, English said the new estimate follows a risk assessment, based on analysis of damage claims.

He said the extra costs can be met through the Natural Disaster Fund which held about $6 billion before the first earthquake. The government will meet the shortfall. EQC also has reinsurance in place to help meet the cost of any future events.

“Today’s announcement will not affect homeowners’ claims, which EQC will continue to pay in full. And it will not delay rebuilding in Christchurch,“ English said.

Basically this means an extra $3b to $4b of borrowing. There is no choice about this – it is just what the costs are.

But it is worth reflecting that even by their own calculations, Labour’s tax plans require greater Government borrowing for at least the next seven years. And that is before we even get to their spending plans. Will these extra costs make Labour reconsider their policy of tax cuts and boosting benefits?