Christchurch – The Disturbing Reality

In a matter of only a few days, the media has moved on from Egypt and continued with the resultant contagion and it seemed until only this past Tuesday that the focus was on Libya. Unfortunately for Christchurch and the rest of New Zealand, this has changed again with the focus of the media’s attention now being on the rescue efforts after another strong earthquake virtually demolished much of our second largest city.

The images of Christchurch reeling seem similar to those of a war-torn city, albeit without the bullet holes and bomb blasts. Christchurch was just starting to get back onto its feet and had a wonderful day a matter of days ago when it held a very successful Boxing Day sale. Cantabrians have the ability to pick themselves up from adverse circumstances. This time around, the challenges will be enormous.

What needs to be overcome the most is the emotional challenge. Undoubtedly a lot of people after a rough shaking night, in maybe makeshift conditions, will be wondering if their future really lies in Christchurch. Then of course there is the financial cost. Those who were insured will soon find out if they had an appropriate level of cover. Inevitably there will be lots of people who did not have cover.

It is widely believed that most households cannot survive financially if their income is severely reduced for three months. This is exactly the situation that many Christchurch families are likely to find themselves in. A lot of businesses have been destroyed so it is inevitable that there will be many job losses. For people with skills in the construction and related industries there will be even more work opportunities.

How long will it take to restore Christchurch? It could take years for the building work to be completed. It could take many months for the infrastructure such as water and sewerage and roads to be back to acceptable standards. This had not been restored from the September earthquake, and the damage seems to be much more severe this time around.

The AMI Stadium in Christchurch is one of the main venues for the rugby world cup. There must be real questions as to whether Christchurch can now host these games. It is ironical that only last week, officials were meeting to consider what would happen if Christchurch had another quake. One option would be for these matches to be transferred to Australia which would allow greater potential ticket sales as their ground seating capacities are greater than the New Zealand venues. Ironically, it was the Australian Rugby Union that shafted New Zealand over co-hosting the RWC a few years ago.

While the Christchurch news is tragic for New Zealand, economically there could be more of an impact if the Middle East situation does not improve dramatically. Oil prices are already at two year highs. Now we have one of the largest oil producers, Libya, possibly heading for civil war. Saudi has not yet been struck by protests and it may be inevitable that there will be revolts against their royal family. Iran also has its political difficulties, and if disruptions spread to their oil industry, oil prices will really spike.

The New Zealand economy is very oil price sensitive. Freight prices are a significant cost both for exporters and importers. Fortunately when it comes to paying for oil we have a relatively strong currency. If our dollar falls, and most likely we will see a fall as a reaction to the Christchurch earthquake, fuel costs will rise. So we could be in for a double hit to our economy which it not good news. As kiwis have proven in the past, we are resilient and will weather the storm.