In a post scheduled for later today, I’ve written about the economic effects of the Christchurch earthquake and the rebuilding but I decided to split this section off for its own.
Christchurch needs a more ambitious rescue package than has been announced. Relying on EQC and insurance payouts to do the heavy economic lifting that will be needed is not enough. I would cancel for at least a year the top bracket tax cuts due to come into force in a month and use the half a billion that will be saved for a real economic revival plan for Christchurch.
I would use it to grant emergency bridging funding to businesses closed by the quake so that they can continue to pay their workers, meaning that their families don’t suffer and they can continue spending.
I would use more of the money to meet the damage costs of any uninsured people and announce that EQC levies will now be raised on rates, rather than home insurance, so that everyone contributes and is covered even if they can’t afford ordinary insurance.
It is crazy that the poorest are the most likely to be left out of pocket by the earthquake.
There would still be hundreds of millions left over to give Christchurch the long-term stimulus through spending on smart, green projects like modern state housing. Christchurch will need that longer-term investment get through this shock and the boom and bust of rebuilding to come (let alone the effects of a second global recession)
Remaining money should be used to reduce government borrowing. Last week, the IMF ranked the New Zealand government as the best able to handle new economic shocks (another round of applause to Labour for not cutting taxes based on cyclical surpluses like the Right wanted but cutting net debt instead). Since the figures that assessment was based on were issued, the Crown accounts have taken have taken two huge hits – first, the South Canterbury Fiance bailout and now an even bigger hit to get us back to where we were before the quake. It is absolutely nuts in this situation that the government is planning to borrow half a billion dollars a year to fund tax cuts for the wealthiest New Zealanders.
Update: I wrote this piece last night and this morning on RNZ I heard the Christchurch Chamber of Commerce asking the government for the kind of emergency wage grant I’m suggesting. Gerry Brownlee was interviewed immediately after. From his dissembling and rambling I think it’s safe to say the government won’t be coming to the party.