Follow by Email

Monday, April 4, 2011

Christchurch earthquake job losses dole 'disaster'

Christchurch earthquake job losses dole 'disaster'

JOHN HARTEVELT AND VERNON SMALL
Last updated 05:00 05/04/2011
 
The Government is bracing for a bulge in the dole queue with the first signs of economic pain from the Christchurch earthquake showing up in a revised $9.2 billion budget deficit.

Latest figures disclosed last night show Christchurch businesses had taken cash grants to support 69,533 workers whose jobs were under threat.

Support to those businesses, so far worth $161.7 million, will be phased out by the end of next month, and the Council of Trade Unions says as many as 20,000 will then be forced on to the unemployment benefit.

"This would be a disaster," CTU spokesman Marty Braithwaite said. "We will see many leave Canterbury, confidence will evaporate, and there will be considerable hardship for a long period."

The grim picture in Christchurch was compounded by news yesterday that Foodstuffs Wellington was making more than 100 people redundant in the lower North Island as part of a restructuring programme.

Prime Minister John Key dismissed the CTU figures on Christchurch, however, saying he had not seen any projections about the number of people who would stay out of work.

"The challenge for the Government isn't to sit around navel-gazing about how many people might go on an unemployment benefit or not. I think the focus of the Government should be on how we can keep as many people employed as we practically can," Mr Key said.

He accepted, however, that there would be a "short-term bulge" in benefit figures. "That's created by the fact there are people whose homes and possessions are in Christchurch and their families are engaged in schools, but their job has actually gone."

The quake is expected to cost the Government about $5b in recovery work, with an extra $3b to $5b loss of tax revenue.

The latest Government account figures showed a $1.5b hit from the finances of the Earthquake Commission as a result of the February 22 quake.

There was more bad news in the accounts, with $331m added in the revised cost of the failure of South Canterbury Finance as Government receivers found they would get back less from related-party loans than earlier expected.

The accounts for the eight months till the end of February showed the budget deficit running $1.7b higher than forecast, due mainly to the EQC and SCF costs. That pushed the deficit to $9.2b before taking into account investment gains of $5.2b from the New Zealand Superannuation Fund, ACC and the Government Superannuation Fund.

"All of this points to the fiscal challenges we face at Budget 2011," Mr Key said. "There is a lot more spending [on quake recovery] to come."

The Crown accounts also showed export prices up, which, along with inflows from EQC's overseas reinsurers, would boost the balance of payments. Over time, the Treasury estimated reinsurance inflows would reach $9b, enough to push the current account into surplus for the first time in 37 years.

But both the CTU and Labour's earthquake recovery spokesman, Clayton Cosgrove, insisted the Government should not cut off the subsidy schemes in Christchurch.

"I am seriously concerned about how effectively the Government is actually listening to businesses and the people they employ," Mr Cosgrove said. "The business assistance programme simply must continue."

THE GOOD

Strong export prices for dairy and other products are boosting farmers' incomes.

Farmers and households are reducing debt and we are now spending about 99c for every $1 we earn.

Overseas insurers paying to fix earthquake damage will pump $9b into the economy.

The inflows will push our transactions with the rest of the world into surplus for the first time in 37 years.

The rebuilding of Christchurch will eventually give the economy a big boost.

THE BAD AND THE UGLY

The Government will have to pay $5b towards fixing Christchurch.

69,500 jobs are under threat from the quakes and 3877 are so far confirmed out of work.

That will contribute to a decline in tax revenue of $3b to $5b.

The budget deficit is expected to reach a record $16b this year.

Tourism, especially in the South Island, will take a big hit from the quakes here and in Japan.

The receivership of South Canterbury Finance is expected to cost $331m more.

The economy could go into a "double dip" recession in the first half of 2011.

The May 19 Budget will see no new spending and cuts for many areas.

- The Dominion Post

No comments:

Post a Comment