The floods that battered Auckland, parts of the Bay of Plenty and King Country may cost the economy close to half a billion dollars.
Infometrics principal economist Brad Olsen said it was still too soon to know the know the full extent of the damage to Auckland’s businesses and trade, but he said the uptick in demand as the rebuild began would increase construction costs.
“There is a huge amount of furniture, carpet, fittings, vehicles and similar that need to be replaced and that will put further demand, pressure on an already tight supply situation,” he said.
“We expect there’s going to be sustained cost pressures in some areas.
“In terms of economic activity, perversely, you can see the Auckland storm event actually slightly boosting GDP, because there’s a whole bunch more spending investment that needs to go on.
“But of course, that’s just makes up for a whole bunch of resources that have been crashed and so despite the fact that you might see a small boost in GDP, relative to what you would have otherwise seen, that’s not really good news, it’s just an artificial bump.”
Based on population data and previous flooding events, the event could cost about $446 million, Olsen said.
BNZ senior markets strategist Jason Wong said the rainfall would add supply-side and demand-side pressures in the region and exert additional inflation pressure in the coming months.
The claims were also mounting with the two main insurance companies, IAG and Suncorp, with more than 8000 claims between them.
IAG chief executive Amanda Whiting said the number of claims was significant and she expected more to arrive this week.
“At this stage we’ve seen, through all of our AMI, State and NZI brands, around 5200 claims,” she said.
“That is fairly significant in such a short period of time, a very large event and bigger than we’ve seen in the last two years.
“The claims that we’re seeing at the moment are for home, contents, vehicles and businesses, so a range because the impact has been so widespread.
“We expect to actually receive more over the coming days as people return home from a long weekend or from being evacuated from their homes and being able to return.”
Whiting said IAG customers should lodge an insurance claim as soon as they could.
Suncorp Group, which owns the Vero and AA Insurance brands, had received about 3000 claims and said its losses from the weather event would be capped at $50m.
So far, there have been only limited reports of damages to bigger commercial and industrial concerns.
But uninsured businesses, damaged machinery, road closures and waste management were high on the list of challenges for many.
The Auckland based Employers and Manufacturers Association, which represents about 7100 upper North Island businesses, said it was offering every assistance to affected members.
EMA head of advocacy and strategy Alan McDonald said many businesses were facing major financial impacts.
“One of the things we’ve found is there’s quite a significant number of people who aren’t insured,” he said.
“With things like Covid-19, a lot of businesses have dropped their insurance.
“The CEO of the largest Māori business network, Whāriki, which has slightly more members at 3000, did a quick survey and found possibly up to 60 percent of those surveyed weren’t insured.
“These are very, very small businesses who have been under a lot of pressure for a long period of time, so probably not quite representative of the wider community, but we do know there are a number of uninsured people as well.”
Businesses had also been dealing with some looting, while waste left over from the clean-up was causing problems as well, McDonald said.
Meanwhile, aged care and retirement village operator Arvida evacuated residents from its Parkvale complex on Friday night.
Chief executive Jeremy Nicoll said the residents were safely evacuated and relocated to temporary accommodation.
Damage to the complex was still being assessed but villas, apartments and the clubhouse were affected, he said.
Auckland property manager Stride, which leases big-box retail properties, said there had been leaks and isolated flooding in their buildings but no significant damage.
Banks offering financial relief
Major retail banks are offering financial relief to those affected by the floods.
ASB and Kiwibank have each come up with a range of temporary measures to ease pressures including mortgage repayment deferrals, and easy access to savings.
“ASB will support customers affected by extreme weather events impacting Auckland with tailored packages including suspension of home loan repayments and emergency overdraft facilities available for personal, business and rural customers,” the bank said in a statement.
Among ASB’s measures are $10,000 overdraft for home loan customers, and $100,000 working capital for business and rural customers.
Kiwibank measures included early access to Kiwisaver funds for hardship or term deposits, as well as deferral or reduction of mortgage repayments.
Tower receives 1900 insurance claims
Insurance firm Tower has received 1900 claims for the Auckland flooding event but expects more will flow through this week.
Chief executive Blair Turnbull said 1000 house claims had been filed, with car and home contents claims making up the remaining 900.
“Tower is well prepared to respond to such large-scale events and is in a strong position to support the recovery,” he said.
“We are proactively communicating with our customers via text message and email, we have bolstered resourcing in our contact centres and have assessors on the ground.
“We expect to receive further claims as customers assess their damage.”
Turnbull said Tower had robust reinsurance arrangements, covering house, contents and motor losses with multiple treaties in place.
That was in addition to providing $934m of catastrophe cover, which had an excess of $11.85m and was within the $30m Tower had allowed for large events in FY23.
Tower’s full-year guidance remains unchanged.
Story Credit: rnz.co.nz