Businesses face uncertain future after NZ quake

Business is brisk for Steve Crosby, who is helping switch the lights back on in this ruined city by selling portable generators from a van parked in roadside rubble. But thousands of other businesses remain closed — perhaps indefinitely — by an earthquake that has become New Zealand's most expensive natural disaster.

Last Tuesday's 6.3-magnitude tremblor killed at least 148 people and devastated the heart of picturesque Christchurch, has become New Zealand's most expensive natural disaster, costing an estimated $15 billion.

Although the damage to infrastructure is restricted to Christchurch, the ripple effects may tip the broader New Zealand economy into recession.

In Christchurch's downtown alone, 6,000 businesses have been destroyed or remain isolated by a police cordon surrounding the search and rescue operation.

They include the city's best hotels, such as the 26-story Hotel Grand Chancellor, now tilting on its foundations and slated for demolition. Their loss is a blow to New Zealand's second-biggest industry, tourism, and to Christchurch's reputation as the gateway for visitors to the country's majestic South Island.

The scale of the destruction, estimated at $15 billion, has forced the government to consider building a temporary central business district elsewhere in this city of about 350,000. Some critics even suggest the city's commercial center be relocated permanently.

Engineers and planners said the city's decimated center may be unusable for months and at least a third of the buildings must be razed and rebuilt. Big employers are already laying off workers and some business leaders fear the city will enter a long-term decline if its reconstruction is botched.

Crosby, the 57-year-old owner of Generator Place, said his sales have doubled this month thanks to the quake leaving thousands of residents sheltering in the ruins of homes and in tents.

He said has not taken advantage of the disaster by jacking up prices because he is looking ahead.

"People have got long memories," he said. "If I started ripping them off, they'll remember the next time."

Andy Vanlier, co-owner of the Beach Cafe in the coastal Christchurch suburb of Waimairi Beach, estimates he has already lost 25,000 New Zealand dollars ($18,750) worth of stock and business since the quake forced him to close. He was planning to reopen after cleaning the place up, but worries about the long-term effects of the quake.

"A lot of people have left Christchurch," he said. "We're hoping people will want to get back to normal, have coffee and talk about their experiences."

In the same suburb, Les Overend said he was nervous about taking his "Mr. Whippy" ice cream truck back on the road too soon but found residents have appreciated any reminder of life before the disaster.

"People were very glad to see us," he said of the truck, which blares chirpy tunes to attract customers. "They look at us as part of normality."

Bank of New Zealand head researcher Stephen Toplis said Christchurch's small- and medium-sized businesses are the lifeblood of its economy and especially vulnerable as the city begins what will be a yearslong rebuilding effort.

Business owners are mulling how long they can afford to keep staff while not bringing in much money, and they might face higher costs moving into new buildings where rents could be higher.

"Who wants to be the first restaurant to open when there's nothing else there?" Toplis said of the devastated downtown district that Prime Minister John Key has declared will be rebuilt.

With the central business district closed, "most of the services, in fact all of the services that are offered in the CBD, will need to relocate elsewhere," Earthquake Recovery Minister Gerry Brownlee said.

Key on Monday announced the first financial measures to get Christchurch back on its feet — subsidies for employers worth NZ$120 million ($90 million) to help pay salaries for some 50,000 people unable to go to work because of damage.

Despite the intervention, one of New Zealand's largest supermarket chains, Foodstuffs, announced it was laying off 236 workers at two destroyed Christchurch supermarkets.

Key said he expected the economic cost of the earthquake to be around NZ$20 billion ($15 billion).

That cost comes as a blow to the New Zealand economy that has rebounded from the worst of a recession in 2008 following the global economic downturn but has struggled to grow in recent quarters.

Finance Minister Bill English said the government would take on more debt in the short-term to pay for rebuilding infrastructure in Christchurch and the surrounding Canterbury region, which accounts for 15 percent of the national economy.

The quake could cause a shallow recession, Toplis said, and some analysts predict the central bank will cut interest rates next month to help the fragile economy.

"Fortuitously, we're in the midst of a commodity boom, and I think that will rescue us," Toplis said.

Agriculture is New Zealand's biggest industry and dairy products such as cheese and milk powder are its biggest export. The farm sector has not been severely damaged, although exports have been disrupted by extensive damage at Lyttelton, the South Island's largest port which was at the epicenter of the quake.

But tourism, which provides 18 percent of New Zealand's foreign exchange, could unnecessarily suffer if tourists failed to realize that the damage was restricted to Canterbury, New Zealand Tourism Industry Association chief executive Tim Cossar said.

"There's going to be an impact on Christchurch," Cossar said. "You can't lose that much accommodation and have that much of the city closed down and not have a profound effect in the short term and possibly the long term as well."

Business advocate Paul Lonsdale, manager of the Christchurch Central City Business Association, said restoring tourism, which brings NZ$2.4 billion into Canterbury a year, was critical for the city.

Unless the crisis facing Christchurch was handled well, "we could face financial collapse," Lonsdale said.

Providing a sign of hope for some, most of the modern buildings built to current safety standards had survived the quake, which suggested that Christchurch could be safely rebuilt.

"There's no reason to believe the place is going to become a permanent ghost town," Toplis said. "But it's going to be a very, very long adjustment process and that adjustment can't begin until the place stops shaking."


McGuirk reported from Canberra. Associated Press writer Steve McMorran contributed to this report from Christchurch.