OPINION
Nick Stewart
The floods, having caused devastation to land and life, will also devastate the Hawke’s Bay economy by putting pressure on many businesses that are also having to deal with flooded homes and staff members who have lost everything. Many have still not regained their pre-Covid strength before being dealt this latest blow.
Our horticulture, viticulture and cropping businesses will be unable to operate profitably this year. This will have a huge downstream impact on our regional economy, even if the influx of infrastructure and rebuilding of flood-damaged buildings provides an influx of cash in other areas.
Like the Christchurch earthquake and Covid, the Government will find a way to fund the rebuild of the flood-damaged areas.
There’s a solution to finding some funds for a rebuild: stop vanity projects and concentrate on providing essential aid to places like Hawke’s Bay, Wairoa, and Gisborne. Places where, if the roads aren’t functional, we’re entirely cut off.
Can we really afford light rail in Auckland when Wairoa and Gisborne are completely cut off from the rest of New Zealand?
Can we afford to spend years back and forth on navel-gazing exercises like Let’s Get Wellington Moving? The recent pedestrian crossing addition near the airport came with a $24 million price tag — and opposition from the airport itself.
Then there’s the doomed cycleway across the Auckland Harbour Bridge — $51m was spent on planning, only to scrap a project that shouldn’t have been considered a priority in the first place, given it served only a specific subset of the city’s populace.
We need to stop the dithering, recategorise certain projects as nice-to-haves, and provide the necessities for productive areas like Hawke’s Bay and Gisborne.
This is not the only way the Government could help us rebuild our economy. It can help us to help ourselves without having to spend much money (which will ultimately save money for the taxpayer).
A pragmatic government would take the lessons from Christchurch and managing insurance claims, and pressure insurance companies to settle quickly and fairly with those who have suffered flood damage.
Even more important is for the Government to take a firm line with the banks. Banks complain that the increase in their capital ratios has made lending difficult and forced them to call in loans, or not reissue debt where they would have done so in the past.
For our growers, this has meant sound, long-standing businesses with cash-flow issues caused by a poor season have not been able to convert their seasonal finance into long-term debt. In the past banks have allowed this. They know in a normal ten-year period there will be some good years, some bad years, and some extremely profitable years. This tends to balance out over time, while season-by-season financing puts our growers in a tough position.
The Government could ease up on the capital ratio requirements for banks if the banks agree to allow businesses to convert this season’s debt to long-term debt. The Government could also provide guarantees to banks who provide loans to our successful viticulture and horticulture businesses — which are now going to have a terrible year due to the floods.
The Government has a huge number of levers it can use to help our region recover from the floods. It is the Government’s influence, as much as actual spending, that is a key component here. The key is to front-foot the package and give the damaged region and its people confidence.
The impact of Cyclone Gabrielle has been compared to Cyclone Bola in 1988 — it’s probably much worse because the brunt of Bola was localised to mostly Tairawhiti/Gisborne while Gabrielle has severely damaged several regions (and has surpassed Bola’s death toll already). Northland was hammered with property damage and loss of power. Auckland lost power and lives and now has red and yellow-zoned homes. Coromandel has property and road damage. Gisborne and Hawke’s Bay are all the above, plus core infrastructure and crop losses. It’s a grim list.
With Cyclone Bola, the compensation package was huge for its time. It was the brainchild of the David Lange-led fourth Labour government. The farm funds alone were $50m, which is $121m today adjusted for inflation. In this agriculture package, compensation was paid on the basis of 60 per cent of non-insurable losses based on market values, also incorporating income and stock losses.
The wider package cost the government $110m, or $268m today adjusted for inflation. When you consider how much the Hawke’s Bay region has grown in terms of population, economic intensification and productivity over 35 years, the potential rebuild cost is sobering.
The after-effects of Gabrielle are going to hurt for a while because they impact the nation’s primary growing and food-producing regions. Even those who got off lightly in the actual storm will feel its lingering impact. It will be hard for the population to avoid the inflationary impact of the reduced fresh produce, and the stimulatory effect of the rebuild. Furthermore, as we move into repair mode, we (and the Government) need to be thinking of not just clean-up, but risk management.
We’re living in a time when climate change presents a real and present risk, and these extreme events are becoming ever more likely. How can we rebuild our infrastructure so our cell towers and electricity supply aren’t brought down in one fell swoop? How can we reduce the flood risk present in multiple regions? How can we best secure a road network that will stay open for supplies and aid?
We need to think about the future. We need to push both local and national governments to think for the future. It’s hard to go beyond what’s happening right now when it’s still unfolding and everything feels so raw, but this initial impact is just the beginning of dealing with an event of this magnitude. In the months and even years to come, we will see the social and economic impact of Cyclone Gabrielle — much as we did with Bola.
Hopefully, a robust announcement is forthcoming. The sooner, the better.