Auckland Floods Financial Impacts
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Auckland Floods Financial Impacts

Finance
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3.2.21
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Joseph Darby

New Zealand retail banks are rolling up their sleeves to support their customers

The major New Zealand banks have all laid out support packages to those in Auckland, Northland, and other areas hit by flooding. Targeted relief packages differ by bank, though generally involve a range of possible support options for both business and personal customers. These may include:

  • Suspension of principal payments for several months on home loans and business loans
  • Temporary overdraft facilities
  • Deferred payment on business credit cards

The CEO of the country’s biggest bank, ANZ, urged personal and home loan customers to contact the bank if they need to relieve pressure on their financial situation.

“There are a range of ways we could help, such as restructuring their home loan repayments, providing access to an overdraft facility or an urgent credit card limit increase,” Antonia Watson said.

“There are also a number of fee waivers in place, as well as the ability for customers in hardship to break term deposits without penalty.”

Counting the Cost

It’s been a long week for our biggest city and the surrounding regions. The clean-up will last some time, and when it’s all done this could well be New Zealand’s second most costly natural disaster – after the Christchurch earthquakes.

It’s still too soon to know the full extent of the damage to businesses and trade, though it may be the floods that battered Auckland, Northland, and parts of the Bay of Plenty and King Country will cost the economy close to a billion dollars.

The impacts could be wide-ranging.

Infometrics principal economist Brad Olsen said the uptick in demand as the rebuild begins 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.

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 Auckland based Employers and Manufacturers Association (EMA), 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 [businesses] who aren't insured," he said. This is on the back of rising costs, and mass-disruption with lockdowns, which have both contributed to businesses ceasing insurance.

Spare a thought for many upper North Island hospitality, travel, and tourism businesses, who’ve been under pressure for some time. They’ve had several summers with on-and-off lockdowns and closed borders, and now face flood-related difficulties!  

Cost of Living

It’s not just Aucklanders in the firing line either, New Zealand’s cost of living, which was already a pain-point for many Kiwis, could get worse because of the floods.

Insurance payouts will be pushed to individuals, organisations, and families to replace a huge amount of damaged and destroyed items. Think about all those building products, fittings, furniture, and the labour cost to repair or replace them – anyone helping solve the housing crisis by building new homes now must compete for tradespeople (“tradies”) and building supplies.

Supply and demand issues could flow through to prices of carpet, furniture, fittings, electronics, and vehicles – all of which are needed to replace damaged and destroyed items.

Some crops have been damaged or destroyed, which might drive up the cost of some foodstuffs.

Insurance Will Probably Go Up

Many of the costs explained above should be transitory, that is, they shouldn’t last. There is one cost that might for all of us: insurance premiums. The premiums for contents, vehicles, and housing may all go up as insurers and those who support and enable the insurance cover from overseas reassess the possibility of other disasters and ‘unprecedented’ events up and down New Zealand.

The Bottom Line: Flood Financial Impacts

While the clean-up has begun, it’s still too early to tell the full financial impacts of the flooding.

In any case, it’s great to see New Zealand’s major banks jump at the opportunity to help their personal and business customers by offering a range of targeted assistance. Anyone in financial difficulty should be reaching out to them immediately.

It’d be the pleasure of one of our trained professionals to help you work through any of the topics mentioned above, so get in touch today.

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