New Zealand’s Green Party is proposing issuance of billions in newly created “Earthquake Bonds” as a way to replenish disaster funds drained following the 2010 and 2011earthquakes.
“[We] propose the Reserve Bank purchase, in a staged way, earthquake recovery bonds to fund the rebuild of Christchurch and overseas assets to rebuild the Natural Disaster Fund more quickly,” said New Zealand Green Party parliament member Russel Norman in a statement Friday. “Both measures will have an immediate downward impact on our exchange rate.”
Under the Green Party’s plan, the New Zealand Reserve Bank would purchase government-issued earthquake post-event “recovery bonds” that would go towards rebuilding Christchurch as well as top up the drained Natural Disaster Fund.
Earthquakes that struck near Christchurch in 2011 caused economic losses totaling $18 billion and were the third costliest trembler in history, according to Swiss Re.
The disaster fund — run by the country’s Earthquake Commission (EQC) — has paid out approximately $3.9 billion of its $5.9 billion in assets to cover earthquake related claims and saw its reinsurance “premium increased significantly” over each renewal, according to the EQC.
“The National Government raised the EQC levy in February raising yearly revenues from $86 to $260 million. Treasury advises that the new levy rate will rebuild the Fund to its pre-earthquake level of $6 billion in about 30 years,” Norman said. “Buying Christchurch earthquake recovery bonds will reduce the need for the Government to borrow offshore. Currently, about 60 percent of all Government borrowing is from offshore.”
In addition to rebuilding the disaster fund, the bond purchase would would also have a knock-on effect of economic Quantitative Easing (QE) within the New Zealand economy, the Green Party argues, and would help fight currency speculators circling the Kiwi.
“Our Government needs to be rolling up its sleeves and implementing practical monetary and industry policy solutions that work,” Norman said.
