The economy may be turning, but the rain doesn’t stop

Thursday, 10 October 2024

The prime minister visited Dunedin to assess flood recovery efforts but was met by protesters angry about cuts to the city's hospital redevelopment plan. He praised the regional response to last week’s catastrophic flooding.

Ben Thomas is a regular opinion contributor. He is a public relations consultant and political commentator who has worked for the National Party.

OPINION: With the Reserve Bank having cut the official cash rate, and ultimately downstream interest rates, by half a percent, the Government is understandably basking in the good news.

Along with what Forsyth Barr called the “circuit breaker” of the extensive list of fast-track projects announced on Sunday by Chris Bishop, the beginning of an economic recovery is taking shape.

Even better, the Reserve Bank has signalled more cuts ahead. Heading towards the 2026 election, the coalition Government parties will be starting to think the economic cycle is working in their favour. Timing, after all, is everything in politics.

At such moments it seems churlish to look away from the bright future and into the rear view mirror. But there have been recent reminders here and abroad that time matters outside just politics, and it doesn’t always cycle, it sometimes just moves relentlessly forward.

Dunedin’s flooded streets after the torrential rain storm of early October, just the latest reminder that adaptation is now centre stage in responding to climate change.

That is certainly the case with the changing climate and its increasingly frequent and intense manifestations in severe weather events, with flooding in Appalachia and, closer to home, Dunedin ramming the point home.

Adapting to those changes was for a long time regarded by the politically active class as either a cop-out from, or simply less interesting, than mitigation (reducing emissions), which could be solved by personal philosophies as varied as anti-capitalist degrowth and free-market financialisation.

Adaptation is now centre stage.

Enter the cross-party finance and expenditure committee inquiry into climate adaptation, presented to Parliament last week. It was commissioned by Climate Change Minister Simon Watts, to recommend bipartisan principles for a legislative framework to handle the issues at the sharp end of adaptation, in particular where costs fall.

There are age-old questions, like whether councils or the Crown should pay for building flood barriers and other infrastructure resilience.

Volunteers fill sandbags in Dunedin after hours of heavy rain caused surface flooding across Otago.

Then there are the profoundly thorny questions of compensation for private individuals, and the vexed problem of managed retreat, the planned desertion of areas ahead of rising sea levels or future flooding.

Homes are a necessity of life for everyone, and houses are many New Zealanders’ chief asset. Individuals would struggle to bear the cost of their own losses if their houses became worthless. Local government and the Crown will ultimately be unable to bear the burden on a regional and national level.

For about a decade, political progress towards allocating this risk has mostly consisted of chin-stroking about “finding a balance” between the relevant parties. The only real change has been excising insurance companies from musings about cost-sharing, after that sector made relatively clear following disasters it will simply exit the market in risky areas rather than pick up the slack of the state.

The select committee’s report may seem like more of the same. A framework should “minimise long term cost”, and achieve “a balance between central government and community leadership” while avoiding moral hazard. It should be based on a principle of equity.

However bland they might seem, the multi-party report’s principles are important.

International reinsurers, who threatened to exit New Zealand following the black swan Auckland Anniversary weekend floods and Cyclone Gabrielle, are extremely sensitive to policy intentions and directions, factoring in any change in the direction of travel. The report moves in the right direction.

Christchurch’s residential red zone, more than a decade after the earthquakes which saw the government buy up homes which were unsalvageable after the disaster.

It even motions towards the apportionment of responsibility, suggesting holiday homes might not be eligible for the same kind of compensation as family homes, and that the longer residents have been on notice about the risks in their area, the less likely they could be to receive compensation.

Compensation for disasters is currently ad hoc and after the event. It’s also on a trajectory of inevitably diminishing returns as the frequency increases and cumulative costs mount.

Central government’s buy-out of homes in Christchurch’s so-called red zone following the Canterbury earthquakes was, the previous government’s expert working group on managed retreat noted last year, “extremely generous”. Compensation offers to flooded Auckland homeowners were more circumspect.

By the time of flooding in Dunedin last week, Willis said as a matter of fairness it was important the Government “don't do for one group of people what we then can't afford to do for another group of people”, saying the Government would respond to the select committee report on adaptation by Christmas.

Dunedin’s council had looked at a scheme for buying out flood-prone properties mid-last year, but said it did not get Government buy-in (literally: it assessed the cost as over $130 million).

Somewhat ironically, around the same time the Government’s working group recommended that post-disaster interventions such as forced buy-outs should inform, and be relatively consistent with, an “anticipatory risk reduction system”, that is the relocations of buildings, families and communities that will constitute managed retreat.

In other words, timing is everything in politics, but as far as the effects of climate change and the economic impact go, the only choices for political impact are now or eventually.