Creating an Economically Resilient New Zealand (CERNZ)


 

Dr Garry McDonald

Programme Leader

Market Economics

 

Background


 

Natural hazards can have enormous economic consequences across space and through time for the communities affected by disasters. These effects can be mitigated through better resilience planning and by putting adaptation strategies in place; however this can be costly, especially when compared to less resilient alternatives. The Creating an Economically Resilient New Zealand programme is developing economic decision support tools that enable New Zealanders to transition effectively and quickly to a nation that is more resilient to natural hazards. 

These toolsets, which operate at multiple scales and for multiple stakeholders, offer capabilities to simulate the socio-economic consequences of disruption caused by injury and damage to our built environment from natural hazard events.  These tools also extend widely practiced approaches/conventions to economic decision/policy analysis that enable us to create better business or value cases for resilience building initiatives.  They also allow us to identify best practice risk sharing and financial interventions to motivate resilience.

 

 

Projects


 1

Enabling Pathways to Resilience

Creates the first ever interface between the multi-hazard toolbox developed in The Resilience Challenge and the existing tools Riskscape and MERIT (Measuring the Economics of Resilient Infrastructure Tool) to enable rapid assessment of economic consequences of resilience-building strategies through time and across space for multiple stakeholders.

Project lead: Dr Garry McDonald

Host: Market Economics

 2

Valuing Resilience Initiatives

Designs and tests a modified economic evaluation (based on Benefit-Cost Analysis and Multi Criteria Analysis) framework to enable better business case development in the context of resilience to natural hazards in a range of New Zealand organisational contexts.

Project lead: Dr Nicky Smith

Host: Market Economics

 3

Motivating Resilience

Investigates toolkits that create best practice risk sharing and alternative financial interventions in support of resilience.  The toolkit expands the empirical evidence base for risk transfer/financial mechanisms towards resilience, and draws on the emerging field of behavioural economics, which seeks to understand the systematic biases, heuristics and market failures underpinning inefficient behaviour.

Project lead: Prof Ilan Noy

Host: Victoria University of Wellington

 4

Flow-on impacts

This project, funded from the Challenge’s contestable funding process in 2017, is developing a transferable method for identifying resilience enhancing characteristics of local economies and ‘hot spots’ (critical industry sectors and inter-regional links) that amplify the flow-on impacts from natural hazards through the economy.

Project lead: Dr Morag Ayers

Host: Market Economics

 

Key Achievements


 

Reporting socio-economic impacts

We developed a rapid assessment method that enables reporting of socio-economic impacts through time and across space for multiple stakeholders.  The work was used immediately following the November 2016 Kaikōura earthquake to assess the economic impacts to communities, districts, regions and for the nation, that would likely play out over the next 2 years.

 

Simulation of a Wellington earthquake

We have also created an end-to-end simulation (from damage, through risk assessment, to economic impacts) of a hypothetical Wellington Fault 7.5Mw earthquake event.  This can assess the economic consequences to Wellington and the rest of New Zealand over the first 5-years following the event, both with and without resilience-building infrastructure investments.  The simulation comprehensively accounts for all critical infrastructure interdependencies that exist within the region.  It is being used by a consortium of all Wellington infrastructure providers, and most lifeline organisations, to create an infrastructure investment business case for a more resilient Wellington.

  

Economic consequences of road outages

The programme team, in conjunction with the New Zealand Transport Agency, has also created an online tool that enables simulation of the likely economic consequences of road outages for any road in New Zealand.  The tool takes account of standard disruption impacts such as changes in travel distance and time, as well as business operational impacts that occur through production supply and consumer use chains within the New Zealand economy. This tool has been used to evaluate the economic consequences of road closures such as the 2017 Manawatu Gorge, and 2017 State Highway 1 landslides near Wellington.

 

Thesis Research Students

Nhu Cuong Nguyen (PhD at Victoria University of Wellington) – The State-Owned Earthquake Insurance Scheme and recovery from the 2010 – 2011 Canterbury earthquake sequence.

Affiliated from other RNC programmes

Robert Cardwell (PhD at The University of Auckland) – Application of Integrated Land Use – Economic Models to Hazard Management Strategy and Planning (Urban programme).

Ashton Eaves (PhD at The University of Auckland) – Building resilience to climate change through modelling managed retreat in a coastal setting (Edge programme).

Selected publications

 

McDonald G, Cronin S, Kim J-H, Smith N, Murray C, Procter J. 2017.  Computable General Equilibrium Modelling of Economic Impacts from Volcanic Event Scenarios at Regional and National Scale, Mt. Taranaki, New Zealand. Bulletin of Volcanology,79, 1-18. 10.1007/s00445-017-1171-3

McDonald G, Smith N, Kim J-H & Cronin S. 2017. The spatial and temporal ‘cost’ of volcanic eruptions: assessing the economic impact, business inoperability, and spatial distribution of risk in the Auckland region, New Zealand. Bulletin of Volcanology, 79, 48. DOI 10.1007/s00445-017-1133-9

McDonald G, Smith N, Ayers M, and Kim J-H. 2017. Economic impacts of the 2016 Kaikoura earthquake: A report prepared for the Ministry of Transport. Ministry of Transport, Wellington

Noy I. 2016. A Global Comprehensive Measure of the Impact of Natural Hazards and Disasters.” Global Policy, 7(1), 56-65

Smith N, Brown C, McDonald G, Ayers M, Kipp R & Saunders. 2017. Challenges and Opportunities for Economic Evaluation of Disaster Risk Decisions. Econ Dis Cli Cha, DOI 10.1007/s41885-017-0007-0

 Stevenson J, Noy I, McDonald G, Seville E & Vargo J. 2016. Economic and Business Recovery. In: Natural Hazard Science, Oxford Research Encyclopedias, DOI: 10.1093/acrefore/9780199389407.013.19

 

 

Economics programme details

Download