that are now uninhabitable. there has also been substantial damage to commercial assets and infrastructure, particularly within christchurch ’ s central business district. it has proved very difficult to calculate the cost of the damage. it is likely over $ 20 billion ( most of this involving damage to housing, with significant damage also to commercial buildings and infrastructure ). of course estimates of damage, estimates of insurance claims, and estimates of reconstruction can all differ somewhat. our working assumption is that there will be approximately $ 20 billion of rebuild. this is equivalent to around 10 percent of gdp, which represents a very large shock in relative terms. ( as a comparison, the massive earthquake that struck japan in march 2011 is estimated to have caused damage equivalent to around bis central bankers ’ speeches 3 to 4 percent of japan ’ s annual gdp. ) we recognise that there is considerable uncertainty around these numbers and that revisions to this estimate are likely to continue for some time. indeed, we frequently note that our working assumption is to the nearest $ 5 billion. it is also important to note that this assumption relates to the current replacement value of damaged assets. the nominal cost of rebuilding these assets could be larger as construction costs and prices for materials may well increase over the coming years, and as reconstruction incorporates quality improvements. indeed, the reserve bank ’ s insurance oversight team estimates that total property insurance claims ( including buildings and other assets ) stemming from the earthquakes could be considerably higher than these numbers. in addition, some of the damage caused will not have been insured or will not be repaired. the response to these events the devastating impact of the canterbury earthquake necessitated a large and coordinated response by central and local government, as well as private sector agencies. new zealand was also fortunate enough to receive assistance from other nations during the disaster recovery period that followed the february earthquake. for the reserve bank, the earthquakes raised a number of broad concerns related to protecting the soundness of the financial system. we were also conscious of our aim of maintaining medium - term price stability. when determining the appropriate response to achieve these goals, we considered three distinct phases in economic activity following the earthquakes : disruption, stabilisation and reconstruction. rather than representing specific time periods, each of these phases relates to the underlying state of the economic environment. in turn, each raised a different set of concerns. in the period of disruption that immediately followed the earthquakes, human life and safety were the dominant concerns, with recovery efforts led by civil defence. the reserve bank and other

into the future monetary policy framework – submission by the reserve bank of new zealand, july. rbnz ( 2007 ) monetary policy statement, december. sill, k. ( 2007 ) “ the macroeconomics of oil shocks ” philadelphia federal reserve business review q1, p. 21 - 31. stock, j. and m. watson ( 2002 ) “ has the business cycle changed and why ”, nber working paper 9127.