Earthquakes that struck Christchurch yesterday may add to the case for New Zealand’s central bank Governor Alan Bollard to delay interest-rate increases until next year.

The magnitude 5.2 and magnitude 6 tremors in New Zealand’s second-biggest city were the worst since a February temblor that killed more than 180 people and closed the central business district. New Zealand’s currency fell and traders reduced bets on the cash rate rising from a record-low 2.5 percent this year, according to swaps trading.

“Bollard has said very carefully that what they want to see is evidence the rebuilding is taking off,” Roland Randall, an economist at TD Securities Inc. in Singapore, said in an interview. “Maybe if you’ve got more liquefaction and so forth it’s going to take longer for the ground to be ready to rebuild and that’s going to delay the process.”

New Zealand faces a NZ$15 billion ($12 billion) damage bill from the February earthquake and an earlier, magnitude 7 temblor that hit Christchurch and surrounding districts in September. Yesterday’s damage to roads, pipes and buildings may slow reconstruction that Bollard has forecast will help the economy grow 4.8 percent next year, the fastest pace in 10 years.

There is a 48 percent chance Bollard will increase rates by a quarter of a percentage point to 2.75 percent in December, ANZ National Bank Ltd. prices for interest-rates swaps showed at 12:45 p.m. in Wellington, down from a 74 percent chance on June 10. New Zealand’s dollar dropped as low as 81.15 U.S. cents from 82.20 cents immediately before the first quake struck at about 1 p.m. local time. The currency bought 81.47 cents at 12:45 p.m. in Wellington.

Pipes Burst

In the eastern suburbs, ground was shaken, bursting pipes and flooding streets with water and silt forced to the surface by liquefaction, a phenomenon where soil loses its strength after violent shaking. Since February, the government has been assessing whether some of these areas should be abandoned because they’re prone to such problems.

“There has been further subsidence in parts of the city,” Prime Minister John Key told TV3. “There will be areas that can’t be built on.”

Christchurch was hit by a magnitude 5.2 quake at 1 p.m. local time that was followed by a 6.0 temblor at 2:20 p.m., the U.S. Geological Survey said. The city’s airport was closed, power was out for as many as 56,000 customers.

Aftershocks Continue

The two biggest quakes were located 10 kilometers (6 miles) southeast of the city and at depths of 11 kilometers and 9 kilometers, respectively, the USGS said.

More than 30 quakes have been recorded since 2:20 p.m. yesterday, ranging up to a magnitude 4.7 temblor that struck the city at 2:48 a.m., according to New Zealand’s GNS Science. The government agency says further aftershocks are possible, which may delay the demolition process.

“Within the order of a month or so, or maybe two months, we’ll get back to where we were before these two events happened yesterday” in terms of aftershocks, Matt Gerstenberger, a seismologist at GNS in Wellington, said in an interview.

Inspection teams have been checking the inner city and eastern suburbs where water pipes burst yesterday, reducing pressure and flooding streets, the council said on its website.

A number of bridges were closed and roads damaged, and residents were asked to avoid unnecessary travel. In some of the city’s hillside areas there are risks of rock falls, prompting evacuations, the council said. Schools are closed today.

Injuries Reported

“We have broken roads again, and potholes, and some buildings have collapsed,” Aaron Gilmore, a Christchurch-based member of parliament, said in an interview with Bloomberg Television yesterday. “The irony is the productive part of the city, to the west and the north, seems to be completely untouched by this. But where the people live, in the eastern suburbs, has suffered damage again.”

About 46 people were treated for minor injuries, Civil Defense said in an e-mailed statement. Two people were rescued after being trapped in an inner-city building, it said earlier. Power has been restored to 95 percent of households, Orion New Zealand Ltd. said on its website.

Further Damage

Christchurch’s central business district has been cordoned from the public, tenants and property owners since February, forcing companies to relocate and retailers to close, as crews demolish wrecked buildings. Several buildings in the so-called red zone, including the Grand Chancellor Hotel, the city’s tallest, have been in danger of toppling.

As many as 50 buildings have suffered further damage that may require demolition, Warwick Issacs, manager of demolition at the Canterbury Earthquake Recovery Authority’s, told Radio New Zealand.

“There will be some buildings in there we will have to demolish or partially demolish in order to make the area safe to traverse the roads again,” he said.

The damage is mainly to property already damaged after the February temblor, Earthquake Recovery Minister Gerry Brownlee told Radio New Zealand.

If the buildings were in such a state that they collapsed, “they were probably going to come down anyway,” he said. “I don’t think it is going to hold us up or put us back at all.”

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net

To contact the editor responsible for this story: Iain Wilson at iwilson2@bloomberg.net

http://www.bloomberg.com/news/2011-06-13/n-z-rocked-by-aftershocks-currency-tumbles.html

June 13, 2011