The Treasury says it will take more than four years to make good the physical damage from last month's earthquake and the one in September.

Its preliminary estimate of the damage from the two events is $15 billion, give or take a couple of billion.

Most of it, $9 billion, is damage to residential buildings, with the rest split evenly between commercial property and infrastructure.

"It is unlikely all this work will be completed within our four-year forecast period," the Treasury says in a report released yesterday.

It is a "line call" whether the economy was already back in recession by the end of last year as consumers and businesses remained cautious about spending.

In any case it has shaved 1.5 per cent off its forecast for economic growth this year, leaving 2 per cent, concentrated in the latter part of the year.

This reflects the immediate hit to economic activity, ongoing damage to confidence and a further delay in reconstruction from the September earthquake, which was just getting under way.

Rebuilding work will boost economic activity from next year on, but those higher growth rates will be from a lower starting point each year than would have been the case without the earthquakes.

So the Treasury expects nominal gross domestic product - a rough proxy for the tax base - to be a cumulative $15 billion lower over the five years to March 2015 than it forecast last December.

Finance Minister Bill English said based on these early assumptions the total loss of tax revenue could be in the range of $3 billion to $5 billion over the five years.

"This is manageable in the context of the Government's revenue base of about $330 billion over the five years," Mr English said.

In addition there will be some increase in its operational spending.

For example the unemployment rate, now 6.8 per cent, is forecast to fall more slowly, to 5.6 per cent by this time next year instead of 5.2 per cent in the December forecasts. Private sector economists have also been revising down their growth forecasts for this year, by a similar amount to the Treasury.

But they point out that not all the economic news has been grim.

Prices for New Zealand's export commodities are at record highs, boosting farm incomes, while the recent drop in the exchange rate to a 19-year low against the Australian dollar will make life easier for manufacturers exporting across the Tasman.

The numbers;

• $15 billion cost.
• 4 years to repair physical damage.
• 1.5 per cent shaved off economic growth forecast.
• $3 billion-$5 billion in lost tax revenue over five years.

(Source NZ Herald,  Brian Fallow )