One small eruption, one big cost

Moderate volcanic explosion could cost city nearly $10b

Even a moderate-sized volcanic eruption in Auckland could cost the local economy nearly $10 billion — and a push towards intensification could make the city even more vulnerable.

That’s according to researchers who looked at 7270 possible eruption locations to estimate the economic fall-out of a blow in the city.

Much of Auckland is at risk — more than 50 volcanoes lie beneath a field stretching across 360sq km — and more than one million people live on areas where an eruption could occur.

An eruption from one of the volcanoes could blast out an explosion crater 1km to 2km across, destroying everything in it, but planners believe people in its path would be evacuated well before an event.

In their study, the University of Auckland’s Professor Shane Cronin and Dr Garry McDonald of consultancy Market Economics modelled a scenario assuming a medium to small eruption anywhere in the city.

Such an event could cost between $8b to $9.7b — equivalent to 8.5 per cent to 10.4 per cent of regional GDP.

The study, just published in the Bulletin of Volcanology, follows a 2015 Market Economics paper that found much of Auckland’s industrial belt, including Penrose, Onehunga, Otahuhu and East Tamaki, was particularly vulnerable.

But Cronin said all past evaluations had concentrated on physical damage to buildings and roads.

“For this paper we saw the need to look beyond this and into what really happens when communities and businesses are disrupted by disaster — especially in respect of the ability of business to keep operating and to keep people in employment.

“Thus it was really important to look at the dynamic impacts of a volcanic disaster, which can be as big as or greater than the physical damage to property.”

They modelled effects by breaking the city down into a series of blocks, before looking at the mix of about 100 business types at each location and in what state they would be more than a year after impact.

Cronin said manufacturing businesses, made inoperable by plants put out of action, or goods and services cut off from and transport links, would be badly affected.

But some service businesses could adapt to a disaster through operating from home or a temporary premises.

“Ultimately though, if they are dependent on infrastructure, like roads, they must also stop if there are no mechanisms to reroute.”

Cronin expected few businesses would be aware of such threats.

“The big change to our economy over the last years is that we are geared to a ‘just in time’ practice. There are very few businesses that would have any back-up at all.

“Manufacturing businesses and large factories . . . can’t just ramp down to 30 to 40 per cent, depending on demand or supply.”

Another of the big implications of the paper was that the push toward intensification in Auckland could make it all the more vulnerable to disaster, Cronin said.

“For example, if all the manufacturing or all of the services is in one location — then disasters could have a massive impact.”