A first-of-its-kind study assessing the rising economic fall-out of extreme weather disasters in New Zealand has flagged an urgent need for smarter, “needs-based” recovery packages for businesses, rather than blanket ones.

With the country just having observed its wettest, warmest year and a summer of extreme storms, how to bear the massive costs of climate change’s physical impacts has come under sharper focus.

Over recent weeks, New Zealand’s largest insurer reported a 402 per cent jump in weather-related claims, while a bleak Treasury report warned the direct impacts on businesses and communities would only grow.

Yesterday, Prime Minister Chris Hipkins announced that $1 billion earmarked in this year’s Budget would help Hawke’s Bay, Tairāwhiti and Auckland recover from Cyclone Gabrielle, which, combined with the summer floods, are estimated to have cost between $9b to $14.5b.

The new study, led by Victoria University researcher Apurba Roy and published in the journal Environmental Economics and Policy Studies, reached back further, to the last decade.

“We were interested to see if we could uncover any evidence on the impact of extreme weather events on businesses in New Zealand - no one had looked at that before,” said study co-author Professor Ilan Noy, chair of the university’s Economics of Disasters and Climate Change group.

To analyse local economic trends in regions hit by past cyclones, floods and wildfires, the researchers compared information from a Stats NZ-run business database with Toka Tū Ake EQC (the Earthquake Commission) and Niwa (the National Institute of Water and Atmospheric Research) catalogues.

In earlier work, the researchers had found such trends varied. For instance, while the individual incomes of people living in areas affected by big cyclones took a hit, the same pattern didn’t hold when they instead looked at peoples’ losses from experiencing more local flood events over time.

Their latest study found this also extended to businesses.

“Indeed, we found that decreases in firms’ income is only found for cyclones, and not for floods,” the study said.

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As expected, some sectors fared much worse than others.

In 2018 - the year that Cyclone Fehi and Cyclone Gita slammed into New Zealand - financial and insurance services suffered the worst profit losses from ex-tropical cyclones, at nearly $110 million.

That compared with the $15m hit that agriculture, forestry and fishing-linked industries took - and the $13m and $7m combined profit losses respectively recorded by the wholesale trade sector and transport, postal and warehousing firms.

For wildfire impacts, the researchers looked solely at the forestry sector - and were surprised to find no discernible impact on forestry firms.

While the analysis didn’t cover any years past 2020, Noy said the sheer scale of recent disasters like Cyclone Gabrielle and the Auckland floods - each bearing extreme features expected to become more common under climate change - would have translated to wider sector costs.

“Bigger events have bigger impacts on each affected firm because they don’t only affect your own firm and your immediate surroundings, but also all the firms you are connected to, and all your customers and suppliers,” Noy said.

Overall, Noy said the heavy costs from weather disasters observed in the study supported the need for financial support to help businesses recover.

“However, that support needs to be designed appropriately so it does not lead to further undue risk-taking and worst outcomes in terms of future resilience,” he said.

“It also suggests that post-disaster assistance should be selective in whom it helps - and be need-based, rather than provide a blanket assistance programme for all firms in an affected region, which sometimes seems to be the preferred policy.”

He pointed out that some commercial entities - such as many construction firms - actually saw boosts in income following disasters.

“There are clearly further questions around what kinds of interventions or actions - by government, businesses, or even insurers and investors - can ameliorate these adverse impacts and improve outcomes for individuals and for businesses,” he said.

“Ultimately, climate change is, for the time being, something we need to learn to live with - while also trying to prevent it from deteriorating further.”