The Treasury expects rebuilding efforts after the Canterbury earthquake will help economic growth in 2011 and put upward pressure on inflation.
However, in the short-term it is predicting annual economic growth to slow slightly in the year to the end of September.
The Treasury estimates the 7.1-magnitude quake on 4 September caused $4 billion worth of damage.
But it warns this is still an indication only and the full cost of the damage will become known only once all insurance claims have been assessed.
Though the reconstruction effort will lift economic growth during the next two years, the Treasury says this is simply a matter of replacing wealth lost as a result of the quake.
The Treasury also notes many people have lost items of high personal value but these will not show up in the damages estimates, given their financial value will be quite small.
It predicts the quake will lower the growth rate by 0.4% in the September quarter which would lower the annual growth rate by just 0.1%.
Paradoxically, the reconstruction effort is expected to boost growth by 0.5% in the 12 months to the end of June next year.
