New Zealand is struggling to recover in the wake of last week's powerful earthquake that caused an estimated CDN$2.2 billion dollars.

The 7.1-magnitude temblor smashed buildings and destroyed roads and rail lines, mainly in Christchurch and the surrounding area on New Zealand's South Island.

No one was killed in the quake that destroyed hundreds of buildings, and only two people were reported to have suffered serious injuries.

James Thompson, of the Canterbury Civil Defence Emergency Management Group, told CTV News Channel on Monday that officials are beginning to get a grasp of the extent of the destruction in the city of 400,000.

"We have had a lot of engineers out surveying buildings and getting a good picture of the damage that has occurred," Thompson said. "The estimated costs at this stage are about $3 billion New Zealand dollars."

Thompson said the city is digging out from the rubble and life is slowly beginning to return to normal.

"There were a lot of power outages right at the start of the earthquake and just after it occurred, but power has since been restored to about 95 per cent of properties throughout the region which has been due to a great effort by our power companies," he said.

In addition, urban search and rescue engineers and structural engineers have been going through major structures to ensure their safety. So far they have issued clean bills of health to government buildings, gathering places and major businesses.

Next, Thompson said, they will be moving on to smaller businesses and residential buildings.

Efforts are also getting underway to repair roadways and rail lines hit hard by the quake. Images from Christchurch show some roads twisted and broken from the quake. However, Thompson said few are totally impassable, so transportation has continued to flow in most parts of the region.

Thompson said extra police and soldiers have been brought in to the city to help maintain law and order.

He added that all hospitals in the region are functioning, though a boil-water advisory is in place due to the risk of cross-contamination from sewage.

However, new challenges were coming to light Monday. Residents in a subdivision in the city's south were forced to evacuate when deep layers of silt spewed from the ground, turned to liquid under pressure from the quake.

"We thought we were having a tsunami," said homeowner Lalita Sharma. "We stepped outside into knee-high liquid. We thought the house would sink."

The quake struck at 4:35 a.m. local time on Saturday. About 500 buildings have been flagged for demolition due to quake damage. Roughly 100,000 of the 160,000 homes in the region sustained damage from the quake.

New Zealand's Prime Minister John Key warned Monday the country's economic recovery will be hindered by the cost of the cleanup.

New Zealand's economy has recorded two quarters of minor growth after 18 months of recession.

The immediate economic outlook looks bleak for the country, according to economists, but reconstruction will likely give a boost to the struggling construction industry next year.

"There will be considerable disruption to the (regional) and national economy in the short term," but activity should pick up as reconstruction gains momentum, Key said.

With files from The Associated Press