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CHRISTCHURCH (AFP) - New Zealand's most destructive earthquake in nearly 80 years caused two billion dollars' worth of damage Saturday, felling buildings, tearing up roads and sending terrified residents fleeing into the streets.

Officials said it was "extremely lucky" no one was killed when the 7.0 magnitude quake shook the island nation's second-largest city of Christchurch just before dawn.

Frightened residents fled from their homes to find streets covered in rubble and glass, but despite the extent of the damage only two people were seriously injured in the city of 340,000 people.

Christchurch mayor Bob Parker said he was "horrified by the amount of damage" which daylight showed was considerably worse than first thought.

"There would not be a house, there would not be a family in our city that has not in some way have damage done to their person, to their property," Parker said on national radio.

"I think it's like an iceberg; there is... below the visible line, significant structural damage."

Few people were on the streets as the quake hit but building facades crashed to the ground, crushing parked cars and showering the roads with shattered glass, while gas and water electricity supplies were cut.

Facts:Quake among New Zealand's worst

A state of emergency was declared in Christchurch and a 7:00 pm to 7:00 am curfew imposed in the city centre as initial estimates put the damage at up to two billion dollars (1.44 billion US).

Residents were warned to stay away from damaged buildings for fear of further collapses as severe aftershocks continued to rock the city.

"I think we've been extremely lucky as a nation that there's been no fatalities... we're blessed actually," Civil Defence Minister John Carter said after being briefed on the impact of the quake he described as a "significant disaster".

Prime Minister John Key flew to the city to survey the scene and support residents, many of whom described the quake as a terrifying experience.

"We are not going to let Christchurch suffer this great tragedy on its own," Key said.

The quake, initially recorded at a magnitude of 7.4, struck at 4:35 am (1635 GMT Friday) at a depth of five kilometres (three miles) some 45 kilometres west of Christchurch, the US Geological Survey said.

"Oh my God. There is a row of shops completely demolished right in front of me," resident Colleen Simpson told the Stuff website, adding that many people had run out onto the streets in fear.

Christchurch Hospital spokeswoman Michele Hider said two men in their 50s were seriously injured -- one was hit by a falling chimney and the other was cut by falling glass.

Police closed the centre of the city as looters targeted damaged shops, police Inspector Mike Coleman said.

"There's considerable damage there, and we've already had reports of looting. Shop windows are broken and obviously it's easy pickings for displays and things."

In the hours immediately after the quake, roads in the seaside suburbs were packed with cars as residents moved inland, but there was no tsunami.

Kevin O'Hanlon, from the Mairehau area of Christchurch, said: "Just unbelievable. I was awake to go to work and then just heard this massive noise and, boom, it was like the house got hit. It just started shaking. I've never felt anything like it."

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Mayor Parker said he was in bed when the quake struck and he was "absolutely scared. I've never felt anything like it and I've experienced, like most Kiwis, a number of good shakes."

The quake, felt throughout the South Island and the lower North Island, was the most destructive in New Zealand since the 1931 tremor in Hawke's Bay that killed 256 people.

It caused the temporary shutdown of Christchurch International Airport, forcing the diversion of inbound international flights to Auckland and Wellington until the airport reopened Saturday afternoon.

New Zealand sits on the so-called "Ring of Fire", the boundary of the Australian and Pacific tectonic plates, and experiences up to 15,000 tremors a year. It averages at least one a day that is magnitude 4.0 or stronger.

Meanwhile, as residents took stock of the quake damage they also had an eye on looming bad weather with destructive gale-force winds up to 130 kilometres (80 miles) an hour predicted to arrive on Sunday.

"Winds of that speed can be damaging and with many buildings extensively damaged (by the earthquake) it could cause a major headache for emergency services," a weather service spokesman said.