More than $2 billion has been the loss to the Australian economy because of the v that the country has experienced this summer. And the fire season is yet to get over.
There are concerns being expressed by economists that Australian consumers, who have already tightened their purse strings, will be prompted to spend less because of the fires which could prompt the Australian Reserve Bank to announce another interest rate cut next month.
Economists however also find some solace in the surplus budget of the Morrison government.
This financial year, the direct losses because of the fire to tourism, agricultural and retail income is already between $1.1 billion to $1.9 billion, estimated Terry Rawnsley, the head of economic analysis at SGS Economics and Planning.
Rawnsley further estimated that there has be an additional loss of $500 million since the start of the summer because of the loss to national economic output due to the regular shrouding major cities by smoke and haze. That number includes costs because lost productivity, reduction in spending and because of ill health.
“You’re getting up to a $1.5 to $2.5 billion impact on the economy,” he said.
An earlier modeling of the Tathra fires in 2018 as well as the relation between the economic output and the size of insurable losses formed the basis of the estimated numbers. Economic costs will sire with the rise of insurable losses which was at $375 million according to the last estimate by the Insurance Council of Australia.,
Further, a hit of 0.15 per cent for the national gross domestic product this financial year because of the fires is also estimated by Rawnsley, who believed that the majority of that will be accounted for in the March quarter. It might not be possible to fully recover from the losses for many affected communities, he warned.
“For those local communities, they’re looking at a 25 to 50 per cent reduction to their economy. Whether they can bounce back again from that is the question for the long term,” he said.
“A lot of those areas are holiday towns and rely on summer-period income to get them through the year. If the town’s been burnt out, people may decide to leave for good. Some of those areas are pretty marginal to start with. If your population drifts away, you don’t really get that benefit from rebuilding stimulus.”
There will also possibly be a reduction in the level of national economic output to the tune of between 0.25 and 1 per cent because of the fires, estimated AMP Capital chief economist Shane Oliver. Again, the majority of the losses would be recorded for the March quarter.
In the context of the human cost of the bushfires, the budget surplus is not a priority, Prime Minister Scott Morrison and Treasurer Josh Frydenberg have said.
“A big chunk of Australia is on fire, but the economic impact is not quite as big as it would appear,” they said.
(Adapted from SydneyMorningHerald.com.au)