Floods cost to Australia ‘higher than Katrina’
SYDNEY, 12 January 2011 – Australia’s devastating floods could slice more than Aus$10 billion (US$10 billion) off GDP and hammer the economy worse than Hurricane Katrina affected the United States, economists said Wednesday.
US officials said in 2005 that Hurricanes Katrina and Rita that year caused $70-$130 billion in property damage and would have a sharp but short-lived impact on the overall economy.
The difference in Queensland was serious losses in mining and farming production, as well as tourism in a state which is home to the famous Great Barrier Reef and pristine beaches.
Experts said the floods, which have turned most of the mining and Great Barrier Reef state of Queensland into a disaster zone, could cut growth by one percentage point in the near term, including lost exports and infrastructure damage.
The Queensland Tourism Industry Council, which earlier indicated that tourism losses from the floods could reach Aus$100 million, has now indicated that the impact will be even more severe as the floodwaters threaten Brisbane.
“Clearly the cost is going to be substantial,” said Stephen Walters, chief economist at investment bank JP Morgan, adding that the deluge could shave as much as one percent off GDP — or up to Aus$13 billion — in early 2011.
But he said the economy, currently riding a resources boom driven by Asian demand, would likely recover in the second half of 2011 on the back of economic activity related to rebuilding homes, businesses and infrastructure.
“The profile for GDP is going to be… a dip near-term, or at least much weaker growth, not necessarily negative — but quite a bit stronger in the second half and into 2012,” he told AFP.
An analysis released by Westpac said GDP in the quarter to March could be cut by one percent, but the annual fall would translate to about 0.3 percent. Australia’s economy is currently tracking annual growth of 2.7%.
John Rolfe, an economist with Queensland Central University, said in the short-term the floods would hit coal and primary produce exports but the impact would drag on the economy for several years.
“In the longer term, the economy is going to suffer because of the amount of ongoing disruption to production, mostly because of the additional expenditure — both private and public expenditure — to fix infrastructure.”
“So essentially investment for the next two or three years is going to be going into repairs instead of into new productivity.”
Rolfe said growth would have to be revised down, but only slightly to between 0.1 and 0.3%.
Economist Warwick McKibbin, who also sits on the board of the central Reserve Bank of Australia, said it was too soon to predict the economic impact but it would be greater than simply the loss of exports.
“I have no idea of what the costs will be but it’s not just the exports,” he told AFP. “It’s going to be a lot bigger than people think. It’s going to be a lot bigger than just the cost of the damage.”
Queensland Treasurer Andrew Fraser said it was not yet possible to say how much the worst floods in more than a century would cost, but that they were “a real blow to the Queensland economy”.
“We are talking here of billions in terms of budget impact,” he said.