Fires in Australia destroy 0.5% of economic growth

UNITED STATES (OBSERVATORY NEWS)

The direct losses of the Australian economy after forest fires, which have been ongoing since last fall, will amount to $ 3.5 billion, or 0.2-0.5% of the country’s economic growth, Westpac Bank, one of the largest in Australia, said.

Australia expects GDP to decline in 2020 due to fires and lower iron ore prices.

Westpac expects the Reserve Bank of Australia to cut rates twice this year, but forest fires are unlikely to have a significant impact on the decisions of the country’s regulator.

The Australian economy has avoided a recession since the early 1990s, but economic growth has slowed since the middle of last year, as households face record debt and weak income growth, which limits spending.

Because of the fires, 10.55 thousand lawsuits were filed with a total insured value of 939 million Australian dollars ($ 645.6 million). But uninsured losses requiring state compensation are approximately twice the size of the insured.

As a result, taking into account the already issued 2 billion Australian dollars ($ 1.4 billion) by the state, the total cost of the disaster today is likely to be about 5 billion Australian dollars ($ 3.54 billion).

The Bank believes that the cost of the disaster is comparable to the fires on Black Saturday 2009 in Victoria, which destroyed 2029 houses and at the same time led to much greater losses: 173 people were killed.

“Measuring the economic impact of disasters is always very difficult, especially when the total damage is still unknown,” the bank warned. “But the rule of thumb for natural disasters is that the total cost is about double the insurance damage.”

According to the bank, the most affected areas make up only 1% of the Australian economy.

Thousands of livestock were killed in agriculture, dairy production was reduced due to disrupted power lines, and some vineyards were burned, while others were spoiled by smoke.

But most of the fires occurred in forests, not agricultural areas, and in general the impact of fires on agriculture will be minimal compared to the damage from the ongoing drought.

However, the blows of fires on tourism and consumer confidence, as well as air pollution can cause even greater economic damage, the bank warned.

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