Australia Flood, Cyclone Disasters to Cost Economy $9.4 Billion, Swan Says
Australian Treasurer Wayne Swan
Eric Taylor/Bloomberg
Australian Treasurer Wayne Swan.
Australian Treasurer Wayne Swan. Photographer: Eric Taylor/Bloomberg
March 18 (Bloomberg) -- Paul Bloxham, chief economist at HSBC Holdings Plc in Australia, talks about the impact of natural disasters in Japan, New Zealand and Australia on the countries' economies. He speaks with Francine Lacqua on Bloomberg Television's "On The Move." (Source: Bloomberg)
Australian Treasurer Wayne Swan said recent natural disasters will likely cost the economy around A$9 billion ($9.4 billion) after the government raised estimates on losses to the coal industry by 20 percent.
“The cost is likely to be even larger than we initially thought,” Swan said in a weekly economic note yesterday. “No one was ever under any doubt that the financial toll of the devastation we’ve seen in Queensland and elsewhere in Australia this summer was going to be substantial.”
Lost coal production may cost A$6 billion instead of the A$5 billion previously forecast, the Treasurer said, warning that the numbers are “conservative” compared with estimates from some businesses. Damage to crops would add A$2 billion to the bill and lost tourism amounts to A$400 million, he said.
Tropical Cyclone Yasi in February tore through sugar- and banana-producing areas, following two months of flooding in Queensland that killed 36 people, shut mines and wiped out crops. The state produces 80 percent of the coking coal exports from Australia, the world’s biggest supplier, and grows more than 30 percent of the nation’s fruit and vegetables.
The weather disruptions are expected to have hit resources and agriculture hardest, Swan said.
Some mining companies expect coal output may drop from previous forecasts by between 20 million tons and 30 million tons this year, according to a Treasury report released April 2.
“The top end of this range is much higher than Treasury’s estimate of 22 million tons, and would amount to a hit of about A$8 billion,” Swan said.
Cut to GDP
The disasters will cut Australia’s gross domestic product by half a percentage point in the year through June 30, he said.
In addition, Japan’s strongest earthquake in history on March 11 is estimated to have dented demand for Australia’s bulk commodities by almost A$2 billion in this fiscal year, shaving less than one-fourth of a percentage point from GDP, according to the Treasury.
“Weaker growth will clearly mean that revenues take a substantial hit in the near term,” Swan said. “There’ll need to be some tough decisions in the budget as we stick to our strict fiscal rules.”
Prime Minister Julia Gillard has pledged to return the budget to surplus by the fiscal year ending June 30, 2013. The next budget is due on May 10.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
To contact the editor responsible for this story: Paul Tighe at ptighe@bloomberg.net
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