Natural disasters in Australia probably cut more than 1 percentage point from economic growth in the first quarter, Treasurer Wayne Swan said ahead of a government report this week on gross domestic product.
The June 1 report from the Bureau of Statistics likely will show a “dramatic hit” from floods and a cyclone in Queensland state, and an earthquake and tsunami March 11 in Japan, Swan said yesterday in a weekly economic note. Japan is Australia’s second-biggest trading partner after China.
Swan’s latest estimate was higher than one he made in April that put damage to GDP in the first quarter at 0.75 percentage point. The median estimate in a Bloomberg News survey of 23 economists is for a 0.3 percent first-quarter contraction from the final three months of 2010.
“No matter the outcome on Wednesday, the encouraging medium-term picture for our economy doesn’t change our task ahead,” Swan said. “Our fundamentals are strong and our prospects are bright.”
The total economic cost of the disasters is likely to be about A$9 billion ($9.6 billion), with more than half the estimated A$6 billion impact to coal production showing up in the March quarter, Swan said.
Australia’s central bank has held the nation’s benchmark interest rate unchanged at 4.75 percent since November to allow Queensland, which produces 80 percent of the coking coal exported from the country, to recover from the flooding.
“The size of that loss isn’t surprising when you consider that 85 percent of Queensland’s 57 coal mines suffered production losses in the early part of the year,” Swan said.
Tropical Cyclone Yasi tore through sugar- and banana- producing areas in Queensland in February, following two months of floods that 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.
As rebuilding gets under way and exports accelerate, Australia’s economy will expand next year at the fastest pace among nations in the Group of 10 bloc of currencies, the Organization for Economic Cooperation and Development said last week. The economy will advance 2.9 percent this year, even after the disasters, and accelerate in 2012 by 4.5 percent, its fastest pace since 2007, the Paris-based OECD said.
The Reserve Bank’s next meeting on interest rates is scheduled for June 7. Earlier this month, it said GDP “is likely to have declined in the March quarter” and that it will “look through” the disasters’ impact on production and prices and focus on the medium-term outlook in setting rates.
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