News > Cost of Australia's natural disasters rise
The economic consequences of Australia's recent environmental disasters are continuing to unfold as the effects of large scale disruption continue to make themselves felt. The devastating combination of the wide scale flooding and hurricane Yasi that hit Queensland and Victoria earlier this year is set to cost the economy A$9bn (£5.8bn), according to the Australian treasury department. This is a major increase on the earlier estimate of A$5.6bn (£3.6bn).
Treasurer Wayne Swan said the areas hit the worst will be the country's industrial and agriculture sectors. The hardest hit will be on the coal industry which has seen output fall by about 20%. "Lost coal production could cost be A$1bn (£640m) more than previously estimated," Mr Swan said. "Damage to crops will be close to A$2bn (£1.3bn)," Mr Swan added, among a list of other depressing economic predictions.
Damage to these sectors is a real concern as Australia's economic boom has been powered largely by the success of its commodities sector, with increasing demand from emerging economies sustaining economic expansion in recent years. As the floods and cyclone hit Australia's resource-rich states, the impact on the overall economy was amplified.
Mr Swan said the disasters will cut Australia's Gross Domestic Product (GDP) by 0.5% in the year to 30th June. "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," Mr Swan said. "The latest figures back that up and indicate the cost is likely to be even larger than initially thought," he added.
The cost of natural disasters at home is not the only worry for the Australian economy. Japan is Australia's second largest trading partner, and Australia's economy will undoubtedly see some negative effects as Japan struggles with the aftermath of the earthquake and tsunami of 11th March. Australia exported 15% of its goods to Japan in 2009-10. The biggest sectors are iron ore and coal, with Japan accounting for 27% of shipments of those commodities. The Japanese disasters have hit industry hard with production at some of Japan's biggest manufacturers being halted or suspended. As a result, demand for raw materials is likely to fall in the short to medium term.
It all adds up to challenging economic times ahead - at least in the short term - for both of these Pacific Rim nations.