Floods cost economy $5 billion last year
12th January 2023

Key points

  • Early estimates from Treasury put the loss of economic activity from flooding last year at $5 billion.
  • Treasurer Jim Chalmers says uncertainty over natural disasters will be one of the key factors weighing on the economy this year.
  • A report from global reinsurance company Munich Re found Australia’s floods were the fourth most costly natural disaster around the world in 2022.

Treasurer Jim Chalmers has warned economic pressure from natural disasters will continue through 2023 after modelling showed severe flooding across the country last year cost the economy $5 billion.

Along with interest rate rises, the Ukraine war, COVID-19 outbreaks in China and the prospect of a global recession, the government believes the cost of natural disasters will be one of the largest influences on the economy this year.

More than two-thirds of Australians lived in a local government area that was subject to a natural disaster declaration at some point in 2022.Credit:Elise Derwin

Early estimates from Treasury put the loss of economic activity from flooding last year at $5 billion, which is equivalent to a quarter of a percentage point of economic growth in 2021-22.

Separate analysis from the new National Emergency Management Agency found more than two-thirds of Australians lived in a local government area that was subject to a natural disaster declaration at some point in 2022.

Major floods affected parts of NSW, Queensland, Victoria, Tasmania, South Australia and the Northern Territory last year, killing more than two dozen people. Flooding continues to affect communities in parts of SA and Western Australia.

Chalmers said while the government’s main focus was on the human tragedy of natural disasters, they were also a substantial cost to the budget and the economy more broadly.

“We know these types of disasters put up prices, slow down growth in the near term, and cost the budget billions of dollars,” he said.

The flooding in northern NSW, South-East Queensland and northern Victoria in particular wrought havoc on supply chains and the supply of fresh produce including lettuce, stone fruit and milk.

Annual inflation for fruit and vegetables reached 16.2 per cent in September – the highest level in 11 years – and food prices are expected to remain affected through the coming months.

The $5 billion economic price tag for the flooding does not include the cost of government support, including the $3.5 billion spent on disaster recovery payments.

Chalmers, who is travelling to Lismore in north-eastern NSW on Friday with Emergency Management Minister Murray Watt to witness rebuilding efforts, said natural disaster funding would be a key focus in the May budget.

“This isn’t optional spending – it has to be done,” he said.

“In Australia, we’re always conscious that natural disasters have the ability to throw us off course, and we expect this uncertainty to be one of the key factors weighing on our economy in 2023.”

The Treasury estimate also excludes the private cost to households or businesses faced with rebuilding.

A report from global reinsurance company Munich Re found Australia’s floods caused $US8.1 billion ($11.7 billion) of losses, making them the fourth most costly natural disaster around the world in 2022.

Watt said the government was focused on ensuring the country was better prepared and quicker to respond to natural disasters.

“While delivering fast disaster recovery support is essential, taking proactive steps to reduce disaster risk and get people out of harm’s way is equally important,” he said.

“Each dollar lost and piece of property destroyed has a human impact, and we stand alongside communities right across Australia who are hurting from disaster events.”

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