Bushfires – Digital Finance Analytics (DFA) Blog

How Bushfires May Impact Tourism

We look at the tourism data to assess the impact on GDP, regional visits and the education sector. How much of the $60 billion contribution to GDP (fourth largest) could be impacted, and will a marketing campaign make any difference?

This week, the Australian Tourism Export Council told the Australian Financial Review that cancellations by tourists from large markets such as the US, UK and China was hurting the industry and could cost the country at least $4.5 billion by the end of the year. There have been mass cancellations, and bookings in some areas are down by half. And this may not be just a short-term blip, with pictures of the smoke last week in Melbourne, Canberra and Sydney all adding to the concerns potential tourists may have.

The hazardous ratings were worse than in many industrial cities around the world. And whilst Australia is a large country (it takes 5 hours or so to fly from Sydney to Perth) the bushfire impact is bigger than just the areas where bushfires are still burning. And the lasting damage to Australia as an environmentally sensitive country and worth a visit might be shot. In addition, it is estimated more than 1 million wild animals and birds may have perished and in some area’s species – like Koalas and Platypus are threatened with extinction.

The Government announced that they would spend $76 million dollars on marketing campaigns to underscore to international and interstate visitors that Australia is open for tourists to visit. The bulk of the money to be spent on overseas advertising. Prime Minister Scott Morrison said Australian tourism is facing “its biggest challenge in living memory”. And described the funding — drawn from the Government’s national bushfire recovery fund — as an “urgent injection” of funds for businesses impacted by the bushfire crisis.

The Government’s package includes $20 million for marketing to domestic travellers and $25 million for a global tourism campaign to advise international visitors that Australia is “safe and open for business”, as well as $10 million towards creating new attractions in bushfire affected regions of the country.

So today I wanted to look at the tourist data for Australia to see how important it is and to examine where the tourist dollar comes from, and where it goes to. And we need to look at both international visitors, and separately local visitors, including those from other states. Some of the reporting in the mainstream media have only told part of the story. Then I will try to estimate the potential impact.

According to data from Austrade, total tourism generated $149.6 billion dollars to the year to 30^th September 2019. Within that, domestic overnight travel had 115.7 million visitors spending a record $79.1 billion, while foreign visitors generated $45.2 billion in income to the economy, up 4.7% on the previous year. This was generated from 8.7 million international visitors, up 2.5%, with an average spend per trip of $5,219.

Data published by TOURISM RESEARCH AUSTRALIA using ABS data shows that in 2018-19, total tourist consumption was $152.0 billion, which resulted in $60.8 billion in GDP to the economy which is 3.1% of the national total and employed 666,000 persons or 5.2% of the Australian workforce. Note though that this is a derived estimate, according to the ABS as we do not measure tourism directly.

In fact tourism is our largest service export, contributing $39.1 billion to Australia’s economy in 2018–19. This represents 8.2% of all goods and services exports – and places the industry fourth overall behind iron ore, coal and natural gas. But we actually have a tourist trade deficit, with visitors coming here – Exports of $39.1 billion from international visitors to Australia while Australian travelling overseas – Imports were $58.3 billion.

The tourist GDP contribution has been growing by between 5% and 6% for some years, and is up from around $38 billion in 2010-11 to $60 billion last year. This has seen tourism grow from a 2.9% share of national GDP to a 3.1% share.

So now let’s look in more detail at the tourist sector, and at international trade first.

Within the $45.7 billion, $17.1 million came from holidays, $13.2 billion from education, $7.5 billion from visiting family and relatives, $4.1 billion on business, $2.2 billion on business and $1.2 billion for other reasons.

Visitors from China accounted for $12.3 billion of spend, of which $3.2 billion was holidays and $7.1 billion on education. This came from 1.3 million visitors, with an average spend per trip of $9,235.

The United States was second, with $4.0 billion spent, of which $2.0 billion was for holidays and $300 million on education. This came from 771,000 visitors with an average spend per trip of $5,200.

Next was the United Kingdom with $3.3 billion spent, with $1.4 billion on holidays. And $1.3 billion on visiting family and friends, and just $68 million on education. We had 669,000 visitors from the UK and their average spend was $4,959.

New Zealand accounted for $2.6 billion in spend, of which $1.1 billion was holidays, 0.7 billion on families and friends and just $76 million on education. Interestingly they accounted for $1.3 million visits and their average spend was $2,032. That may tell you something about our Kiwi cousins!

Across the states and territories, NSW received $11.5 billion, of which $3.6 billion was for holidays, $4.7 billion for education and $1.4 billion for visiting relatives. The average spend per trip was $2,610. Of this around $1 billion was from regional NSW, mainly holidays at $381 million and education $362 million.

Victoria accounted to $8.8 billion, of which $2.3 billion was holidays, $4.0 billion education and $1.5 billion was visiting relatives and friends. The average trip was worth $2,810. Regional Victoria earned $594 million from international tourism, of which $249 million was holiday related from international visitors.

In Queensland, international tourism was worth $6 billion, including $2.8 billion for holidays, $1.7 billion for education and $830 million for visiting families and friends.

Within that Gold Coast generated $1.3 billion, including holidays at $755 million and education at $335 million, Brisbane was $2.8 billion comprising holidays $644 million and education $1.3 billion, and regional QLD generated $1.8 billion, of which holidays was $1.4 billion.

Turning to local tourism, that generated $79.1 billion, with an average spend of $684 a trip, and over an average 4-night stay. Of that $35.2 billion was holidays, $13.9 billion visiting relatives and friends, $17.8 billion business related and $12 billion other reasons.

Across the states, $23.2 billion was spent in NSW, with regional NSW collecting $13.9 billion, $16.5 billion in VIC, with regional VIC earning $7.1 billion, $19 billion in QLD with the Gold Coast generating $3.7 billion and Regional QLD $10.2 billion, $5 billion in SA, $8.5 billion in WA, $2.3 billion in NT, $2 billion in the ACT and $2.7 billion in Tasmania.

So a couple of observations, international revenue from education is more significant than from overseas people visiting, so it will be important to reassure potential students that Australia is safe and open for education services – to that end, the pictures of smoke in Sydney and Melbourne are extremely damaging when it comes to selecting a country in which to study, and as degrees in particular can take three of four years, this could create a long term hole in GDP.

Local travel by Australians can generate significant income, so focus on reassuming locals it is safe to travel to fire effected areas will be important, but many will likely stay away until the fires are out. As at today there are still more than 80 burning in NSW alone.

In fact, my read of Morrison’s announcement is its more to do with public perceptions of how he is handling that bushfires (after earlier bloomers), than really making a difference. For that we need to have the fires extinguished, and we need strategies to mitigate future risks. So, to me, $76 million is a pimple on the elephant and will make very little difference indeed.

But we can estimate the potential loss, bearing in mind more than half of tourists come over the summer period. So, apply this to the proportion of areas directly impacted overall, I get around $4 billion dollars in income lost. If you add in a broader swathe of cancellations to Melbourne, Canberra, Adelaide and Sydney, and assume a 5% reduction in education spend, I get an additional $8 billion in this financial year. Thus, if I put all the known data together, that $60 billion GDP could easily drop by $12 billion over the next year, and the impacts could run over 2021 and beyond. But to reemphasise the point there are indeed many areas of Australia still open for business and it’s a big country, but its going to be a hard message to communicate while the fires are still running.

https://www.tra.gov.au/domestic/domestic-tourism-results

https://www.austrade.gov.au/Australian/Tourism/News-Research-and-Publications/research

https://www.abs.gov.au/ausstats/abs@.nsf/mf/5249.0

https://www.adnews.com.au/news/where-the-76-million-tourism-marketing-bushfire-recovery-package-will-be-spent

Australia, You Were Warned Says Scientists!

Those who say “I told you so” are rarely welcomed, yet I am going to say it here. Australian scientists warned the country could face a climate change-driven bushfire crisis by 2020. It arrived on schedule. Via The Conversation.

For several decades, the world’s scientific community has periodically assessed climate science, including the risks of a rapidly changing climate. Australian scientists have made, and continue to make, significant contributions to this global effort.

I am an Earth System scientist, and for 30 years have studied how humans are changing the way our planet functions.

Scientists have, clearly and respectfully, warned about the risks to Australia of a rapidly heating climate – more extreme heat, changes to rainfall patterns, rising seas, increased coastal flooding and more dangerous bushfire conditions. We have also warned about the consequences of these changes for our health and well-being, our society and economy, our natural ecosystems and our unique wildlife.

Today, I will join Dr Tom Beer and Professor David Bowman to warn that Australia’s bushfire conditions will become more severe. We call on Australians, particularly our leaders, to heed the science.

The more we learn, the worse it gets

Many of our scientific warnings over the decades have, regrettably, become reality. About half of the corals on the Great Barrier Reef have been killed by underwater heatwaves. Townsville was last year decimated by massive floods. The southeast agricultural zone has been crippled by intense drought. The residents of western Sydney have sweltered through record-breaking heat. The list could go on.

All these impacts have occurred under a rise of about 1℃ in global average temperature. Yet the world is on a pathway towards 3℃ of heating, bringing a future that is almost unimaginable.

How serious might future risks actually be? Two critical developments are emerging from the most recent science.

First, we have previously underestimated the immediacy and seriousness of many risks. The most recent assessments of the Intergovernmental Panel on Climate Change show that as science progresses, more damaging impacts are projected to occur at lower increases in temperature. That is, the more we learn about climate change, the riskier it looks.

For Australia, a 3℃ world would likely lead to much harsher fire weather than today, more severe droughts and more intense rainfall events, more prolonged and intense heatwaves, accelerating sea-level rise and coastal flooding, the destruction of the Great Barrier Reef and a large increase in species extinctions and ecosystem degradation. This would be a tough continent to survive on, let alone thrive on.

The city I live in, Canberra, experienced an average seven days per year over 35℃ through the 1981-2010 period. Climate models projected that this extreme heat would more than double to 15 days per year by 2030. Yet in 2019 Canberra experienced 33 days of temperatures over 35℃.

Second, we are learning more about ‘tipping points’, features of the climate system that appear stable but could fundamentally change, often irreversibly, with just a little further human pressure. Think of a kayak: tip it a little bit and it is still stable and remains upright. But tip it just a little more, past a threshold, and you end up underwater.

Features of the climate system likely to have tipping points include Arctic sea ice, the Greenland ice sheet, coral reefs, the Amazon rainforest, Siberian permafrost and Atlantic Ocean circulation.

Heading towards ‘Hothouse Earth’?

These tipping points do not act independently of one another. Like a row of dominoes, tipping one could help trigger another, and so on to form a tipping cascade. The ultimate risk is that such a cascade could take the climate system out of human control. The system could move to a “Hothouse Earth” state, irrespective of human actions to stop it.

Hothouse Earth temperatures would be much higher than in the pre-industrial era – perhaps 5–6℃ higher. A Hothouse Earth climate is likely to be uncontrollable and very dangerous, posing severe risks to human health, economies and political stability, especially for the most vulnerable countries. Indeed, Hothouse Earth could threaten the habitability of much of the planet for humans.

Tipping cascades have happened in Earth’s history. And the risk that we could trigger a new cascade is increasing: a recent assessment showed many tipping elements, including the ones listed above, are now moving towards their thresholds.

It’s time to listen

Now is the perfect time to reflect on what science-based risk assessments and warnings such as these really mean.

Two or three decades ago, the spectre of massive, violent bushfires burning uncontrollably along thousands of kilometres of eastern Australia seemed like the stuff of science fiction.

Now we are faced with more than 10 million hectares of bush burnt (and still burning), 29 people killed, more than 2,000 properties and several villages destroyed, and more than one billion animals sent to a screaming, painful death.

Scientists are warning that the world could face far worse conditions in the coming decades and beyond, if greenhouse gas emissions don’t start a sharp downward trend now.

Perhaps, Australia, it’s time to listen.

Author: Will Steffen, Emeritus Professor, Australian National University

Westpac’s Bushfire Recovery Support

Westpac has announced that for one year, it will cover the mortgage repayments of home loan customers who lost their principal place of residence due to the bushfires raging across the country, paying up to $1,200 per month per customer. Via Australian Broker.

Westpac’s Bushfire Recovery Support Package also includes interest free home loans to cover the gap between insurance payouts and construction costs for consumers who need to rebuild, as well as $3m in funds allocated to bushfire emergency cash grants, of which eligible retail customers can claim up to $2,000.

At the time of writing, the bushfires have claimed the lives of 28 people across the country, with over 3,000 homes destroyed or damaged in New South Wales alone.

“These initiatives are designed to provide practical, on the ground support for our customers, our people and for those who are caring for affected communities,” said Peter King, Westpac’s acting CEO.

The relief package also makes grants of up to $15,000 available to assist small businesses with the cost of refurbishing premises that have been damaged or destroyed during the bushfires.

Westpac has committed to “fast tracked” credit approvals to provide short-term assistance to businesses impacted by the fires, as well as offering 2.83% three-year variable rate, low-interest rebuilding loans.

Further, no foreclosures will be made for three years on any farming businesses in the affected areas, and all volunteer firefighters across the nation are able to access the Disaster Relief Package.

FBAA managing director Peter White has encouraged brokers to be aware that it’s not only clients who have lost their properties that are unable to meet their mortgage repayments; while that subsection may be the most likely to automatically speak to their lenders and insurers, there are many others whose properties were not touched by fire but have been impacted in other ways.

“There will be those who have had to evacuate, or who may operate a small business that has seen a dramatic drop in revenue because an area has been blocked off. There will be others who have had to sacrifice their earnings to help friends, family or their community,” White said.

“Lenders are currently allowing people to momentarily stop their repayments, and while each situation is different, they are listening and helping and working with all borrowers.”

According to White, brokers are ideally positioned to have the most impact on and support damaged communities.

“Chances are the bank won’t come knocking on our clients’ doors because they don’t know who is being impacted and who isn’t, but we can knock on those doors,” he said.

“Finance brokers are part of local communities and we know many of our clients and their families personally, so this is a great opportunity for us to serve our clients and repay the trust they have in us.”

Household Financial Confidence Crashes

DFA is releasing the latest in our 52,000 household survey series examining household financial confidence. The score to mid January is an all-time low of 81.2, well below the neutral setting and the previous low back in 2015.

A series of events, including the bushfires and the perceived weakness in the Federal Government response, the volatility of the financial markets, and weak Christmas spending are all taking their toll. It is the biggest movement we have seen in the monthly series, so we expect a rebound next time, perhaps. But weak wages growth remains the underlying cause.

The survey did not reach those in the regional areas impacted by the bushfires directly, but is still statistically reliable elsewhere.

By way of background, these results are derived from our household surveys, averaged across Australia. We have 52,000 households in our sample at any one time. We include detailed questions covering various aspects of a household’s financial footprint. The index measures how households are feeling about their financial health. To calculate the index we ask questions which cover a number of different dimensions. We start by asking households how confident they are feeling about their job security, whether their real income has risen or fallen in the past year, their view on their costs of living over the same period, whether they have increased their loans and other outstanding debts including credit cards and whether they are saving more than last year. Finally we ask about their overall change in net worth over the past 12 months – by net worth we mean assets less outstanding debts.

Looking across the age bands, all household cohorts dropped, though younger households more so than older groups. Those aged 40-50 showed a significant fall. So this is a broad-based decline.

Across the states households in NSW and VIC dropped the most, and VIC was significantly impacted. These two states are net lower now than QLD, WA and SA, due to largest decline over the past year. Major urban centres here have been hit by smoke haze and poor environmental conditions which have really brought home the severity of the current bushfires. Plus jobs are an issue, and wages weak.

All property segments took a hit, but owner occupied households less so than property inactive (renting or living with friends or family) or property investors. Property investors continue to report weak rental returns, and higher vacancies, and little if any capital growth.

Looking at the moving parts within the index, those feeling more positive about job security fell 2.48% to 5.35, and those feeling about the same dropped by 2.35%, while those feeling less secure rose by 1%. This is caused by more underemployment (including bushfire related), more zero hours and gig economy jobs, and more households working in multiple part-time jobs. Retail, construction and tourism were specifically hit, as well as the agricultural sector. Those employed in the small business sector are specifically exposed.

As a result of the jobs issues, plus no growth, income is also under pressure. More than half of households reported lower income than a year ago, up 1.74%. Only 3% reported a real rise, down 0.98%, while 40% saw no change. These income pressures are significant and mounting. Those relying on income from bank deposits are seeing returns being trashed, but many households are not willing to switch to higher risk alternatives, preferring to trim their spending instead.

On the other hand, costs of living continue to outpace wages growth. A massive 95% of households reported higher costs than a year ago, up 1%. Costs are increasing across food staples (thanks partly to the drought and supply issues), school fees, childcare, healthcare, power and fuel. More households are considering cutting back on health insurance, and are seeking cheaper goods more generally. Those accessing food banks and other charitable assistance rose significantly.

Those with savings are continuing to dip into them to support their finances, though this is not necessarily sustainable. Those who received tax refunds, or some relief from lower mortgage rates are preferring to save the funds, or repay debt. They have no intention of increasing spending. Those with stocks and shares, or bonds – who tend to be more affluent – are fairing better, but even here, returns are under pressure from bank stocks. Concerns about the security of the banking system are on the rise.

The impact of lower interest rates have assisted at the margin, but two thirds of households receiving a cut preferred to maintain their original payments, thus paying off debt faster. However those in financial difficulty were able to extend their credit line, though multiple credit cards, personal loans, and structured payments like Afterpay. In addition, demand for short-term loans rose. As a result only 2% of households were more comfortable with their debts than a year ago, 46% less comfortable and 42% about the same.

Household net worth – assets minus debts – remain under pressure, with higher stock and property values for some offsetting pressures elsewhere. One quarter of households said their net worth was higher than a year ago (remembering that home prices dropped in the first half of 2019), while 46% said their net worth was lower now, and one quarter said there was no change.

Looking across our wealth segments, all three dropped, though those holding property, but no mortgage were relatively more positive (though below neutral) compared with those with mortgages or those renting.

This is a serious signal of more economic trouble ahead, despite the fact that now the Federal Government has announced $2 billion in stimulus, plus state money, charitable donations and Government benefits for those impacted by the bushfires. However, the structural issues surrounding flat or falling real incomes and rising costs signals more financial pressure ahead. And as a result, we expect retail to remain slow, despite lower mortgage rates. We suspect the anomaly of strongly rising property prices (where they are occurring) will abate ahead. In many areas, though there has been no, or only a very limited recovery.

As a result, growth will remain anemic for some time yet, and household confidence will remain in the doldrums, though we would expect to see a small bounce next month as the bad news around the bushfires is absorbed. We think more fiscal stimulus will be required to turn this round, but the key is real wages growth, and we cannot see a route to that for some time yet.

The Real Costs Of The Bushfires…

We look at the latest estimates for the costs of the bushfires, especially as they relate to tourism, and consider the problem of smoke pollution, which is something which Australia has been battling for years, but which appears to be at a new level now.

How quickly will we be able to bounce back?

https://aqicn.org/city/wollongong/

https://theconversation.com/even-for-an-air-pollution-historian-like-me-these-past-weeks-have-been-a-shock-129141

https://www.accuweather.com/en/business/australia-wildfire-economic-damages-and-losses-to-reach-110-billion/657235

Sentiment Versus Fundamentals – The Property Imperative Weekly 11th January 2020

The latest edition of our weekly finance and property news digest with a distinctively Australian flavour.

CONTENTS:

00:23 Introduction
01:00 World Bank Global Economics Prospects
04:10 US Jobs
05:30 US Markets
08:30 Gold
09:30 UK
10:25 Europe
11:05 China
11:20 Japan
12:05 Bitcoin
13:40 Australian Segment
13:40 Retail
15:10 Mortgage Stress
15:40 Building Approvals
16:00 Home Prices
16:40 Bushfires Impact
20:10 AUS Markets

January Live Show: https://youtu.be/Z03jkJEmvOI

Politicians Fumble Through The Bushfire Crisis

From The Conversation. As someone who has studied Australian climate policy and politics closely, this summer’s bushfire crisis have been both heartbreaking and bewildering. The grave warnings politicians ignored for so long have now come to pass.

The fires may be without precedent, but these dark weeks have also brought an overwhelming sense of déjà vu. It’s hard to believe, but the Morrison government’s fumbling response to the fires and the broader climate crisis is in many ways history repeating.

From the disastrous optics of Prime Minister Scott Morrison’s trip to Hawaii to blaming conservationists for the fires, our politicians keep making the same blunders and rolling out the same failed strategies.

Here are five recurring themes in Australian politics when it comes to climate change and bushfires:

1. Blaming ‘greenies’

As the fire season ramped up in November last year, New South Wales Nationals leader John Barilaro accused the Greens of preventing governments from conducting hazard reduction burning, implying the party should shoulder blame for the fires.

“We’ve got to do better and I know that we don’t do enough hazard reduction […] because of the ideological position from the Greens,” he said.

Such sentiment, which has been thoroughly debunked, regularly surfaces when bushfires rage.

Following the 2003 Canberra fires and 2009 Victorian fires, the forest industry said conservationists were preventing state governments from conducting hazard reduction burns.

After Victoria’s fires, former West Australian MP Wilson Tuckey also blamed the Greens, and parties seeking their preferences, for preventing controlled burns and causing the crisis.

2. Stoking a city versus country divide

In November last year, Nationals leader Michael McCormack sneered that those who made the link between climate change and bushfires were “raving inner-city lunatics” and “woke capital-city greenies”.

McCormack continues a long tradition of those opposed to strong climate action claiming only inner-city dwellers care about the issue.

It began in the late 1980s, when the the “greenhouse effect” first became a public issue. Some politicians derided it as just another greenies scare campaign, including frontbencher in the Hawke Labor government, Peter Walsh.

Walsh, contemptuous of the Greens movement, continued to rail against climate action after leaving politics. He reportedly described the science around global warming as “highly speculative” and as late as 2008 claimed action on climate “would land us in Middle Ages.”.

3. Experts ignored by politicians

Since April last year, former fire chiefs have implored the Morrison government to act on climate change and better prepare the nation for extreme fire seasons ahead. The government would not meet the experts to hear the advice, let alone implement it.

Successive governments have form when it comes to ignoring experts on climate matters. In September 1994 the CSIRO’s then top climate scientist, Graeme Pearman, briefed the Labor government’s cabinet about the likely impacts of climate change, as a debate over whether to institute a carbon tax heated up. Despite the warning, no tax was implemented.

Pearman retired a decade later under the Coalition government, reportedly having been asked by his superiors to resign for expressing views on climate change at odds with government policy.

4. Leaders not fronting up

Morrison’s decision to take a family holiday in Hawaii as the bushfire crisis grew lost him serious political skin.

Some argue, rightly, that symbolism is less important than substance, and so Morrison’s trip is itself irrelevant. But symbolism creates or destroys both morale, and the possibility of stronger political action.

In 1992 newly minted Labor prime minister Paul Keating sent environment minister Ros Kelly to the Rio Earth Summit, prompting one journalist to observe he was “preoccupied with winning the upcoming election (and) said he wasn’t going all the way to Rio to give a six-minute speech”.

It made Australia the only OECD nation not represented by its head of state, and sent the message that Australia was not taking a serious approach to the discussions.

5. ‘Jobs, jobs, jobs’ mantra

The Bureau of Meteorology this week confirmed this season’s horror bushfire crisis is linked to climate change. Planetary warming is clearly a threat to the nation’s economic well-being.

However Australian governments have routinely created a false dichotomy between environmental protection and jobs. Most recently, we’ve seen it in the Coalition government’s support for the Adani coal mine in central Queensland, and its repeated mantra of “jobs jobs jobs”.

The strategy has been used before. After the Franklin Dam fight in 1983, concern over environmental issues entered the political mainstream. But as former Labor science minister Barry Jones said later, that changed in 1991 when economic recession hit.

“Jobs, jobs, jobs became the priority and in some quarters there was a cynical reaction suggesting that environmental issues were luxuries which characterised affluent times […] This is a criminally short-sighted view,” he said.

What to do?

Only sustained citizen pressure will prevent a repeat of the past 30 years of political failures on climate change. The public must stay informed and demand better from our elected representatives.

Politicians can, when pressed, make better decisions. In April last year, the New Zealand government banned offshore oil and gas exploration after years of public pressure. And the following month, the UK Parliament declared a climate emergency after months of protests by activist group Extinction Rebellion.

It’s often said those who fail to learn from history are doomed to repeat it. But the world must act radically in the next decade to avoid catastrophic global warming. We cannot afford another 30 years of the same old mistakes.

Author: Marc Hudson, Researcher on sociomaterial transformations, social movements, Keele University