Digital Finance Analytics (DFA) Blog
"Intelligent Insight"
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?
According to a Moody’s report, just out, the near-term credit implications for Australia and the states are limited given a likely contained economic impact and the availability of ample fiscal buffers.
Taking into account both the direct costs and indirect loss of revenue, Moody’s estimate that the cost of the bushfires will reduce Australia’s
general government’s fiscal balance overall by around 0.1% of GDP per year in the next two fiscal years.
The bushfires are mainly concentrated in rural areas, predominantly in national parkland. As a result, the economic cost has been limited, says Moody’s, who revised their forecast for 2020 GDP growth to 2.1% from 2.3% in 2020.
Although fires have burnt across the country, they say the bushfires have been concentrated in NSW, covering an area more than six times larger than that affected by the 2018 Californian fires, for an economy that is seven times smaller than that of California. Predictions by the Australian Bureau of Meteorology indicate that the fires are likely to continue and could even intensify over the coming months.
The Commonwealth government bears some of the direct containment and repair costs – such as for the deployment of military resources for firefighting – as well as the ultimate costs through transfers to the states. The government also incurs some expenditure on relief for affected areas, with AU$2 billion already announced to support affected farmers and businesses. Moreover, Commonwealth tax revenue from affected areas will be hit by temporarily weaker economic activity.
In 2020, reconstruction will boost economic activity, partially offsetting the initial losses from the areas which are being rebuilt.
Over the longer term, if bushfires of this severity were to become more frequent, they would expect tourism and investment, especially in rural areas, to be affected:
…over time, increasingly frequent and severe natural disasters related to climate change are likely to result in rising and recurring costs for Australia’s general and local governments, which will test their capacity – currently strong – to mitigate these costs
The bushfires raging across Australia are likely to lead to elevated mortgage arrears in the coming months and, if weather-related “peril events” continue to become a more regular occurrence, they could reshape the standard arrears fluctuations expected throughout the year, according to a new report from S&P Global Ratings, via Australian Broker.
“Mortgage arrears typically increase during the summer period, reflecting the pre- and post-Christmas spending and extended holiday season, before declining during the second quarter,” the report reads.
“If the longevity and intensity of bushfire seasons become a more regular occurrence, arrears could remain elevated for longer periods in drought-prone areas due to the flow-on effect of bushfire devastation on local employment conditions.”
Local employment conditions such as tourism and agriculture are expected to be impacted, causing debt-serviceability pressures for affected borrowers.
This dynamic will be further compounded in areas with drought conditions, or where agriculture forms a large part of local employment, with arrears predicted to remain elevated for an even longer period of time.
Lenders to borrowers in affected areas will likely experience an increase in financial hardship claims, which they are obliged to consider under consumer laws and banking codes. Possible concessions can include a reduction in the interest rate or payment, lengthening of loan maturity, or full or partial deferral of interest for a temporary period.
I discuss the latest with Journalist Tarric Brooker, who uses the handle @AvidCommentator on Twitter. .. lots to pick apart…
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/
More proof the proposed Cash Restriction Bill should be withdrawn – in emergencies, cash is still king!
