The Strategist

Australian fires burn down 0.5% of economic growth

01/13/2020 - 11:00

Direct losses of the Australian economy after forest fires, which have been unceasing since last fall, will amount to $ 3.5 billion, or from 0.2-0.5% of the country's economic growth, Westpac Bank, one of the largest in Australia, said.
Australia expects a drop in GDP in 2020 due to fires and lower iron ore prices.

Westpac expects the Reserve Bank of Australia to cut rates twice this year, but forest fires are unlikely to have a significant impact on the decisions of the country's regulator.

The Australian economy has been avoiding a recession since the early 1990s, but economic growth has slowed since the middle of last year, as households are facing record debt and weak income growth, which limits spending.

10.55 thousand claims with a total insured value of 939 million Australian dollars ($ 645.6 million) have already been filed. At that, uninsured losses requiring state compensation are approximately twice the size of the insured.

As a result, taking into account the 2 billion Australian dollars ($ 1.4 billion)already issued  by the state, the total cost of the disaster is likely to reach about 5 billion Australian dollars ($ 3.54 billion).

The Bank believes that the cost of the disaster is comparable to the fires on Black Saturday 2009 in Victoria, which destroyed 2029 houses and at the same time led to much greater losses - 173 people died.