- More than 5,000 insurance claims totalling $375 million have been made in relation to the Australian bushfires, including 1,600 destroyed homes, according to the Insurance Council of Australia (ICA).
- The real cost however will likely run into the billions, with fourteen times more land scorched than during the Black Saturday fires.
- In addition, up to 1% of GDP growth is estimated to be wiped out, according to economist Shane Oliver, potentially pushing the nation into negative growth this quarter.
- All together, the costs could derail the government’s projected $5 billion surplus as the economy slows.
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When the bushfires finally subside, the total cost to Australia will be staggering.
According to the Insurance Council of Australia (ICA), claims alone have already run into the hundreds of millions.
“Insurers have received 5850 bushfire-related claims in NSW, Victoria, South Australia and Queensland since the Insurance Council declared a bushfire catastrophe on November 8. Losses are estimated at $375 million, with a further $56 million in insured property losses in September and October,” ICA head of communications Campbell Fuller told Business Insider Australia.
Those figures, however, are only current until 7am on Sunday, and do not include the most recent losses in the New South Wales’ Southern Highlands and South Coast regions.
Nationwide, there have been more than 1,600 confirmed property losses, with more than 1,400 of those in New South Wales alone. 110 have been lost in Victoria, 88 in South Australia and 45 in Queensland.
For comparison, ten years ago the infamous Black Saturday fires in Victoria destroyed 2,000 homes. With months still to run, this season’s total could soon surpass that unenviable bar.
However, the real cost beyond insurance claims will be far greater. While the government won’t yet put a dollar figure on the impact of the bushfire crisis, the bill looks set to run into the billions and pose an imminent threat to the federal government’s beloved bottom line.
The Black Saturday fires, for example, are thought to have cost $4.4 billion, burning 450,000 hectares and killing 173 people. So far, this season’s fires have scorched at least 6.3 million hectares, or 14 times more land, with 27 people believed to have died.
AMP Capital chief economist Shane Oliver estimates the fires will wipe off 0.25% to 1% of the country’s GDP growth this year, or roughly somewhere between $3 billion and $13 billion. With the economy growing at just 0.4% this year, it’s a cost the Australian economy can’t really afford right now.
“That could take us perilously close to zero or below that for a quarter”, Oliver told the AFR.
The economic toll is expected to occur as some key sectors bear the brunt of the crisis.
“We suspect effects are likely to be experienced across regional banks and economic activity, power production, electricity network operation, healthcare and tourism,” a Citi Research note issued to Business Insider Australia states.
Examples of that can already be seen. Tourism Australia has already put its latest campaign ‘Matesong’ – released just weeks ago – on ice, understandably not wanting images of idyllic Australia beamed overseas at the same time news coverage shows the country on fire. UK tourism could be impacted in the short term, with its government warning prospective travellers of the risks.
“Australia continues to battle serious bushfires across multiple regions. Authorities in some regions have declared a State of Emergency and ordered road closures and evacuations. Poor air quality can occur some distance from the sites of the fires and provoke respiratory conditions,” the UK Government’s updated travel advice cautions.
Having copped criticism for not doing enough, the Morrison government has also pledged $100 million in income support for victims, spent $20 million on the leasing of four waterbombing aircraft, and shook loose another $11 million to operate them.
On top of that, the government has compulsorily called up 3,000 army reserve personnel to fight the fires or the deployment of three naval ships and aircraft to evacuate those caught up in them.
Economist Stephen Koukoulas has dismissed the spend as “chicken feed” in comparison to the total economy.
“It’s clear that government funding cuts in the first instance, and rejections of extra funding in the second, have contributed to the severity of the fire catastrophe.
Think of that the next time you hear someone extol the virtues of a budget surplus and low government spending,” Koukoulas tweeted.
Having downgraded its estimated surplus to just $5 billion for the end of the financial year, the government might not even have that come the end of bushfire season.
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