Beyond the destruction of human life and property, the Australian government is anticipating costs of $5 billion AUD ($4.99 billion USD) due to the massive floods in the Queensland region.While Nomura projects losses from the flood at a slightly lower $4.54 billion AUD, they see a negative adjustment to GDP in 2011 of 0.35 points.
With projections for 2011 GDP growth at 3.25%, the floods may bring the Aussie growth rate below 3%.
But there’s some promising news for later this year in Australia, according to Nomura.
Reconstruction spending may deliver a slight increase in economic activity over the next 6-12 months (approximately 0.15pp of GDP by our estimates) and the relief AUD1,000 payments to every person affected should give a boost to retail activity in Queensland over the next few months. Furthermore, given the significant global market share of Queensland’s coking coal mines, we also expect resulting price increases in coking coal to offset some of the losses in production volumes.
So while the up front costs of this damage are going to be huge, it will be mitigated by the end of 2011. Still there will be some costs to final GDP numbers in 2011.