Weather and natural disaster impacts on the Australian national accounts

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Released
1/06/2022
Source
Australian National Accounts: National Income, Expenditure and Product, March 2022
Released
01/06/2022 11:30am AEST

The La Nina weather cycle influenced Australia’s weather during summer and early autumn, leading to severe flooding in areas of south-east Queensland and northern New South Wales.

The impacts of these events can be seen in key national accounts aggregates. Severe storms disrupted mining and construction activity, resulting in reduced gross value added for these industries. Residential and commercial properties were damaged, resulting in increased non-life insurance claims and governments increased spending on defence assistance for affected areas.

While the ABS does not produce national accounts aggregates at the regional level, through the use of data sources such as supermarket scanner data, the ABS is able to also provide insights into regional impacts on economic activity.

Government support for natural disaster relief

National defence spending rose 5.6 per cent in the March quarter, driven by the complex logistical operation undertaken for flood assistance. Throughout March and April, the Australian Defence Force was deployed to flood-affected communities in northern NSW and south-east Queensland to distribute supplies, assist with evacuations, and provide logistical and clean up support. During the March quarter, defence spending in QLD and NSW rose a combined 7.8 per cent, compared with 3.0 per cent in other states.

Financial support was provided by the Commonwealth Government through the Australian Government Disaster Recovery Payment and the Disaster Recovery Allowance during the quarter.

These payments do not contribute directly to Gross Domestic Product (GDP) but do appear in the income accounts as social assistance benefits from general government to households, and other current transfers from general government to business.

Spike in non-life insurance claims due to La Nina

197,000 insurance claims were made due to storms and floods that impacted south-east Queensland and coastal New South Wales in February and March. The Insurance Council of Australia estimated there will be $3.3 billion in insured losses and has ranked it to be the costliest flood in Australia’s history and the 5th costliest disaster overall.

Updated data shows 2022 flood was Australia’s costliest - Insurance Council of Australia

Non-life insurance claims to households rose 18.6 per cent in the March quarter, reflecting $2.8 billion paid due to these flood and storm events. Non-life insurance claims to households are now at its highest level in the timeseries, $584m higher than claims seen during the 2020 bushfires. Insurance claims do not contribute to GDP but will have a significant impact on the household saving to income ratio which would have been 0.8 percentage points lower with the absence of these insurance claims.

The rebuilding of destroyed or damaged dwellings, commercial buildings and infrastructure is expected to contribute to GDP in future quarters.

Industry impacts

At an industry level, the La Nina weather event had adverse effects on economic activity in coal mining and construction industries.

Coal mining industry Gross Value Added (GVA) declined 2.7 per cent for the quarter and exports of Coal fell 1.8 per cent. Construction firms similarly noted that bad weather and flooding contributed to a slowing of work done during the March quarter.  

Coal mining was less impacted than in the flood events of 2010 and early 2011, where coal mining Gross Value Added (GVA) fell 10.3 per cent for the December 2010 quarter.  

Small area spending impacts

Supermarket scanner data provides insights into household spending in flood-affected regions. While flooding was widespread across New South Wales and Queensland, the analysis below focuses on data for the Northern Rivers region, which includes Lismore, Ballina and other flood affected areas.

With over 3,000 houses being damaged or destroyed during the floods, widespread evacuations, power outages and mobility difficulties, sales of food dropped dramatically. This was most evident in perishable items such as milk, where sales were subdued for up to 2 weeks after the worst of the flooding.

Non-food sales increased over the same time period. These increases were seen in a range of non-food product classes, but most notably in communication equipment and picnicware sales (such as disposable plates and cutlery).