Bushfires, storms and floods, while very different natural events, all have similar impacts on the economy. They can reduce production and incomes, damage and destroy assets within specific geographic areas, while also leading to a spike in insurance claims, potentially increased payment of government benefits and an increase in public and private expenditure as part of the recovery effort. The measurement challenges and impact on economic statistics of differing natural disasters are often similar.
The recent bushfires, storms, and floods could be reflected in a range of economic statistics across the December 2019 and March 2020 quarters.
- The most recent ABS monthly statistics are for December 2019 retail trade and international trade, while labour force statistics are available for January 2020. No significant economic impacts have been detected in these monthly series.
- Economic Indicators for the December Quarter 2019 started being released in mid-February 2020. The national accounts for the December Quarter 2019 will be released on 4 March. A portion of the bushfire activity occurred during this quarter.
- Economic indicators for the March 2020 quarter (which will capture the remaining period of the bushfires) will be published on the ABS website from mid-April 2020, with the March quarter national accounts published on 3 June.
The ABS maintains a dynamic register of organisations undertaking economic activity in Australia. This register shows the 43 Local Government Areas (LGA) that have received an Australian Government Grants Package payment for infrastructure and strengthening community resilience. There are a total of 200,955 businesses in these 43 LGAs, noting that some of these areas are quite large while impacts may be more localised. These businesses accounted for 8.5% of all active Australian businesses as at June 2019. Most of the businesses in these LGAs are small having employment of less than 4 persons.
Industries with the highest number of business counts in these LGAs are:
- Construction with the largest industry classes Carpentry Services, House Construction, Electrical Services, and Plumbing Services.
- Agriculture with the largest industry classes Beef Cattle Farming, Sheep-Beef Cattle Farming, and Grain-Sheep or Grain Beef Cattle Farming.
- Rental, Hiring and Real Estate Services with the largest industry classes Non-Residential property Operators, Residential Property Operators, Real Estate Services and Accommodation.
Natural disasters might be seen in the following economic indicators:
Business turnover and output
Production by business in the affected areas may be impacted during and after disaster periods. These impacts will be captured in the Quarterly Business Indicators Survey.
Impacts on the broader labour market tend to be relatively minor. Where there are impacts they are most likely to be evident in the hours worked series.
If Australians’ are unable to participate in paid work, this may flow into wages. Profits for businesses may be reduced through increased expenses due to repair or replacement as well as disruptions to business activity.
During the disaster it might be expected that household consumption in the affected regions will fall. Following the disaster, household consumption data will capture activity associated with the replacement of destroyed or damaged assets.
Private capital expenditure
The rebuilding of destroyed and damaged dwellings, commercial buildings and infrastructure will be captured in the Capital Expenditure Survey, the Building Activity Survey, and the Engineering Construction Survey.
As a response to the bushfires Australian governments have announced a number of new initiatives to support recovery efforts. The new initiatives include capital, consumption and transfer expenditures, with the economic impact expected to become evident in the March quarter 2020.
The household income account will show claims of insurance in net non-life insurance (cash transfers from financial corporations to households). The insurance claims are a form of secondary income and will be recognised in the national accounts at the time of the event that gave rise to the claim.
Data provided from the insurance sector shows that the claims from the recent bushfire events accrued roughly equally in the December 2019 and March 2020 quarters, although claims are still being processed and therefore this data is subject to revisions.
In the national accounts donations are recorded as a form of income accruing when the monetary (or in-kind) transfer is made. As such it is anticipated that the significant majority of donations will be recorded in the March quarter 2020 accounts.
The disasters have resulted in the loss of capital stock, including dwellings, non-residential buildings, productive infrastructure and livestock. If losses due to the bushfires are considered exceptional and catastrophic, the destruction of capital stock would be reflected in the other changes in the volume of assets account. This data is published in the annual National Accounts which, for the 2019-20 reference period, will be released in October 2020. At this time, and noting information is still evolving on the losses experienced, the ABS does not envisage implementing the exceptional and catastrophic loss treatment in this annual publication.
The economic impact of previous natural disasters – cyclones and floods – is set out in Box 1.