Got milk? More on the economic impact of the floods

Brett Alegre-Wood
January 19, 2011

Lag effect following a natural disaster and its economic impact

As the cleanup continues after the floods the pictures and stories are an amazing display of what being an Aussie is all about and its economic impact.

Now more than ever though we're all starting to think of what economic impact impact are the floods are going to have into the future. Even if you weren't directly affected, the lack of milk and tomatoes at Woolies and Coles are a constant reminder of the effect and economic impact of the floods. But there's more to it than overpriced vegetables (I've heard stories of half a cauliflower selling for over $8 near Brissy!) while the farmers were some of the worst hit in the floods, mining, construction, insurance, transport and tourism will all be affected.

I've talked about a ‘lag effect' before and it's true to the floods too – though it's all happening now, we'll be seeing the economic impact and effects for the next two years at least.

Queensland supplies a huge amount of Australia's meat, fruit and veggies. With two thirds of the state being flooded much of this has been lost. The real figures aren't known yet but as I said before the farmers have undoubtedly been hit hard. The mining industry is probably second worst hit in terms of revenue loss as mining stopped because of the floods and with road and ports closed anything already out of the ground had to stay put.

The economic impact of this is rising prices as we've seen and a reduced ability for us to supply the overseas markets. This means international markets see a similar price rise and in the case of cotton where the US, China & Pakistan have had natural disasters of their own it means Aussie producers won't be able to capitalise on stronger export markets.

On the other hand for economic impact, as prices have risen here and in the export market for things like coal (we supply 60% of the worlds coaking coal) & cotton. Those who can still produce and ship their goods will be able to take advantage of the economic impact of price inflation both in the Australian and international markets.

Construction will be one area to benefit as Queensland starts to rebuild. In fact it is argued by some that the economic impact stimulation provided by the need for over 15,000 homes will offset the downfalls by creating a “mini-boom” in the construction and retail sectors as people replace belongings and rebuild homes.

We should expect to see an economic impact of short-term spike in the demand and prices for rental property as people displaced by the floods look for temporary homes and as tradies and others involved in the rebuild relocate to flood affected areas to be closer to work.

All in all however the floods are unlikely to have a major economic impact on long-term property prices. You may see insurance premiums rise as a result of the numbers of claims made but I expect interest rates to stay put for a few months at least.

If you've got questions on any of this economic impact or want more information give the team a call on                 +44 (0)207 923 6100

Live with passion,
Brett Alegre-Wood


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