One economic impact I failed to explicitly mention in my post yesterday on the economic impact of the big wet is the impact on the sugarcane crop, which may be very signficant, as reported in the Courier-Mail this morning:
Yesterday, Canegrowers chief executive Steve Greenwood said that it would take a week or more to fully assess the damage across 18 sugarcane growing regions.
“Early reports are that broadscale flooding in the Bundaberg, Maryborough and Childers areas will cause major damage to sections of this year’s cane crop,” Mr Greenwood said.
“While in other areas, reports are coming in that the crop is looking good under the circumstances – some even reporting that rains in their area have broken a prolonged dry spell and provided the much-needed moisture this year’s crop needed.”
As with the cotton and beef industries, it appears that, to some extent, there will be an offsetting benefit from the rainfall on the cane crop in some regions.
In other news, early indications are that the costs of the big wet in terms of damaged buildings and infrastructure will be large, albeit lower than the costs of the 2010-11 disasters, as reported by the Brisbane Times this morning:
Already, 9800 insurance claims have been lodged in Queensland worth a combined $116 million, according to the Insurance Council of Australia.
The damage to infrastructure is still being assessed, but it has been estimated the bill will run into the hundreds of millions, without counting crop and livestock losses.
That sounds like a plausible estimate to me.
In analysing the economic effects of the big wet, it needs to be remembered that costs reported in terms of damage to buildings and infrastructure won’t be exactly reflected in Gross State Product (GSP). Damage to houses, buildings and infrastructure will affect GSP in two major ways:
- impacts on ongoing business (e.g. losses of wages and profits in affected businesses and rents in damaged houses) will subtract from GSP; and
- during the reconstruction period, spending associated with rebuilding damaged houses, businesses and infrastructure will add to GSP.
It is too early to estimate the relative magnitude of these different impacts.