Qld economy should be resilient to Cyclone Debbie

While we are still to learn the full extent of the damage and economic disruption of Cyclone Debbie, we should be reasonably confident that any adverse economic impact, such as through lost crops, tourism, or disruption to coal mining and exports (see this ABC News report), is temporary, and the State economy will likely recover quickly from it, as it has from previous natural disasters. Indeed, it is expected that capital works during the reconstruction effort will provide a temporary stimulus to affected regional economies. This is what happened in particular after the 2010-11 natural disasters: the floods and Cyclone Yasi (see chart below).

QldGSPgrowth_qtrly

Keep in mind that the State economy is frequently subjected to a wide range of shocks, such as changes in the exchange rate which affect tourism and exports, and changes to global commodity prices which affect mining investment and operational decisions. Natural disasters are another type of shock, which can have a large negative impact on gross state product (GSP) growth in one quarter, but typically do not have a long-lasting adverse impact on the economy. See my 2011 post on Recovery from natural disasters, which quotes John Stuart Mill on the long-observed phenomenon of rapid recovery from natural disasters.

The State Budget will no doubt take a significant hit from Cyclone Debbie, as coal production and royalties may be temporarily lower and as the Government needs to undertake emergency disaster relief measures. I expect our hard-working Queensland Treasury officials, already in the middle of State Budget preparations, will be spending even longer hours in the “Tower of Power” at 1 William St, working out the impact of Debbie on the Budget bottom line.

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4 Responses to Qld economy should be resilient to Cyclone Debbie

  1. Russell says:

    Gene, on a “big picture” basis you will be proved correct but being associated with the tourist industry in the Whitsundays and hearing about the issues such as no power possibly for 3 weeks, the devastation of Shute Harbour and the condemning of much of the marina berths at Abell Pt marina and of course the significant damage on Hamilton and Daydream Islands this is going to take some time to put right. Along with that is the fear and resistance for tourists to come back. Many business are small and marginal and were only now picking up after the GFC and years of high AUD. A lot will go to the wall. Many people who work there are casual workers. Many will not have income so will leave further hitting the local economy. Long term rental vacancies were just picking up as they were devastated by the reduction in CQ mine employes and post GFC tourist drop off. This is going to hurt a lot of people in a big way for a long time.

    • Gene Tunny says:

      Russell, yes, very good points about the damage in the Whitsundays. I should have acknowledged some of the local impacts are severe and could be long-lasting. Thanks for the comment.

      • Russell says:

        Thanks Gene. Now more than ever that area needs a sustained reasonable coal price and the Carmichael mine to go ahead to compensate.

  2. Russell, I’m from Mission Beach so are very aware of the local impacts of which you speak. After TC Yasi in 2011 it took many years for our tourism industry to return to anything like its previous levels. However, having said that, things do get better and the natural environment has an amazing ability to bounce back far quicker than we had expected or hoped for. Support will be no doubt already be pouring; that makes a huge difference but tends to evaporate rather faster than you might like. Other peoples lives move on and Debbie will soon become a distant memory for all those not directly impacted.
    The one lesson we have learned from Yasi was to make sure that people’s mental well-being is considered well after the initial dramas are over. Adrenaline and the need to sort lives out takes over int he first few weeks and months; only later do some of the long-lasting impacts become evident.
    Our thoughts are with all those impacted by Debbie and we wish you the very best with the recovery.

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