In the view of analysts at ANZ, the size, intensity and duration of the current Australian bushfires mean that they will almost certainly have a larger economic impact than past fires.
“The impact on consumer sentiment from the fires and associated haze cloaking major cities is likely to be a key driver of the economic impact at a national level. The recent ANZ Job Ads and ANZ-Roy Morgan Australian Consumer Confidence reports provide an early signal of an identifiable economic impact.”
“While the current bushfires are unprecedented, there are material offsets to the negative impact from insurance payments and assistance from the Commonwealth and state governments. Commonwealth and state government funding committed so far is likely to rise further. We think the support for affected communities during and following these tragic events, along with wider economic benefits that could be gained, justifies current and additional fiscal loosening, as required.”
“This leaves us thinking that the immediate impact on GDP over the final quarter of 2019 and the first quarter of 2020 will be negative, but most likely not beyond 0.1–0.2ppt per quarter at most. This is necessarily a best first guess, and it will be refined as more information comes to hand. This initial impact will be offset (to at least some extent) in later quarters, as rebuilding gets underway.”
“National disasters are more appropriately an issue for fiscal, rather than monetary, policy. Government spending measures can be targeted on the areas and people most acutely affected, whereas monetary policy is a tool with much broader impact. There might be a case for a monetary policy response if the fires trigger ongoing national effects, such as a sustained loss in consumer confidence. As it happens, we were already forecasting a 25bp February rate cut from the RBA, and that call is unaffected by the current assessment of the impact of the bushfires.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.