There are concerns for the Australian economy following the bushfires ahead of when the Reserve Bank of Australia meets as soon as next month, 4th Feb. The crisis is becoming increasingly political as the country looks at the causes and the government’s response.
The bushfire crisis will cost Australia $5 billion in direct losses and lop off 0.2 to 0.5 per cent from its economic growth, Westpac has estimated, with costs comparable to the 2009 "Black Saturday" fires in Victoria, which destroyed 2,029 homes while causing a far greater loss of life with 173 direct fatalities.
"That would put the cost in terms of insured and uninsured losses at around $5bn," Westpac said.
As of Friday, there have been 10,550 insurance claims lodged with an insured valued at $939 million, Westpac said, cautioning, "assessing the economic impact of disasters is always very difficult, particularly when the full extent of the damage is still unknown," it cautioned.
Australia’s pristine ‘AAA’ sovereign rating is not at “immediate risk”
Meanwhile, Reuters reported that Australia’s pristine ‘AAA’ sovereign rating is not at “immediate risk” from the fiscal and economic impact of bushfires raging across the country’s east coast, S&P said on Monday.
“We do not believe that these bushfires will affect credit metrics enough to trigger rating changes in the next one to two years,” said S&P Global Ratings credit analyst Anthony Walker.
Ratings on the east coast states of New South Wales and Victoria - the most ravaged by the fires - were also likely to be unaffected, S&P said.
“We believe there is capacity within our current ratings on the sovereign and state governments to absorb the fiscal costs, which are relatively small compared with their budgets,” Walker added.
FX implications
AUD/USD slips back to sub-0.6900 area amid mixed trade/political sentiments
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.
Recommended content
Editors’ Picks
AUD/USD could extend the recovery to 0.6500 and above
The enhanced risk appetite and the weakening of the Greenback enabled AUD/USD to build on the promising start to the week and trade closer to the key barrier at 0.6500 the figure ahead of key inflation figures in Australia.
EUR/USD now refocuses on the 200-day SMA
EUR/USD extended its positive momentum and rose above the 1.0700 yardstick, driven by the intense PMI-led retracement in the US Dollar as well as a prevailing risk-friendly environment in the FX universe.
Gold struggles around $2,325 despite broad US Dollar’s weakness
Gold reversed its direction and rose to the $2,320 area, erasing a large portion of its daily losses in the process. The benchmark 10-year US Treasury bond yield stays in the red below 4.6% following the weak US PMI data and supports XAU/USD.
Bitcoin price makes run for previous cycle highs as Morgan Stanley pushes BTC ETF exposure
Bitcoin (BTC) price strength continues to grow, three days after the fourth halving. Optimism continues to abound in the market as Bitcoiners envision a reclamation of previous cycle highs.
US versus the Eurozone: Inflation divergence causes monetary desynchronization
Historically there is a very close correlation between changes in US Treasury yields and German Bund yields. This is relevant at the current juncture, considering that the recent hawkish twist in the tone of the Federal Reserve might continue to push US long-term interest rates higher and put upward pressure on bond yields in the Eurozone.