In one of our articles, we praised how Australia has an impressive run of 27 years not having a recession, but it seems that Australia is on the verge of having a slower economy due to massive bushfires triggered from excessive temperatures in Australia.


Australia is counting the cost of climate change, as “unprecedented” wildfires (known locally as “bushfires”) wreak havoc not only on humans and animals but also on the economy. In addition to the human and animal tragedy, the economic impact is also set to be significant and long-lasting. While previous bushfires have tended only to hurt those local economies directly affected, the economic impact will be broader this time.

Massive tracts of land have burned, more than 12 million acres (5 million hectares) have been destroyed. Prime Minister Scott Morrison said the crisis would have a significant economic impact.

Some 1,365 homes have been destroyed in New South Wales alone this fire season and the tally is rising daily as the fires continue to burn and authorities assess the damage. Scores of rural towns have been impacted, including the community of Balmoral about 150 kilometers southwest of Sydney, which was largely destroyed before Christmas.

The Insurance Council of Australia said that about 4,300 claims worth A$297 million ($208 million) have been lodged. Consultancy SGS Economics and Planning has estimated that Sydney’s economy loses as much as A$50 million each day, it is blanketed with a toxic haze from smoke billowing in from the fires. More broadly, the economy faces pressure from increasingly severe heat and storms from climate change, threatening agriculture, property, and tourism. The Climate Council estimates cumulative damage from reduced agricultural and labor productivity might reach A$19 billion by 2030, A$211 billion by 2050 and a massive A$4 trillion by 2100.

temperatures above or below averages

The economist pointed to the direct impact on industries such as agriculture and tourism, together with the broader effects of air pollution, which has affected 30 percent of the population, causing reduced worker productivity, increased health spending, and lower crop yields.

Due to the impact on agricultural output, construction activity, and tourism, it is estimated that the bushfires could curb first-quarter gross domestic product by around 1 percent.

One in thirteen Australian jobs rely on tourism and hospitality. Pockets of Australia’s tourism and agriculture industries have been dealt a particularly heavy blow. Some businesses and institutions have been forced to close their doors during periods of excessive levels of air pollution.


Hotels have reported bookings dropping by around 15 percent this month due to the bushfires, and in the wake of headlines that the city had recorded the world’s worst air quality levels. This is especially difficult for the beach holiday towns that are shutting down during their peak tourist period.


 It has been a devastating start to 2020 for many red meat and livestock producers. More than 46,000 head of livestock has been lost in the fires according to the latest figures. Meat and Livestock Australia, an industry body, says 30 percent of the national sheep flock and 20 percent of the national cattle herd have been either directly or partially impacted by the fires.


The Morrison government has so far pledged $2bn in fire relief – although the money will flow over two years – and the prime minister, Scott Morrison, and the treasurer, Josh Frydenberg, have weakened their previously rock-solid commitment to returning the budget to surplus. They may cut interest rates to boost the economy. Direct spending by governments on the recovery effort would probably be more effective.


The short-term effect of Australia’s bushfires on New Zealand is likely to be small but the long-term implications could be enormous. The more interesting questions are how the fires and related droughts might affect trade and migration decisions over time. The number of New Zealand passport holders living in Australia is huge and every Australian has the right to move here. If the long-term pattern of people moving west [from New Zealand to Australia] changes direction, that is potentially a massive shock for the New Zealand economy.

Shares in Australian companies closely linked to the Chinese economy tumbled on Tuesday morning amid fears the deadly coronavirus outbreak could smash a tourism sector already reeling from the summer’s unprecedented bushfires. Australia’s economy is heavily dependent on China, which as the country’s biggest trade partner makes up 26% of its trade with the world. China is Australia’s biggest export market, particularly in tourism, with 1.5m Chinese tourists arriving every year, and education.

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