Australians are beginning to tighten their purse strings because of the country’s deadly bushfires, according to a survey released on Wednesday, a sign that the economic impact of the crisis is likely to deepen.
As authorities warned that a days-long respite from high fire danger was coming to an end, economists said the cost to Australia’s $1.33 trillion economy could be as high as $3.4 billion.
That would shave around 0.25 points off gross domestic product in the December and March quarters, a development that some economists said could prompt the country’s central bank to cut rates as early as February and lower its growth projections.
Consumer sentiment in January was a hefty 6.2 per cent lower than a year earlier, according to the Melbourne Institute and Westpac Bank survey released on Wednesday. Consumer sentiment data is considered a leading indicator, running ahead of actual spending data.
“The risk is that as economic loss from the bushfires materialises, consumers could still become more cautious in February,” said Citi economist Josh Williamson.
The huge bushfires have cut through the country’s east coast during the peak summer months when many businesses usually rake in earnings from both domestic and foreign tourists. Agricultural sectors, particularly the dairy industry, have also been hard hit.
Morrison repeats unpopular opinion of razing flammable land
The deepening financial woes intensify pressure on Prime Minister Scott Morrison, who has faced criticism over his handling of the crisis and his conservative government’s stance on climate change.
Australia is one of the world’s largest carbon emitters per capita due to its reliance on coal-fired power plants, and the bushfires have become a global talking point with regard to climate change politics. Morrison has repeatedly rejected calls for Australia to increase its carbon emission reduction targets, insisting such a step would it would do too much damage to the country’s economy.
Late on Tuesday, Morrison reiterated his view that preemptive burning of bushland to remove flammable vegetation was as important as reducing emissions to prevent bushfires, a position that has been rejected by fire services chiefs.
Temperatures in New South Wales and Victoria states began to rise on Wednesday after several days of cool weather, leading authorities to renew “extreme fire danger” warnings in some areas where existing fires could be intensified or new blazes sparked into life.