Australia's devastating floods could slice more than Aus$10 billion ($10 billion) off GDP and hammer the economy worse than Hurricane Katrina affected the United States, economists said Wednesday. Experts said the floods, which have turned most of the mining and Great Barrier Reef state of Queensland into a disaster zone, could cut growth by one percentage point in the near term, including lost exports and infrastructure damage.
"Clearly the cost is going to be substantial," said Stephen Walters, chief economist at investment bank J.P. Morgan, adding that the deluge could shave as much as one percent off GDP - or up to Aus$13 billion - in early 2011. But he said the economy, currently riding a resources boom driven by Asian demand, would likely recover in the second half of 2011 on the back of economic activity related to rebuilding homes, businesses and infrastructure.
"The profile for GDP is going to be... a dip near-term, or at least much weaker growth, not necessarily negative - but quite a bit stronger in the second half and into 2012," he told AFP. An analysis released by Westpac said GDP in the quarter to March could be cut by one percent, but the annual fall would translate to about 0.3 percent. Australia's economy is currently tracking annual growth of 2.7 percent.
John Rolfe, an economist with Queensland Central University, said in the short-term the floods would hit coal and primary produce exports but the impact would drag on the economy for several years. Rolfe said growth would have to be revised down, but only slightly to between 0.1 and 0.3 percent.
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