Australia lifts economic cost of floods to A$9 billion

Massive floods and a cyclone that hit large parts of Australia's eastern coast this year will cost the economy around A$9 billion ($9.35 billion), with most of that being felt in resources and agricultural production, the government said on Sunday.
The twin natural disasters in resource-rich Queensland state in January and February, as well as widespread flooding in Victoria, would cost well above earlier estimates of A$5.6 billion, Treasurer Wayne Swan said in a weekly economic update.
"Lost coal production could total A$6 billion, which is A$1 billion more than previously estimated. Damage to crops will be close to A$2 billion, and the loss of activity to the tourism industry is expected to amount to A$400 million," Swan said.
"With the hit to government revenue and business activity, these tragic events have certainly heightened the challenges facing our economy and made the difficult task of compiling next month's budget even more difficult." The revised estimate comes as Prime Minister Julia Gillard and Swan struggle to find enough money to keep their promise of returning the national budget to surplus by 2013, and as yet another cyclonic low threatened Western Australia state.
Next year's budget will be handed down on May 10 and Swan and Gillard have warned of tough spending cuts, with speculation most savings will come from welfare support.
Local media reports suggest an increase of 3.25 percent to the federal budget for next year has now been cut to 2.5 percent after 2010/11 saw the country hit by disasters.
"No one was ever under any doubt that the financial toll of the devastation we've seen in Queensland and elsewhere in Australia this summer was going to be substantial," Swan said.
"The latest figures back that up, and indicate the cost is likely to be even larger than we initially thought."
The disasters, he said, would likely cut gross domestic product by half a percentage point in the year through June 30.
The Australian economy has been one of the world's most resilient economies for six out of the last eight years. The average growth rate from 1998-2009 was 3.4 percent. This is due in large part to proximity to the world's fastest growing region, the Asia Pacific, and powerhouses like India and China in need of raw materials to fuel their own modern-day industrial revolutions.
The last official budget update in November forecast a small A$3.1 billion underlying surplus in the 2012-13 financial year, representing 0.2 percent of GDP.
But Treasury last week said Japan's deadly earthquake and tsunami would knock a A$2 billion hole in export earnings and cut economic growth by less than 0.25 of a percentage point this financial year.
Japan is Australia's second-largest trading partner after China, accounting for around 15 percent of exports in 2009-10 and 27 percent of iron ore and coal exports.