Floods threaten Australia's third biggest city

Residents in Australia's third largest city, Brisbane, sandbagged their homes against rising waters on Monday as torrential rain worsened floods that have paralysed the coal industry in the northeast and now threaten tourism. Four people were killed in and around Toowoomba, a major town west of Brisbane, and others were missing, Queensland state premier Anna Bligh told the Australian Associated Press news agency.
"Mother Nature has unleashed something shocking out of the Toowoomba region," she said, describing it as an "extraordinary deluge that almost came out of nowhere." Prime Minister Julia Gillard said the cost of the floods would not delay a return to budget surplus in 2012-13, but J.P. Morgan predicted the disaster would crimp growth this year and could delay another increase in interest rates.
The worst floods in 50 years have at times covered an area the size of France and Germany combined in Queensland state. At least six people have been killed while dozens of towns have been isolated or partially submerged. More monsoon rains are expected all week. "People need to think about how to get out and if you don't need to travel, stay off the roads," said Police Chief Superintendent Alistair Dawson, referring to some of the smaller towns near Brisbane, Queensland's state capital.
In Brisbane, a city of 2 million, people in low-lying areas were given sandbags and warned the worst of the flooding might not occur until Tuesday or Wednesday. Rain eased off on Monday evening but cloud hung low over a sodden landscape. Police urged motorists to stay off the roads in the state's heavily populated south-east, home to the Sunshine and Gold Coast tourist strips, Australia's premier tourism destinations.
Queensland Tourism said rain and flooding would hurt the industry, but it was too early to quantify the impact. Australias A$32 billion tourism sector was already in trouble due to the strength of the local dollar driving off overseas visitors and enticing Australians to go abroad.
The floods have caused an estimated A$6 billion ($6 billion) in damage and economists say they will cut economic growth in 2011 and heighten inflation as food prices rise and reconstruction begins in the nation's second largest state. Queensland's $20 billion coking coal export industry has been brought to a virtual standstill.
"With more rain falling it could be months before the floodwaters clear and the extent of the damage to essential infrastructure is known," said J.P. Morgan chief economist Stephen Walters. J.P. Morgan on Monday cut its gross domestic product (GDP) growth forecast for 2011 to 3.3 percent from 3.7 percent and raised its inflation forecast to 3.8 percent from 3.2 percent. That pushed out to May from February the likely timing for the central bank's next interest rate increase. "Even inflation-conscious RBA (Reserve Bank of Australia) officials won't hike with Queensland under water," said Walters.
Gillard announced more aid on Monday, but said the floods would not derail an expected 2012-13 return to a budget surplus, with economic expansion now well into the 20th year and annual growth at 2.7 percent in December.