Analysts warn that Australia’s economy could grow more slowly in February as consumers tighten spending.
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 effect 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 1.95-trillion-Australian-dollar ($1.33 trillion) economy could be as high as 5 billion Australian dollars ($3.4bn).
That would shave off about 0.25 percentage points off Australia’s gross domestic product (GDP) in the December and March quarters, say economists, who believe that this could prompt the country’s central bank to cut rates as early as February and lower its growth projections.
Consumer sentiment in January was 6.2 percent 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 in advance 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 warm months when many businesses usually rake in earnings from domestic and foreign tourists. Agricultural sectors, particularly the dairy industry, have also been hard hit.
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 do excessive damage to the country’s economy.
Late on Tuesday, Morrison reiterated his view that pre-emptive 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.
‘Extreme fire danger’
The wildfires have killed 29 people, destroyed more than 2,500 homes and razed 11 million hectares (27 million acres) of wilderness – an area one-third the size of Germany – since September.
Dozens of fires were burning in New South Wales (NSW) and Victoria states on Wednesday. Temperatures in Victoria were expected to top 32 degrees Celsius (89.6 degrees Fahrenheit) on Wednesday, leading officials to declare “extreme fire danger” in some areas. Temperatures in NSW were forecast to hit 40C (104F) on Thursday.
In Sydney, the air is expected to again reach hazardous pollution levels on Thursday as smoke drifts over the city, the NSW government said. Sydney, Melbourne and Canberra have all been periodically blanketed in smoke over the past several weeks, giving all three some of the worst air quality ratings in the world.
A Reuters analysis shows that Australian animals living in specific habitats, such as mountain lizards, leaf-tailed geckos and pear-shaped frogs, are battling the threat of extinction after fierce bushfires razed large areas of their homes.
Several players at the Australian Open tennis tournament in Melbourne struggled to complete matches due to the weather. Others continued to make pledges of financial assistance to efforts to fight the bushfires.
Among the latest was the seventh seed, German Alexander Zverev, who said he would donate 10,000 Australian dollars ($6,838.50) for each match he wins and pledged his entire prize money of 4.12 million Australian dollars ($2.82m) if he wins the tournament. American John Isner has pledged 25 percent of all his prize money and 100 Australian dollars ($68.38) for every ace he serves.
Source ; News Agencies