SYDNEY – Floods and natural disasters that hit all but one Australian state and territory in 2022 cost the economy A$5 billion ($3.48 billion) and stoked inflation according to Treasury estimates which forecast billions more spending in 2023.
Australia suffered four major bouts of flooding last year, with global reinsurer Munich Re estimating that February and March flooding across northern New South Wales state that killed more than 20 was the fourth most costly global disaster in 2022.
Natural disasters cost the economy A$5 billion or 0.25% of real GDP for last financial year, according to Treasury estimates, particularly delays to mining and construction plus the destruction of crops. The figures did not include damage or destruction of infrastructure and other assets.
“We’ve put that number out there really just as a reminder that even though we are rightly focused on the human cost of these natural disasters, which are becoming more and more frequent, there is a cost to the economy as well and a cost to the budget,” Treasurer Jim Chalmers told ABC radio on Friday ahead of a tour of Lismore, a town 700 kilometres (435 miles)north of Sydney devastated by floods last year.
Flooding worsened last year’s record inflation, according to the Treasury, with washed out crops and disrupted logistics contributing to a 16.2% rise in fruit and vegetables prices compared to the pre-COVID decade average of 2.5%.
Days after inflation surprised forecasters to the upside, the Treasury believes fresh food prices will continue to rise.
Chalmers also flagged more demands on the budget he will deliver in May, with billions of additional disaster-related spending expected this year on top of A$3.5 billion spent in 2022.
The government will focus on mitigating future disasters, he said, instead of policies like subsidising expensive insurance for those who live in disaster-prone areas.
“We need to be careful about how we expose the government’s balance sheet to some of these big risks,” he said.