The Australian economy took a whopping $5 billion hit last year as a result of floods, which also contributed to fruit and vegetable prices soaring by 16 per cent, adding to the cost of living crunch.
Treasury estimates revealed the economic impact of the severe weather events, which slashed 0.25 per cent off GDP growth as activity in mining, agriculture, retail, construction and accommodation sectors reduced.
The analysis did not include the billions in losses suffered as a result of damage to houses and infrastructure.
“Flooding was also a driver of inflation in 2022, particularly in higher prices for fruit, vegetables and other agricultural products and from disrupted supply chains,” the Treasury analysis said.
“Fruit and vegetable prices increased 16.2 per cent over the year to the September quarter, compared to an average annual rate of 2.5 per cent over the 10 years preceding Covid-19. Further impacts on inflation are also anticipated in the months ahead.”
Treasurer Jim Chalmers said while natural disasters were “first and foremost a human tragedy”, there were also huge consequences for the economy.
“We know these types of disasters put up prices, slow down growth in the near term, and cost the budget billions of dollars,” he said.
“Natural disaster funding was a key focus in the budget in October and will be a key focus in May as well. This isn’t optional spending; it has to be done.
“In Australia, we’re always conscious that natural disasters have the ability to throw us off course, and we expect this uncertainty to be one of the key factors weighing on our economy.”
The Federal Government also flagged more funding for mitigation strategies, although Dr Chalmers said it was a big challenge.
“We will of course be there for Australians impacted by natural disasters in the same way that Australians are there for each other … almost seven in every 10 Australians live in a disaster [zone] impacted in 2022,” he told ABC radio.
“That gives you a sense of the size and scale of the challenge that we’re up against.”
He also noted that an international organisation defined the severe wet weather events in northern NSW and South East Queensland as the fourth biggest natural disaster in the world.
Meanwhile, Treasury also released new research that showed poverty is “entrenched” in Australia’s poorest households with children born into them only having a 10 per cent chance of becoming top income earners in their lifetime.
However, in positive news, it showed Australian children have a better chance of becoming top income earners compared to the US with children in the bottom fifth of households 60 per cent more likely to make this leap, as opposed to just 7.5 per cent in the US.
The report also found that two-thirds of Australians in their early 30s have higher real incomes than their parents at the same age.
“While this is high by international standards, it has fallen from around 80 per cent for the Baby Boomers, with most of the fall reflecting lower income growth,” the report said.
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