Australia’s economy is likely to be further weighed down by wildfires that have scorched an area larger than the Republic of Ireland and could intensify in coming months with more hot, dry weather predicted.
Goldman Sachs Group Inc. sees immediate economic hits to private investment and farm production, with a drag on tourism deepening over coming months. This will be partly offset by a lift in fiscal spending — including military deployment — translating to a positive contribution from government consumption to GDP.
“The unprecedented physical scale of the current bushfires could amplify the headwinds to farm production or international tourism exports, while the unprecedented smoke haze around major population centers could weigh on spending in communities not directly affected by the fires,” said Andrew Boak, Goldman Sachs chief economist for Australia.
Images of burnt koalas, major cities clogged with acrid smoke and tourists herded onto beaches as a last redoubt against firestorms have been beamed around the world, threatening lasting damage to Australia’s reputation. This could see a longer-term fallout beyond the 0.2-0.4 percentage points expected to be shaved from GDP growth in the near-term.
RBA Bets
Traders are pricing in about 60-per-cent odds the central bank will lower interest rates by a quarter point at its Feb. 4 meeting and government bond yields to three-and-a-half-week lows. The Australian dollar fell on each of the first five trading days of the New Year to be the weakest developed-nation currency over the period.
While some of the angst in markets reflects a flight to safety following the escalation of tensions between the U.S. and Iran, the Aussie dollar’s under performance relative to other currencies suggests there’s also been a drag from the bushfire impact on Australia’s fragile consumer.
Commonwealth Bank of Australia, the nation’s largest lender, says business disruption will see regional economies and tourism particularly hurt. CBA says its PMI already shows “some bush fire impact and leading indicators like accommodation searches are already dropping away.” The bank estimates tourism accounts for 3.1 per cent of gross domestic product and 5.2 per cent of employment.
The government has already announced compensation for volunteer firefighters, deployment of military assets, including the call up of reservists, and a A$2 billion (US$1.4 billion) bush fire recovery fund. These could provide some offset to the pullback in private sector activity.
Shane Oliver, chief economist at AMP Capital Investors Ltd. in Sydney, says the economic hit comes at a time when growth is already weak. “It risks knocking March quarter growth to near zero or below,” he said, adding that while the risk of recession has increased, the country’s 28-year run without two consecutive quarters of contraction is unlikely to end this time.
With more than 120 fires still burning in New South Wales state alone, and the southern hemisphere summer barely underway, the death toll — currently at least 25 people — and devastation could further mount. The blazes have destroyed 25 million acres of forest and bush, razed 1,800 homes and caused the deaths of an estimated half a billion native animals.
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
