Australian Treasurer Jim Chalmers is set to address the effects of a cyclone that recently impacted coastal communities in Queensland and New South Wales on Tuesday.
He will provide preliminary estimates indicating a reduction of approximately a quarter of a percentage point in quarterly GDP growth.
Impact On Inflation
Additionally, the cyclone may increase inflation due to higher building costs and damaged crops, particularly affecting staple prices like fruit and vegetables.
The temporary closure of businesses as a result of the cyclone has resulted in a loss of around 12 million work hours.
Chalmers’ remarks will likely draw attention to how economic activity has been affected, particularly in areas reliant on agriculture and construction. With farms sustaining damage and repair costs rising, supply shortages could exert upward pressure on consumer prices. If rebuilding efforts lead to higher labour demand, wages in some sectors might experience short-term gains.
The reduction in GDP growth that Chalmers will outline largely stems from the disruption to business operations and infrastructure damage. A quarter of a percentage point may seem minor in isolation, but when combined with existing economic pressures, it adds to broader concerns about momentum in the coming months. Household spending could take a hit if higher prices reduce disposable income, particularly if insurance payouts and government support fail to offset losses.
Employment And Recovery
Beyond direct impacts, the cyclone has led to a decline in total work hours, which could weigh on employment figures in the short term. With businesses forced to close temporarily, shifts have been cancelled, delaying projects and limiting output. Any delays in rebuilding efforts may prolong the economic impact, particularly if supply chain disruptions prevent recovery from progressing efficiently.
We expect markets to pay attention to any policy responses aimed at mitigating these effects. If fiscal measures focus on targeted relief, they may provide some stability, but any indications of broader stimulus could shift expectations for monetary policy. Inflation concerns remain, meaning officials will need to maintain a careful balance between supporting recovery and avoiding additional price pressures.
Chalmers’ statements will be monitored closely for any hints about adjustments to economic forecasts. If estimates of lost productivity worsen, investors may reassess near-term growth expectations, which could influence positioning. With inflation already at elevated levels, any further strain on prices could draw a response from policymakers, impacting market sentiment.
