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In the latest client note, the analysts at the US investment banking giant Goldman Sachs assess the impact of the Australian bushfires on the economic growth and the expectations from the Reserve Bank of Australia (RBA).

Key Quotes:

“The RBA to flag downside risks to the outlook from the bushfires in its February Statement on Monetary Policy, but don’t expect the fires to materially impact its central forecasts or policy decision at this stage.

The impact of the bushfires on economic growth will be at minus 0.3% spread over Q4 2019 and Q1 2020. 

Main near-term drags will be farm production and private investment down.

Partially offset by a boost to government spending.

Drag to international tourism … will intensify over the first half of 2020, but this should be broadly offset by a boost to residential construction .

We stress the inherent uncertainties around the current situation. On one hand, the unprecedented physical scale of the current bushfires could amplify the headwinds to growth via smoke haze around population centres not directly impacted by the fires.

While on the other hand, the government’s deployment of military assets, could provide a larger-than-expected boost to government consumption.”

  • Economic cost of bushfires estimated at $2 billion and rising – The Sunday Morning Herald