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  • Economists tip RBA to cut next month amid fears the fires will prompt already cautious consumers to spend even less.
  • Estimates of direct costs lying between $1.1 billion to $1.9 billion this financial year.

There has been little mentioned in the FX world surrounding the Australian devastating bushfires and the possible impact on the Australian economy, however, the cost has already likely topped $2 billion – and is still climbing, according to a report in The Sydney Morning Herald. 

Jessica Irvine, a Senior Economics Writer, has stated that economists are tipping the Reserve Bank (RBA) to deliver another interest rate cut next month amid fears the fires will prompt already cautious consumers to spend even less, although Irvine also wrote that the Morrison government’s budget surplus looks safe, for now, according to the economists. 

Quoting the head of economic analysis at SGS Economics and Planning, Terry Rawnsley, the article says that there are estimates of direct costs to fire-affected regions from lost tourism, agricultural and retail income which is already lying between $1.1 billion to $1.9 billion this financial year.

In addition, the smoke haze regularly shrouding major cities was likely to have reduced national economic output by a further $500 million since the start of summer, Mr Rawnsley estimated, including through lost productivity, spending and ill health.

“You’re getting up to a $1.5 to $2.5 billion impact on the economy,” he said.

FX implications

Indeed, the RBA us tipped to cut rates but has little room to manoeuvre which raises the concerns for Aussie bulls that QE is thus inevitable. More on that here: 

  • AUD/NZD bears stalling on key support, eyes on central banks