Cyclone Yasi set to force further budget cuts
Cyclone Yasi has left a $1 billion damage bill for the state’s agricultural industries, with Prime Minister Julia Gillard warning of further budget cuts to fund the recovery effort.
The category five cyclone ripped through a host of small towns in north Queensland earlier this week, including Cardwell, Mission Beach and Tully, with at least one person confirmed dead.
The recovery effort will be intense, with the immediate priority to restore power and water to 118,000 properties.
Telecommunications could also take weeks to restore, with Telstra reporting 25 mobile phone towers are out of action.
The damage to public infrastructure is expected to run into the hundreds of millions of dollars, adding to the $5.6 billion damage bill from the floods, with the Prime Minister warning of further budget cuts.
The government has already announced $2.8 billion in cuts in order to pay for the flood recovery effort, in addition to a plan to impose a one-off flood levy to raise another $1.8 billion.
Most businesses operating in north Queensland experienced limited damage from Cyclone Yasi, with miners, airlines and transport groups hoping to resume operations within days.
However, sugar prices are set to soar after Cyclone Yasi caused at least $500 million of damage to cane crops between Townsville and Cairns.
Meanwhile, banana growers have lost the bulk of their crops for the second time in five years, following on from the devastation of Cyclone Larry in 2006.
According to the Australian Banana Growers Council, about 80% of north Queensland’s crops have been destroyed, which could cost growers more than $300 million.
The significant losses in banana production are likely to send prices soaring; in the aftermath of Cyclone Larry, prices reached $15 per kilo.
Shortages, and subsequent price rises, are also expected for other fruits, adding to the list of fresh produce for which consumers have already begun paying more after flood damage to crops in southern Queensland and Victoria.
Economists predict the cyclone will increase the risk of a contraction in the economy in the March quarter.
Nomura Australia economist Stephen Roberts told The Australian Financial Review the damage caused by Cyclone Yasi and the floods – including damage to crops, livestock production, the shutdown of ports, airports and businesses – will cost $2 billion and slice 0.6% off March quarter global domestic product.
He warned the effect on inflation could be even more significant, predicting price increases could add up to 0.4% to headline inflation.
The Australian Bankers’ Association says the major banks have announced emergency relief packages to assist affected customers avoid financial difficulty in light of Cyclone Yasi.
Features of the relief packages include:
- Suspension of loan repayments for a specified period.
- Waived bank fees on residential, business and agricultural loan restructuring.
- Waived early withdrawal fees for those customers wishing to withdraw term deposits.
- Temporary adjustment to customer lending limits, including credit cards, to help customers cope with unexpected costs.
- Expediting insurance claims for insurance customers.