Australia — Severe weather events hurt agriculture and tourism exports

The severity of recent bushfires compounds the challenges facing farmers and exporters already suffering from ongoing drought conditions. Before the intensification of the bushfires, the Department of Agriculture forecast agriculture exports to fall 8% to $45 billion (equal to 9% of 2019 goods and services exports) this financial year, because of lower crops and livestock exports. Downside risks to agriculture exports have since risen significantly. Meat and Livestock Australia indicate 30% of the national sheep flock and 20% of the cattle herd live in regions that have been significantly or partially impacted by bushfires. Milk production has been hampered in areas such as Bega. Beverage exports will also take a hit; although according to Wine Australia, only about 1% (or 1,500 hectares) of vines have been damaged by fires, the worst-hit region being the Adelaide Hills. Smaller industries such as cherry farming, forestry and abalone production have also been negatively affected.

The fires will also dent domestic and international travel. During the first two weeks of January, an estimated 8% of North American and European travellers and 6% of Chinese travellers had cancelled bookings for the first half of 2020. The wider reputational impacts are harder to assess and the affects will be compounded by measures taken to contain the COVID-19 outbreak. Regional tourist destinations will be hardest hit; for example, the Blue Mountains, NSW South Coast and Kangaroo Island. Tourism’s larger contribution to economic activity in these regions relative to capital cities underscores the importance of domestic and international travel to incomes, output and employment in regional towns and communities (Chart).

Recent significant rainfalls across the east coast provide welcome relief, though longer-lasting wet weather will be needed to materially improve farming conditions. Rainfall has helped extinguish many significant fires, allowing the recovery and rebuild to begin.