NTDTV: Australia Floods
Floods in Queensland, Australia Impact Growth and Inflation Rate
Australia's commodity-export boom is taking a hit, as the biggest floods in decades force mine closures and evacuations.
Up to 90 million tons of coal capacity are already under force majeure, with waters still expected to peak in some areas.
The affected output is equal to 35 percent of Australia's total coal output for 2009. The disruption has pushed up long-term prices for thermal and coking coal as Australia accounts for more than half of global cooking coal exports.
Cooking coal is vital to Asia's steelmakers.
JPMorgan says the floods could shave as much as 0.4 percentage points off GDP. This is about $5 billion of Australia's A$1.3 trillion economy.
The floods are also causing widespread damage to crops in the state of Queensland, with higher fruit, vegetables, and diary prices expected to add about 0.3 percentage points to inflation in the current quarter.
Australia's listed insurers took a hit, ahead of expected flood related claims. The damage is already estimated at over $1 billion and rising.
Suncorp fell over three percent, while shares of QBE and Insurance Australia were also sharply lower.
The wheat industry has been spared though, as Queensland accounts for less than five percent of the country's wheat output.
The rains and floods have affected around two hundred thousand people over the past two weeks, inundating scores of properties and forcing the evacuation of thousands anxious to rebuild their lives.
"All we want to do is get home and have a look and see what the damage is.. start the big clean up."
Brad Carters is the mayor of Rockhampton, a town of 75,000 accessible only mainly by boats. He says residents are worried but are working through the crisis.
[Brad Carter, Rockhampton Mayor]:
"It's the true Aussie spirit. The people of our community have rallied together. You can understand that they are extremely uncomfortable, very concerned but they are working together. They are helping their neighbors. They're working cooperatively with emergency services personnel."
JPMorgan is counting on that spirit, saying it expects a strong rebound in economy activity once the floods recede and people rebuild, aided by insurance payments and government spending.
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