What effect will drought have on the economy?

The drought currently affecting New South Wales and parts of Victoria and Queensland could wipe $12 billion from Australia’s GDP

The drought currently affecting New South Wales and parts of Victoria and Queensland – labelled by some as the worst in living memory – could wipe $12 billion from Australia’s GDP, according to a recent Commonwealth Bank of Australia report.

The CBA economic briefing says that the drought, which so far has seen 100 per cent of NSW and more than half of Queensland drought-declared, could cut GDP growth by between 0.5 per cent and 0.75 across 2018-19, or as much as $12.5 billion.

CBA chief economist Michael Blythe compared the current dry to the Millennium Drought of 2001-09, during the peak of which all of NSW, most of Victoria and two-thirds of Queensland were drought-declared.

“The agriculture share (of the overall economy) has been relatively stable since the 1980s,” Mr Blythe said. “So the experience during the Millennium Drought looks a reasonable benchmark for the worst case in the current drought.

“At various points during that drought, falling rural production cut 0.5 to to 0.8 percentage points off GDP growth.”

However, Mr Blythe said that despite the potential for farming output to fall as much as 20 per cent, the economy was likely to perform relatively strongly for the year.

“While the impact can be significant, falls in farm output have never been large enough to derail an economy travelling at a decent pace,”he said. “So drought may take the edge off total growth in 2018-19 but the Australian economy is still likely to turn in a good result overall.”

The human toll

But this cautiously optimistic economic outlook is likely to be cold comfort to the farmers and rural communities directly affected by the catastrophic weather conditions.

Col Murray, mayor of the hard-hit NSW regional capital of Tamworth, described the current drought as “the worst we’ve had since 1903”.

“This is something far beyond a normal drought that we experience in regional NSW or regional Australia,” Mr Murray said.

Peter Ryan from Canon Group partner Inland Technology in Tamworth has witnessed first-hand the devastation the record dry conditions have wreaked on his own region.

“The drought’s certainly affecting our business,” Mr Ryan said. “It’s really having an impact on our clients and when they’re affected it affects us.”

Mr Ryan said the area was crying out for financial assistance but he also urged people to be aware of the mental toll on farmers, their families and communities.

“The depression rate increases by more than 70% in rural areas during drought,” Mr Ryan said. “I think the emotional support is just as important as the financial.”

The national mental health charity SANE Australia says that suicide rates in rural parts of the country are consistently 40 per cent higher than in metropolitan areas. Lifeline Australia says that men tend to be at the greatest risk, and cites “drought-related trauma” as one of the key risk factors.

How you can help

Canon Group employees across Australia are encouraged to demonstrate our corporate philosophy of “kyosei” – living and working together for the common good – by doing their bit to help farmers affected by the drought.

Visit Buy a Bale to contribute to buying much-needed animal fodder, or got to RU Aware We Care to make a direct cash donation to the Salvation Army’s Rural Chaplains and Drought Relief Support program.

Canon will dollar-match employee donations collected for these two causes up to $20,000*.

* If donations exceed this amount, further dollar matching will be at the managing director’s discretion.

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