Australian Communities and Disaster Recovery: CBA Economic Analysis

This is part of a regular series of articles by the Commonwealth Bank, who will be using their financial experts to provide news, insight and expert advice for Not for Profit organisations.

Australia’s Not for Profit sector plays a important role in helping communities get back on their feet following natural disasters, such as the Black Saturday bushfires and the Queensland floods, according to a report by the Commonwealth Bank.

A new report from Commonwealth Bank looks at the economic impact of natural disasters on Australian communities, and the role role Not for Profit organisations play in getting people back on their feet.

Above: Burnt trees in the wake of the Black Saturday bushfires.  Flickr image: Some rights reserved by Vermin Inc

Commonwealth Bank economist James McIntyre says more often than not, the Not for Profit sector plays a large role in getting the job done and assisting in disaster recovery, and then the rebuilding of affected communities. CBA’s Viewpoint report offers many valuable insights which may assist the sector in those efforts.

The report examined the recovery and rebuilding effort in four disaster-struck areas of Australia – the communities affected by the Black Saturday bushfires in Victoria in February 2009; North Queensland, which experienced record breaking floods in January and February 2009; South West Queensland, which experience sever flooding in March 2010; and the impact of the flooding and cyclone events that hit Queensland in early 2011.

The report says along with government relief payments, the communities reviewed also benefited from the philanthropy of Australians including corporate Australia which contributed significantly.

The report found that it takes 6 to 18 months for the majority of personal income sources to return to pre-disaster conditions, with very high proportions of people relying on government support to rebuild their lives.

The need for services from Not for Profit organisations is greater in areas where frequent repeat disasters can hinder personal income recovery. The cumulative effect of flood and cyclone damage is hurting North Queensland, with key agricultural industries not having enough time to recover between events. As a result, people are reliant upon unemployment benefits as their only source of income.

The Viewpoint report says what feels like a never ending spate of disasters – natural and manmade – contributed to the dampening of global optimism evident at the start of 2011. Floods and cyclones in Australia, earthquakes in New Zealand, earthquakes, tsunami’s and a nuclear emergency in Japan, and unrest in the Middle East were all unexpected and have had major economic consequences.

McIntyre says it may feel different this year because some of these disasters have happened on our own doorstep – but natural disasters are, unfortunately, not unusual. The organisations that monitor such events report that 350-550 such disasters have occurred each year over the past decade.

The report reveals that disasters do involve some economic cost. And the frequency of such shocks means that there is a certain base level of economic damage that has to be dealt with each year. That economic damage has averaged about 0.2% of global GDP per annum over the past thirty years.

The report says disasters can have a large impact on the regions affected however the lessons of history show that the impact on economic activity tends to be relatively short lived.

CBA’s Viewpoint research found that there are four main factors that shape the pathway to income recovery in disaster-affected communities:

• Scale;
• Frequency of disasters;
• Local industry profile; and
• Proximity to population hubs.

It takes from 6 to 18 months for the majority of personal income sources to return to pre-disaster conditions, with very high proportions of people receiving some form of government support to rebuild their lives in the interim.

But frequent repeat disasters can hinder personal income recovery. The cumulative effect of flood and cyclone damage is hurting North Queensland, with key agricultural industries (sugar cane and tropical fruits) having insufficient recovery time between events. As a result, increasing proportions of people are relying on unemployment benefits as their only source of income, with average salary amounts continuing to decline.

The report reveals that proximity to large towns/cities makes a difference to economic recovery. For the Victorian bushfire communities, the close proximity to metro-based sources of employment and services helped residents to maintain employment and local residency.

The 2009 Victorian Black Saturday bushfires were intense but localised in nature, containing the economic impacts within the region, with little impact on the state or national economies.

Allthogh the economic impact of disasters is largely localised, the report reveals that such events do have a truly national impact – almost four out of ten Australians say they were either affected personally or had friends or family that were affected by the recent natural disasters. Two-thirds of Australians believe the recent natural disasters had a negative impact on the national economy.

McIntyre says natural disasters are part of the fabric of Australia’s landscape. CBA’s Viewpoint report finds that while it can take time, communities do rebuild. This highlights our resilience and reaffirms our nation’s reputation for ‘getting the job done’ even amid tremendous personal and community tragedy.

He says more often than not, the Not for Profit sector plays a large role in getting the job done and assisting in the recovery, and then the rebuilding of affected communities. CBA’s Viewpoint report offers many valuable insights which may assist the sector in those efforts.

• To download the Viewpoint report, please click here [PDF].