The Australian economy narrowly exited a per capita recession in Q4 2024 after recording 0.1% growth.
This followed 21 months of consecutive declines in per capita GDP.
In a speech to be delivered in Queensland on Tuesday, Treasurer Jim Chalmers will reportedly reveal that Cyclone Alfred’s immediate impact on GDP is estimated to be $1.2 billion, which will wipe a quarter of a percentage point off quarterly growth.
That alone should be enough to deliver negative per capita GDP growth in Q1 2025.
The cyclone, which impacted south-east Queensland and the NSW north coast last week, is also expected to push up inflation.
“It could also lead to upward pressure on inflation. From building costs to damaged crops raising prices for staples like fruit and vegetables”, Chalmers will say in his speech.
By last Thursday, 44,000 insurance claims had been lodged, with early modelling pointing to losses of around $1.7 billion.
“The budget will reflect some of those immediate costs and we’ll make sensible provisions for more to come”, Chalmers will say.
“I expect that these costs and these new provisions will be in the order of at least $1.2 billion […] and that means a big new pressure on the budget”.
Indeed, disaster support across the country over the forward estimates is now expected to be at least $13.5 billion, up from $11.6 billion in the most recent MYEFO.
While the cyclone would have suppressed growth in the short term, reconstruction activity will stimulate growth over subsequent quarters.
Therefore, the per capita GDP should bounce back into positive territory, assisted by further expected interest rate cuts from the Reserve Bank of Australia.
