Sunday, January 16, 2011

How will the floods in Queensland and Victoria affect our economy and food supply?

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My thoughts and prayers are with the Queenslanders (QLD), Victorians (VIC) and Northern New South Wales (NSW) which is part of the state that I live in. I thought bush fires were our largest concern to date, however floods that were statistically 1 in 100 year events, and 1 in 200 year events have been decimating our second and third largest states in Australia, making a mockery of the statistics.

It's surreal. Our farmers have been battling drought for so many years now and it is horrifying to read that they have been devasted by the floods. Some commentators have been comparing the devastation results to scenes from a third world nation.

The issues from other major Australian news source:

* Thousands of Queenslanders are without power, adequate housing nor food
* Queensland supplies 28% of Australia's fruits and vegetables demand
* Agricultural industry's estimated loss from crop and equipment damage $1 billion (major farming losses in Gympie, Chinchilla, Rockhampton, Lockyer Valley, Bundaberg)
* Over 10,000 commercial businesses have been affected
* At the flood's peak, it was costing Australians $460 million per day
* The floods have destroyed about $500 million worth of sugar according to the sugar industry
* Mines and farms have been flooded and devasted - as large global suppliers of coking coal and ethanol, the world will eventually pay for this loss due to prices rising
* Food shortages due to panic buying, rail and roads transport infrastructure being destroyed
* Tourism industry is destroyed with cancellations rampant
* Estimated cost of damages so far is $6 billion and mounting
* Escalating food costs for Australians expected across a range of fruit and vegetables: melons, pumpkins, capsicum, grapes, citrus fruits, tomatoes, sugar
* Agforce(Queensland's farm group) estimates shortages in barley, wheat, sorghum, corn and chickpeas until possibly September
* Cattles and sheeps which have drowned, native Australian animals living in underground burrows such as echidnas and wombats have drowned, loss of our wildlife, damage to lands and topsoils which will affect land fertility
* Land erosion and farm equipment damage
* From The - "QLD supplies almost half the world's metallurgical coal, and prices have risen by $US50 a tonne since flooding started" ...the world will end up feeling paying for this as well
* Supermarkets and shops are experiencing shortages with bread, meat and milk supplies due to panic buying and infrastructure supply issues, thus there have been incidences of profiteering with a loaf of bread being sold at $15/loaf

* According to Hugh Tobin from Ausveg (our National Vegetable Industry Body), the vegetable supplies are currently not too badly affected however because of the wet weather conditions, we will eventually see supply drop in the winter time and prices rising as a result of farmers being unable to plant in the current condition and possibly unable to plant their crops in Autumn

* The QLD premier, Anna Bligh said that 28,000 homes have to be completely rebuilt with thousands more that is currently requiring repairs and power to be connected

If you own stocks, which stocks will be affected?

* RACQI which owns RACQ Insurance - facing 6000 claims and counting, their re-insurance trigger policy is triggered at $10 million (all insurers protect themselves by re-insuring against large claims)
* Suncorp which owns AAMI insurance- $200 million trigger for re-insurance
* IAG which owns NRMA insurance - $150 million trigger for re-insurance
* Unfortunately for many house holds and businesses, flood insurance is usually very specific and contains many exclusions, and for many, it was an optional extra and it has been estimated that many homes and businesses did not opt for flood insurance and may not be insured
* The flooding in QLD and VIC will be expensive for the insurance companies
* If you own mining stocks, you will need to check out which mines have been affected in the flooded regions, you can check the company announcements on their websites, on Commsec, Etrade or whatever trading site that you're registered with

How will the floods affect our Government?

All level of Government budgets, Commonwealth/Federal, State and Local, will be affected by the same problems:
* Loss of taxation revenue(GST/payroll tax/PAYG income tax/company income tax/levies/rates)
* Increased expenditure to rebuild infrastructure (roads/rails/ports/ferry docks/sewerage/highways/bridges/community centres/schools/electricity)

Which industries will the flood create a demand in?

Months after, when the flood water recedes and the mud is cleaned, rubbish is dumped and Queenslanders and Victorians (and to some extent, Northern New South Wales) are re-building their lives again- there will be a demand for the following:

* Cars
* Housing, builders, plumbers, electricians, engineers
* Supplies for the construction industry
* Electrical goods and homewares (washing machines, fridges, microwaves, plates, furniture etc)

Do you need financial assistance because of the floods?

There are various options out there in the form of grants and government assistance. Check out the following links here to see if you can qualify:

* Agricultural and farming assistance
* Three month payment package for those who cannot return to their jobs and have lost their jobs
* The main site outlining assistance for Queenslanders
* provided a great outline of the government payments available
* Disaster Recovery Payments at Centrelink or call 180 22 66
* Major banks are placing mortgage payments on hold for affected households - contact your bank to find out if they can assist you with this

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