The bank sees the cost of the disaster as comparable to the 2009 “Black Saturday” fires in Victoria, which destroyed 2,029 homes while causing a far greater loss of life with 173 direct fatalities.
“That would put the cost in terms of insured and uninsured losses at around $5bn,” Westpac said.
As of Friday there have been 10,550 insurance claims lodged with an insured valued at $939 million, Westpac said.
A rough rule of thumb for disasters is that the total cost is about double the insured loss, the bank said.
“Assessing the economic impact of disasters is always very difficult, particularly when the full extent of the damage is still unknown,” it cautioned.
But the most severely affected areas only account for about one per cent of the Australian economy, the bank said.
In terms of agriculture there have been thousands of livestock killed, downed power lines have disrupted dairy production and some vineyards have been burned while others will have smoke taint.
But most of the fires have been in forest rather than agricultural areas, and overall the agricultural impact will be minimal compared to the ongoing drought, Westpac said.
The wider impacts on tourism and consumer confidence, and from the airborne pollution, could be even more economically damaging, however.
The widespread global media coverage and the smoke pollution in Canberra, Sydney and Melbourne is likely to have a significant effect on Australia’s image as a holiday destination and cut into tourism, Westpac said.
The economic costs of the health effects from the smoke pollution are harder to quantify but could also be significant, Westpac said.
Westpac expects the Reserve Bank of Australia to cut the cash rate twice this year but the bushfires are “unlikely to have a significant bearing on the RBA’s decisions”.
S&P Global Ratings, meanwhile, said on Monday that the bushfires posed no danger to the AAA credit ratings of the federal government and the states of NSW or Victoria.
“We believe there is capacity within our current ratings on the sovereign and these state governments to absorb the fiscal costs, which are relatively small compared with their budgets,” S&P said.
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