Short and medium term impacts of Australian bushfires

[rederob]

a large proportion of the rebuilt will be funded by multinational insurance companies, so you will have a lot of funds that are currently stored in US bonds and equities flow into the hands of local tradesmen and women.

In perspective, the recent loss of buildings in NSW is about 10% of the monthly dwelling approvals for that state, and given that the rebuilds will probably be over a year or so, the "new" builds will comprise maybe ONE percent of all dwelling approvals over the course of a year.
However, my point was about the amount of money that is going to be available in the affected communities overall, as farmers have already had the whammy of long term drought bite them and it is a bit presumptuous that everyone and everything "burnt" will be covered (for that matter "adequately") by insurances.

 

[Value Collector]

In perspective, the recent loss of buildings in NSW is about 10% of the monthly dwelling approvals for that state, and given that the rebuilds will probably be over a year or so, the "new" builds will comprise maybe ONE percent of all dwelling approvals over the course of a year.
However, my point was about the amount of money that is going to be available in the affected communities overall, as farmers have already had the whammy of long term drought bite them and it is a bit presumptuous that everyone and everything "burnt" will be covered (for that matter "adequately") by insurances.

I never said everything will be covered by insurance, I said replacing everything will cause increased economic activity over the medium term, whether that replacement is funded by insurance, savings, debt or charity doesn’t matter.

the fact is stuff needs to be replaced and in the medium term that produces economic activity in the affected areas, it’s just the way it is.

you can argue that long term economic activity will be offset due to insurance premiums rising, people having less savings, and debt being incurred, but those only take effect in the long term, medium term there will be a boost of activity.

 

[rederob]

I never said everything will be covered by insurance, I said replacing everything will cause increased economic activity over the medium term, whether that replacement is funded by insurance, savings, debt or charity doesn’t matter.

That's just a guess.
There will be short term spending, and it will be mostly be based on increasing levels of debt for those who can afford to rebuild.
The medium term - 3-5 years - will be lean unless there are welcoming rains. Until then the debt cycle (even spiral) will circumvent economic recovery.
Sadly, rural communities have high risk of suicides and one aspect is "economic change due to natural disasters or climate change."

you can argue that long term economic activity will be offset due to insurance premiums rising, people having less savings, and debt being incurred, but those only take effect in the long term, medium term there will be a boost of activity.

I would argue a grim future in the longer term. I say this with first hand knowledge from a friend who was lucky enough to own two small farms in the Kingaroy region, so he has no mortgage. He's still on the land and just turned 80. He and his wife have been hand feeding their animals for over a year, and that is those few breeders they now have left. Their "disposable" income only comes from selling down their stock now, and that's about to cease.

 

[Value Collector]

I would argue a grim future in the longer term.

People always do, and so far they have always been wrong.

 

[rederob]

People always do, and so far they have always been wrong.

Tell that to the dairy industry for starters.
Then to irrigators.
Or the rural orchardists pulling out their trees.

 

[Value Collector]

Tell that to the dairy industry for starters.
Then to irrigators.
Or the rural orchardists pulling out their trees.

Sure certain industries will struggle occasionally, but you are making out the general economies future is grim.

I don’t think this is the first time orchardists have had to prune some trees because of drought.

As for dairy, it’s a bad business, and is going to get harder regardless of the weather.

 

[rederob]

Sure certain industries will struggle occasionally, but you are making out the general economies future is grim.

I don’t think this is the first time orchardists have had to prune some trees because of drought.

As for dairy, it’s a bad business, and is going to get harder regardless of the weather.

Except for an exceptionally small component of activity in rebuilds the economic activities of affected areas is going to be driven by diminished money being spent as it goes into serving greater levels of debt.
Exactly how does that translate, in your world, into:

...increased economic activity over the medium term....

 

[Value Collector]

Except for an exceptionally small component of activity in rebuilds the economic activities of affected areas is going to be driven by diminished money being spent as it goes into serving greater levels of debt.
Exactly how does that translate, in your world, into:

there is going to be exactly the same
Level of activity as there would have been + the additional rebuild.

hence economic activity will be increased.

but you do you.

 

[rederob]

there is going to be exactly the same
Level of activity as there would have been + the additional rebuild.
hence economic activity will be increased.

Really?
So with less expenditure available there will be greater economic activity.
Stop guessing.
In affected areas there are two prospects for recovery; increased annual rainfall and increased crop/livestock prices.

 

[Value Collector]

Really?
So with less expenditure available there will be greater economic activity.
Stop guessing.
In affected areas there are two prospects for recovery; increased annual rainfall and increased crop/livestock prices.

dude, I have already told you, there will be more expenditure due to insurance flows, forced draw downs on savings, debt and charity.

the heading of this thread is short to medium term, the above will increase spending in the medium term.

longterm, I do believe it will rain again, I think you are stupid if you don’t think it will.

 

[rederob]

dude, I have already told you, there will be more expenditure due to insurance flows, forced draw downs on savings, debt and charity.

the heading of this thread is short to medium term, the above will increase spending in the medium term.

longterm, I do believe it will rain again, I think you are stupid if you don’t think it will.

All you have done is guess, because in the medium term gross debt will increase for those who experienced both direct and indirect losses, so sustaining capital in affected areas is not there.
You have this warped idea that the rebuild can of itself lead to medium economic recovery, but unless there are substantial increases in livestock prices and the rains are back to historic averages, that's plain fanciful.
Yes it will rain again in the affected regions, but the prognosis this summer is very poor, so any attempts to recover stock levels will be curtailed, while cropping etc. recoveries for now are unlikely given the high probability of a 2020 el nino event.
Rather than keep guessing, try responding rationally.

 

[Value Collector]

All you have done is guess, because in the medium term gross debt will increase for those who experienced both direct and indirect losses, so sustaining capital in affected areas is not there.
You have this warped idea that the rebuild can of itself lead to medium economic recovery, but unless there are substantial increases in livestock prices and the rains are back to historic averages, that's plain fanciful.
Yes it will rain again in the affected regions, but the prognosis this summer is very poor, so any attempts to recover stock levels will be curtailed, while cropping etc. recoveries for now are unlikely given the high probability of a 2020 el nino event.
Rather than keep guessing, try responding rationally.

You build 5 houses, 3 funded by insurance, 2 funded by debt, and 1 funded by savings,

You will see medium term economic expansion, the small monthly payments on the 2 out of 5 that needed to take on 30 year loans will not have interest payments in those first few years to offset the economic activity created.

As I said I agree with you if we are talking longterm, but not short or medium term.

 

[ducati916]

All you have done is guess, because in the medium term gross debt will increase for those who experienced both direct and indirect losses, so sustaining capital in affected areas is not there.
You have this warped idea that the rebuild can of itself lead to medium economic recovery, but unless there are substantial increases in livestock prices and the rains are back to historic averages, that's plain fanciful.
Yes it will rain again in the affected regions, but the prognosis this summer is very poor, so any attempts to recover stock levels will be curtailed, while cropping etc. recoveries for now are unlikely given the high probability of a 2020 el nino event.
Rather than keep guessing, try responding rationally.

Seems VC is unaware of Bastiat and his broken window fallacy.

https://en.wikipedia.org/wiki/Parable_of_the_broken_window

jog on
duc

 

[kahuna1]

I doubt the destruction of 100 plus years of infrastructure, .... fences and yards will be undone quickly.

Houses, a mere fraction of the monthly build ... may be replaced.

In 2014 some of these areas were experiencing the worst drought in 100 years of records.

In 2019, 5 years on and massively below rainfall, its now a once in a 400 yer event.

For some regions just burnt, the question is viability longer term as farmland being used as it was for the last 100 years.

The idiotic view of forever growth of GDP or land that can sustain as it always did when clearly things have changed is an absurdity.

Whilst unwelcome to admit, these at the core are chemical reactions and as idiotic as it sounds, climate denial is a delusional myth despite 97% of all scientists in the field agreeing on the topic and threat is real.

If you add CO2 to an atmosphere it hangs around for hundreds of years and traps heat. CH4 or methane is 80 times worse and other gasses even more diabolical. Even base chemical reactions and their products are denied by some flat earth people called climate deniers.

We as humans either ADJUST or perish. What once was, is no longer viable in some cases.



Deny all you like.

Factually these numbers and chemical reactions and heat trapping are beyond stupid debate.

Old farts speaking about past events being worse are idiotic. NO old fart is 3 million years OLD !! When some of the gasses were at similar levels, NONE are 65 million years old where things will be in 2100 and every land animal over 30kg went extinct. That I might add took 35,000 years and a meteor hitting the planet. We humans, who came well after this will have done the same in 300 years.

I am sure some will survive, humans, either way. Pity about all the other plants and animals.

Vast areas of the planets food basket growing areas are undergoing radical change right now and with world population growing 50% by 2100 we face 25% of arable land becoming less viable for farming and in some cases unable to support even a crop.

Welcome to the new world.

 

[rederob]

You build 5 houses, 3 funded by insurance, 2 funded by debt, and 1 funded by savings,

You will see medium term economic expansion, the small monthly payments on the 2 out of 5 that needed to take on 30 year loans will not have interest payments in those first few years to offset the economic activity created.

As I said I agree with you if we are talking longterm, but not short or medium term.

Here's a take on the costs of Black Saturday 2009 suggesting a net loss of almost $1billion. However, these were only the measurables, as the study noted problems assessing other costs: "Due to time constraints and the difficulties in valuing indirect economic and social impacts, some of these impacts were not valued."
Here's a good article on what real people are experiencing right now as a result of the bushfires.
You have confused "activity" with "economic expansion."
Yes, rebuilding involves a lot of activity, and all this is wealth destruction (see @ducati916's link) and increased debt. You cannot create sustainable "expansion" from increasing debt.
Putting "economics" to one side, let's look at the short term for affected parties. They will need to devote time and resources to replace animal/plant stock and infrastructure (26000km of fencing is a big task). In a perfect world that would have been time spent being "productive" in managing a viable property. Now, however, that time and cost is diverted into rebuilding. Broadland cropping might do ok in 2020 if much needed rains come in time, but that's about it as horticulture and livestock in affected areas will remain in subsistence mode until well after any rains.
Currently the medium term looks bleak.

 

[qldfrog]

@Jack Aubrey : you said (and I agree: often true):

2) For every complex problem there is an answer that is clear, simple, and wrong. (H. L. Mencken)

if you apply that to Global Warming for dummies , what is the conclusion you end up with?
Well done: you are on your road to enlightenment; now is the time to use your computer, and rent a few science books at the library to make your own mind!
Have a great evening.

 

[rederob]

@Jack Aubrey if you apply that to Global Warming for dummies , what is the conclusion you end up with?

AGW is simple - a "blanket" effect warms the planet (but perhaps that's too complex for @qldfrog ).

 

[basilio]

I think discussions about rebuilding after these fires is very problematic in a number of cases.

I lived in Northern NSW years ago and had good friends in some of the areas that have been devastated. My take on what will happen is informed by this experience.

1) Hundreds of places that have been destroyed are in small bush communities. Many were on Multiple Ocupancy communities. Few if any of the houses would have been insured . They were mostly owner built and ranged from very basic and simple to adequate.
But it is unlikely many were insured.

2) If some places have been insured it is highly unlikely the payout will cover rebuilding. There are now new regulations in place on the type of buildings allowable in high bushfire risk areas. These require far more substantial fire protection at significantly higher costs than would be afforded by current insurance payouts.

3) There is a real possibility that rebuilding will not even be allowed or practical in many remote, high bushfire risk areas. This is down the track but I suspect the challenges of points 1 and 2 plus concerns about ongoing fire risks will cause a reappraisal of allowable development in many of these areas.

The development of many of these homes and small communities was a slow long term process done by young people on a more generous social security system. These factors no longer exist.

I honestly can't see what the future holds for the many people who lost everything they owned and, as far as I can see, will walk away in their 50's, 60's and 70's with just the shirts on their back.

 

[Jack Aubrey]

@Jack Aubrey : you said (and I agree: often true):


if you apply that to Global Warming for dummies , what is the conclusion you end up with?
Well done: you are on your road to enlightenment; now is the time to use your computer, and rent a few science books at the library to make your own mind!
Have a great evening.

If I bring one more science book into my unit I will exceed a) the rated floor loading, and b) my wife's patience.

I do spend quite a lot of time on skepticalscience.com (which has been actually debating these issues since 2007).

I would certainly classify climate change as a VERY complex problem and one that does not lend itself to simple solutions. As a "classical liberal" in economic terms, and as a former regulator, I do tend to favour market-based solutions (as opposed to regulation or central directives). As a geek, I am also attracted to technical solutions (properly and thoroughly tested) being deployed in an experimental framework. As a democrat (small 'D"), I think governments should act in the interests of all their citizens and work towards a more prosperous future.

 

[SirRumpole]

I would certainly classify climate change as a VERY complex problem and one that does not lend itself to simple solutions. As a "classical liberal" in economic terms, and as a former regulator, I do tend to favour market-based solutions (as opposed to regulation or central directives). As a geek, I am also attracted to technical solutions (properly and thoroughly tested) being deployed in an experimental framework. As a democrat (small 'D"), I think governments should act in the interests of all their citizens and work towards a more prosperous future.

I'll point out a couple of instances where "the market" has clearly failed, ie banks where our four pillars are pretty clearly in some sort of collusion to price interest rates on loans at the highest they can, and interest rates on deposits at the lowest they can, they all seem remarkably similar with the same idea of pricing to maximise profits. Not one of them seems to have the original thought "if we raise/lower our interest rates we might get more customers" . The same applies to private health insurance companies which are in the process of pricing themselves out of business mostly at the same time by offering a product with minimal difference to their competitors.

Which is why I think that maybe governments should go back into the banking and health insurance business, to provide a better deal for consumers and cattle-prod the complacent corporates into some real competition for their very existence.

Of course that will never happen under this government , and maybe not even under Labor which seems to prefer over regulation to actual competition.

PS, sorry this appears in the bushfires thread it's a bit off topic here.