Published works

Australians are all too familiar with disasters arising from natural hazards, such as bushfires, cyclones, and floods. With climate change, we face the possibility of more frequent and intense natural hazards where they occur as in new and unexpected places.

As we enter an uncertain decade, we find ourselves increasingly asking: What does a disaster-resilient Australia look like? How can we help our most vulnerable Australian communities endure the cumulative effects of frequent disasters? Amid tightening fiscal budgets, how can we make the right policy choices for our communities and economy to prosper in this new reality?

Answering these questions requires deep thinking in order to be able to support our communities, businesses, and the broader economy, and help them become more disaster resilient; to not only adapt to a “new normal” but thrive in a changing climate. From a policy perspective, this becomes more pertinent when we consider that the average annual total economic costs of natural disasters of Australia are forecast to reach $39 billion per year by 2050 (Deloitte Access Economics, 2017).

This project has estimated the impact of four disasters in recent Australian history on income of individuals residing in disaster-hit areas. By defining individuals’ ability to return to their pre-disaster income levels as economic resilience, we focused on the following case studies: The 2009 Victorian Black Saturday bushfires, the 2009 Toodyay bushfires, the 2013 Tropical Cyclone Oswald, and the 2010-11 Queensland floods. Through real-life case studies, our research helps illustrate how these events—of different types, localities, and scales—impact and ripple through communities and the broader economy over time. 

We have employed the difference-in-differences modelling approach to pinpoint the income changes due to the disasters. That is, we compared the income levels of individuals living in the disaster-hit areas (treatment group) with incomes of those who resided in comparable areas that were not directly hit by the disaster (control group). The control group provides us with the income path that would have been expected for the disaster-hit population had the disasters not happened, and thus enables us to compute any income deviations (losses or gains) in the disaster-hit areas. To identify the economic vulnerabilities, we analysed in detail the income changes with respect to individuals’ demographic attributes and sectors of employment. Our primary dataset is the Australian Longitudinal Census Dataset of 2006, 2011 and 2016, which includes 5% representative sample of the Australian population and provides data on a range of our economic, demographic, and sectoral variables.

The research has found that the extent of the economic impact of disasters on individuals’ income depends on the type, intensity, and location of the disaster. This finding departs from most policy assumptions, which tend to put all the disasters into the same basket when designing relief and recovery programs.

However, there are also common vulnerable groups across different disasters. We found that certain sectors, such as agriculture and accommodation and food services (of which tourism is part) tend to be the most adversely affected sectors across all types, locality and severity of disasters.

An additional clear insight obtained in this research is that ‘economic smallness’ is a point of vulnerability. In particular, low income earners, small-business owners and part-time workers are more likely to lose income following a disaster. Middle and high-income earners, full-time workers and owners of larger businesses are far less likely to lose income; indeed, they might even earn more.

Part of the reason why the ‘economically smaller’ demographic groups are vulnerable to disasters is that they are employed in disaster-sensitive sectors. Thus, the sectoral vulnerability is translated into demographic vulnerability.

We also found that time frame for recovery matters. For example, following the 2009 Victorian Black Saturday bushfires, low-income individuals and the female workforce experienced lower income levels that persisted until 2016. This contrasts with high-income earners, who despite having lost income in the short term, were able to bounce back to their original income trajectory by 2016. Even though it is intuitive to think that economic resilience levels could be different across different demographic and sectoral groups, this project brings this intuition to the fore, and documents exactly what those less resilient groups are, as well as the associated income losses (or gains).

Overall, this research has revealed disaster costs that would not normally be identified by the direct damage estimates. For example, the direct total (tangible and intangible) damages of the 2009 Victorian Black Saturday bushfires were $7 billion (Deloitte Access Economics 2016). However, we found that, following the Black Saturday bushfires, agricultural employees who lived in the fire-ravaged areas lost an average of A$8,000 in annual income for the following two years. Employees in the accommodation and food services industries lost an average of A$5,000 per annum. The indirect loss estimates are typically bypassed in the wake of disasters, as the policy community typically focuses on the direct damage estimates when assessing the economic costs of disasters.

This research has also demonstrated that the burden of lost income due to the disasters is not borne equally. That is, the income gap routinely increased after disasters. For example, following the 2010-11 Queensland floods, the difference between those on low and middle incomes in the Brisbane River Catchment area increased by about $7,000 a year. This meant that the poor became poorer following disasters in Australia. In addition, female workers tend to lose income after some disasters compared to their male counterparts. Moreover, the income divide persisted in the medium term after some disasters. This finding of rising inequality is novel for Australia and was not documented previously.

In an earlier phase of this research program, during 2014-15, we studied the nation-wide impacts of floods and bushfires and their effects on economic sectors in Australia. This research used national accounts data from six Australian states for the period 1978-2014, and explored whether and how floods and bushfires as well as extreme weather (i.e. extreme precipitation and temperature) impacted the course of sectoral activity in the overall Australian economy.  We found that Australia’s sectoral output is sensitive to floods – Australia lost more than two years’ worth of agricultural output during the period 1978-2014 due to floods. Bushfires, on the other hand, do not affect overall output, though they exhibit sectoral effects. The project Optimising Post-Disaster Recovery Interventions in Australia complements this earlier research by studying individuals’ income changes through four case studies.

The policy implications of this research are clear and important. Decision makers need to have a more disaggregated view to understand the economic impact of disasters. Our findings show that socioeconomic vulnerabilities are concentrated in certain demographic groups and sectors of the economy. In addition, both the poor and female employees exhibit lower economic resilience to disasters, in that they may not be fully able to return to their pre-disaster income trajectory in the medium-term. This highlights the potential for disasters to widen income inequality over time.

In a nutshell, this research suggests that policymakers need to better understand the socioeconomics of disasters and formulate public policies to better distribute scarce budgets and resources towards vulnerable socioeconomic groups and employment sectors that are more sensitive to disasters.

In terms of utilisation, the project has focused on generating awareness and provoking thoughts among the policy and wider community regarding economic effects of disasters on individuals. The project has produced four research reports pertaining to each case study, along with four policy briefs that summarized each report. The project also produced demographic profiling analyses for each disaster analysed. The findings from these four case studies were disseminated to a national audience through a webinar in August 2020, and the feedback received was overwhelmingly positive. The project has also published two articles in ‘News and Views: Australian Journal of Emergency Management’ and was featured in two articles in the Fire Australia magazine, which helped share the results with the emergency management sector. Finally, our demographic profiling analysis on the VIC Black Saturday bushfires and associated findings have been cited and discussed in the recent CSIRO Report to the Prime Minister Morrison on climate and disaster resilience (CSIRO, 2020).

The project has also made strong media engagement about its findings. These media outputs included, two articles in The Conversation, several radio interviews on the economic impact of bushfires (including two at ABC Radio National “The Money” program with Richard Aedy, ABC North Queensland, South Korean eFM), a number of national newspaper articles, quotations and citations, several media releases made by the media team at Deakin University.

Looking ahead, we expect to disseminate our research reports and policy briefs more widely to public and private organisations in Australia. We also expect to disseminate our findings through media and policy engagement in the next bushfire season to create further awareness and provoke thoughts on how Australia can enhance the economic resilience of its communities. The project team is currently involved with new projects on the health and wellbeing analysis of Black Saturday bushfires and Queensland Floods as direct outcomes of the present project. Finally, we will be progressing a number of working papers that have greatly benefited from and been informed by our BNHCRC research program methodology and learnings.

To conclude, we believe that this project is the end of the beginning rather than beginning of the end regarding potential research projects in the economics of disasters in Australia.