Counting the cost of the big dry - $4 billion

June 8, 2005 - 5:19PM

A new forecast suggests the big dry will wipe $4 billion off Australia's economic growth this year, as new figures show nearly all of NSW is officially in drought.

The grim economic prediction and bleak assessment of NSW came as weather forecasters today held out the hope of rainfall of up to 30 millimetres through a large area of south-eastern Australia later this week.

But the rain is unlikely to water down the economic impact of one of the worst droughts on record.

Westpac senior economist Justin Smirk said the economic impact, although severe, will not be as big as the nationwide drought of 2002-03.

The current drought is focused on the eastern states while Western Australia has enjoyed good rainfall and a positive start to the winter crop season.

"So while the West Australian crop will provide some offset, even if we get average seasonal conditions from here we estimate that the downturn in farming output will subtract around $4 billion from economic growth in 2004-05 and a further $1.4 billion in 2005-06," Mr Smirk said.

"The West Australian crop means it will not be a nationwide drought, but will nevertheless still have a significant impact."

WA is expected to produce about half the nation's winter crop this season, after the Australian Bureau of Agricultural and Resource Economics (ABARE) yesterday slashed its estimates for grain production in the drought stricken eastern states.

Despite the severity of the drought and its impact on the economy, Mr Smirk said it will not top the event of 2002-03, which wiped a full percentage point off GDP.

"We've already seen with the last drought that farmers shed a lot of labour, a lot of staff," he said.

"Farmers have already adjusted to working with less so it's unlikely you'll get that effect again.

"In terms of economic impact it's not going to be as large as the 2002-03 drought."

The NSW government's monthly drought figures today showed 91 per cent of the state is now officially drought-declared.

"This is a devastating shift in climate and very, very worrying for the long-term of eastern Australia," NSW Premier Bob Carr said.

The state government announced it will provide $1.5 million towards an 8.7km water pipeline for the drought-ravaged city of Goulburn.

The pipeline will pump water from the Mulwaree Ponds to the dam which supplies Goulburn with water, guaranteeing the inland city a water supply until August 2006.

Meanwhile, Bureau of Meteorology senior forecaster Scott Williams said rain bands were expected to cross parts of the country on Friday, with heavier falls on Saturday in south-eastern NSW and Victoria.

He said the falls could trigger a significant change.

"This could see a change in the weather pattern and we may well get into a more normal winter rainfall pattern through south-eastern Australia after this," he told ABC radio.

The predicted rain, however, is being treated by some growers as a cruel tease.

Jess Prell, who runs a sheep farm 30km from Goulburn, is paying little attention to the forecasts after enduring months with little or no rain.

The bureau predicts the area may receive only minimal rain on the weekend.

"We've been told it would come before, and then it hasn't. We just can't get our hopes up and then be passed over again," Ms Prell said.



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