US-sized Cyclone Yasi could cost Australia more than $2 billion

“A continuation and a probable increase in domestic food-price inflation will arise because of Yasi,” says Mathews of the Commonwealth Bank of Australia.

Oprah plugs for Queensland

Queensland’s prized tourism industry is also reeling and the state’s peak tourism marketing body will delay the launch of a $10 million post-floods advertising campaign which had aimed to lure visitors back to the “sunshine state.” Queensland had been expecting to cash in from global coverage generated by Oprah Winfrey’s recent visit to Australia and subsequent four-part television special. The payoff from Ms. Winfrey’s “ultimate Australian adventure” is now in doubt, as images of surging floodwaters, howling winds, and battered homes replace shots of golden beaches and tropical rainforests.

Prime Minister Julia Gillard has pledged to rebuild communities hit by Yasi, warning the country to prepare for further budget cuts to cover the expense. In the wake of the floods, Ms. Gillard proposed a one-off tax to raise $1.8 billion to help cover rebuilding costs. She has ruled out introducing another tax for Yasi.

The string of natural disasters to hit Australia over the past two years is also likely to see global reinsurers up their risk rating of the country. This, in turn, will increase the premiums they charge local underwriters – a cost ultimately borne by consumers.

“There might be a view from the global community that there has been sufficient activity here to make some changes to [risk] ratings,” Mark Senkevics, head of Australia and New Zealand for global reinsurer Swiss Re, said on Thursday. “It is likely, in my view, that will happen.”

Climate change to blame?

The move to reconsider Australia’s risk profile comes as the government’s top climate adviser issued a stark warning to the nation that the frequency of extreme weather events would only intensify.

“You ain’t seen nothing yet,” Ross Garnaut, the federal government's climate change adviser, said Thursday at the launch of a report into the impact of climate change on Australia.

The world has warmed by about 1 degree since industrialization, said the economics professor at Australian National University. The intensification of extreme weather events since then, Mr. Garnaut said, was only a fraction of what could be expected under further temperature rises.

“The science says that without mitigation – and with the sorts of emissions growth that my analysis shows will follow the industrialization of China, of India, of Indonesia and the acceleration of economic growth in Africa – then that first degree is just the beginning,” he said.

IN PICTURES: Cyclone Yasi

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