Regional Economies to Rise From the Ashes
There will be a silver lining for areas devastated by fire with a resurgence predicted for real estate, building approvals and gross regional product.
While many areas were still reeling from the emotional and financial impact of Australia’s summer of smoke and fire, regional economies are tipped to flourish, according to PRD’s latest research report.
The impacts of COVID-19 and the stock market crash would also be softened in these areas compared to capital cities.
PRD analysed the long-term effects of four previous catastrophic bushfires in Australia and found that each community was in a better economic position just a few years down the track.
Related: Regional House Prices Outperform Capital Cities
Gross regional product growth after bushfire
| Fire | Insurance Cost | Year of Fire | One Year Later | Third Year | Fifth Year |
|---|---|---|---|---|---|
| Canberra Bushfires 2003 | $350m | 0.4% | 3.1% | 0.7% | 0.1% |
| Black Sunday Bushfires, Victoria 2009 | $1.07bn | 0.2% | 0.5% | 2.8% | 1.2% |
| Perth Hills Bushfire 2011 | $35m | 0.2% | 5.8% | 4.9% | 3.0% |
| Pinery Bushfire, South Australia 2015 | $61m | 4.5% | 9.7% | N/A | N/A |
Source: PRD - Australia Bushfires | The Real Estate Perspective
PRD chief economist Asti Mardiasmo said while emotional anguish could not be quantified, when communities chose to unite and rebuild there were positive economic benefits.
“Each of the four previous bushfire affected areas analysed experienced an increase in gross regional product growth in the year immediately following the bushfires,” Mardiasmo said.
“For example, the Perth Hills region experienced an increase in GRP growth from 0.2 per cent in the year of the bushfire, up to 5.8 per cent in the year following.
Median house prices flattened in all locations in the year of the bushfires, but by the second-year medians were above those in the year of the bushfires.
The report also found that economies started to turn around once compensation and insurance payments filtered into the communities, and the towns were rebuilt.
Demand for construction often bought more people to the towns, boosting demand for accommodation, food and services.
Once charities passed on donated funds, local economies also started to improve with that money being spent locally helping many business owners get back on their feet.
Mardiasmo said it was essential these funds were quickly passed on to residents so that the economic cycle was kick started in these towns again.
PRD managing director Todd Hadley said historically, local economies in bushfire affected towns underwent a resurgence within just a year of the disaster.
“While it may be hard now for anyone to believe their community will survive, let alone thrive again, our research shows that is exactly the case,” Hadley said.
“Our analysis should give confidence to those wishing to remain in their local area but are unsure about its future economic viability.”
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