Bushfires: mega-blaze created, insurance claims top $1bn as disaster tipped to deliver $5bn hit

The national bushfire crisis has triggered $1bn in insurance claims and is predicted to deliver a hit to the economy of more than $5bn.

Scott Morrison and Emergency Management Minister David Littleproud in Canberra on Friday. Picture: AP

The national bushfire crisis has triggered $1bn in insurance claims and is predicted to deliver a hit to the economy of more than $5bn, increasing the chances that the ­Reserve Bank will cut official ­interest rates in February.

Economists warned that about half a percentage point would be wiped from national economic growth amid estimates that sheep and cattle losses could be 120,000 to 140,000 and milk supplies could take years to recover.

The estimates — in a crisis that has claimed 25 lives and burned six million hectares — emerged as state and territory leaders backed Scott Morrison’s call for an inquiry into all aspects of the bushfires as firefighters in three states battled escalating blazes.

Residents in Victoria’s alpine region were evacuated on Friday, ahead of a potentially dangerous wind change, while previously stricken parts of East Gippsland were bracing for renewed fire ­activity late into the evening.

In NSW, 3300 firefighters were deployed to battle more than 130 blazes.

In the Snowy Mountains, the massive Green Valley fire and the Dunns Road fire merged with the East Ournie Creek fire to create a mega-blaze almost half a million hectares in size.

A mild change was expected to move through southwestern NSW on Friday evening, potentially easing conditions at the weekend in some places but creating erratic fire conditions in others.

The Prime Minister this week announced a $2bn fire recovery package and called up reservists.

On Thursday, Mr Morrison floated a federal royal commission or ­judicial inquiry into the fires, but said such an inquiry needed state backing.

On Friday, he defended the government’s climate change policy as a “balanced one’’.

“It’s one that understands the need to take action here but one that balances the economy,” he told radio station 2GB.

Anthony Albanese flagged a fresh assault on the government over its “pathetic” climate change policies.

“We won’t let the government off the hook. Our supporters want us to hold the government to ­account,” the Opposition Leader said.

It is expected the cost of the ­latest crisis could top the $4.4bn ­impact of the Black Saturday bushfires in Victoria in 2009 — the equivalent of 0.2 per cent of annual GDP — with losses to agriculture, manufacturing, consumer spending and regional tourism.

Westpac economists on Friday forecast that the ongoing disaster would cut GDP between 0.2 per cent and 0.5 per cent, with the total hit to the economy likely to reach $5bn.

The Insurance Council of Australia also released figures showing insurance losses stretching back to September standing at $995m, from 11,272 claims.

The figure is expected to rise sharply as fires continue to burn.

AMP Capital chief economist Shane Oliver estimated that the fires could see a 0.4 per cent drag on the economy, starting in the December quarter and extending into the March quarter.

He said the likely drag on growth made the Reserve Bank more likely to cut rates in February, and that “the pressure for further fiscal stimulus has also intensified”.

Smoke in cities would also cut growth by suppressing retail and restaurant spending.

Companies with operations impacted by the fires face massive rebuilding tasks.

Kangaroo Island tourism operator SeaLink Travel Group said the adventure-style Vivonne Bay Lodge was destroyed by fires that swept the island, while ferry bookings had plummeted.

“The Vivonne Bay property and the restaurant, which was a higher quality bush experience, have pretty well been destroyed,” outgoing SeaLink chief executive Jeff Ellison told The Weekend Australian.

The world-renowned Southern Ocean Lodge was also destroyed on Kangaroo Island. One of Australia’s most prestigious properties, it was developed by the Baillie family and was owned in a joint venture arrangement with US-based KSL Capital Partners.

Elsewhere, farmers are facing multi-year recoveries, with independent meat and livestock analyst Simon Quilty estimating sheep and cattle losses of 120,000 to 140,000. The fires had also exacerbated a short supply in animal fodder and transport. “The impact on pastures in fire-affected areas will be significant and could see the carrying capacity of burnt grazing land reduced dramatically for several years as pastures need to be rebuilt,” Mr Quilty said.

“This will slow down the rebuilding of the Australian herd and flock when that occurs.”

Agribusiness lender Rabobank is expecting a further decline in ­national milk production this year — down from the 5.8 per cent drop it forecast in December. “It’s not going to be a one-season recovery,” Rabobank senior analyst Michael Harvey said.

Bega Cheese is expecting to lose about 1.9 million litres of milk as a result of the fires, or about 0.2 per cent of its annual supply of one billion litres.

Acting chairman Max Roberts said Bega immediately established a crisis team following the fires and had supplied farmers with emergency feed, water and generators.

National Farmers Federation acting chief executive Pru Gordon said the bushfire toll on the $60bn sector would compound the impact of the drought, and the NFF was on alert for primary producers buckling under the pressure and walking off the land in the next six months.

She said she was aware of about 40,000 head of livestock killed in the disaster, but that number was expected to grow substantially.

The damage bill from destroyed permanent plantings, ­pasture and fencing was likely to be massive, Ms Gordon said.

Josh Frydenberg told The Weekend Australian that the government’s “focus is on keeping people safe and recovering from the devastating bushfires”.

NSW Premier Gladys Berejiklian said her government was “open” to a national bushfire inquiry, but the state would also conduct its own independent review.

State-based inquiries will also be undertaken in Victoria and Queensland when the fires are ­extinguished.

A spokesman for Queensland Premier Annastacia Palaszczuk said the state would have “no issue” with a commonwealth-­initiated inquiry, while the office of Victorian Premier Daniel ­Andrews said the state was also prepared to work with the federal government.

Additional reporting: Ben Packham, Jared Lynch