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Natural disasters in Australia are very costly, and often have devastating socioeconomic effects on impacted communities. Examples in the past decade include the Victorian Black Saturday Bushfires 2009 and the Queensland Floods 2010-11, which caused significant loss of life, losses across multiple sectors (including mining and agriculture), and damage to countless homes and properties. With the severity and frequency of natural disasters expected to increase (Kitching et al., 2014), there is growing academic and policy effort towards better understanding: the risks such disasters pose on Australian communities; the impacts they have on different industry sectors and community groups; and the role that disaster risk reduction can play in minimising such impacts and building disaster resilience.
Estimating the total economic costs of natural disasters can be difficult, owing to the lack of complete and systematic data, conceptual difficulties (Kousky, 2014) and divergent predictions from growth theory about the effects of natural disasters on economic growth (Loayza et al., 2012). While the literature is inconclusive, with some studies reporting negative effects and others positive or insignificant effects (Loayza et al., 2012), a recent meta-analysis of the literature showed evidence of negative impacts in terms of direct costs (Lazzaroni and van Bergeijk, 2014), with more severe disasters causing the highest damage and increasing the likelihood of long-term and/or negative consequences (Boustan et al., 2017; Kousky, 2014).
There is also evidence of distributional effects. Economic and human losses shown to be more pronounced in poorer countries (Schumacher and Strobl, 2011), and institutional factors and educational attainment levels found to be important determinants that influence resilience and recovery (Kousky, 2014; Felbermayra and Gröschl, 2014). Economic diversity also matters. Relying on a single economic sector for income heightens community vulnerability and elongates disaster recovery time compared to diversified economies (Cutter et al., 2008). The type and interlinkages of economic sectors also play a significant role. Due to its land-intensive nature, the agricultural sector is often adversely affected (FAO, 2015). Locally, a study of major Victorian bushfires found that industries most susceptible to direct or indirect impacts are the Agriculture, forestry and fishing sector and retail trade (Stephenson, 2010). Conversely, the construction sector may experience a boom in the immediate aftermath of the disaster as households redirect expenditure towards rebuilding that they otherwise would have deferred, only to experience a lull in the next few years once that expenditure subsides (Kousky, 2014). Even with a diversified economy structure, the interdependence of sectors can have knock-on effects (Yu et al., 2014). Thus, industries more heavily reliant on inputs from the agricultural sector are likely to experience adverse effects to their production.
While these broader examinations are useful, aggregated numbers can mask or hide very large distributive impacts, as the typical instruments used (GDP and aggregated consumption) can be misleading measures of actual welfare losses (Hallegatte S, 2014). What is missing is a systematic understanding of how these broader economic impacts of natural disasters translate to the individual level vis-à-vis income effects; how long these effects persist; and which individuals within the community bear the brunt of these costs. Indeed, regardless of a country's economic development, a lower socioeconomic status has been consistently associated with greater post-disaster hardship (Norris et al., 2002), with the poor suffering significant disaster losses due to lower financial capacity and limited access to public and private (e.g. insurance) recovery assets (Blaikie et al. 1994; Gladwin and Peacock 1997). For example, while storm damage from Hurricane Katrina was uniform across demographic groups, it was lower income individuals who were less likely to have evacuated or own cover for flood insurance (Masozera et al. 2007). Many other known vulnerabilities to disasters, such as being female, old age, or with lower educational attainment (McKenzie and Canterford, 2016), are highly correlated or interdependent with income. The link between income and disasters also extends to mental health outcomes: In the case of bushfires, the longevity of disruptions to income post-disaster has been shown to materially affect the mental health of those affected by bushfires (Gibbs et al., 2016). Thus quantifying the effects of disasters based on these social and economic dimensions can help policymakers better target and evaluate disaster mitigation recovery programs.
To that end, our research program explores the impact of a number of Australian natural disasters, of various types (fires, flood and cyclone), scales (small, large), and locational settings (regional, metropolitan) on the disaster-hit individuals’ economic resilience (measured through their income stream). It disaggregates these impacts on individuals based on who they are (their demographic attributes), if they work (unemployed, employed), how much they work (part-time, full-time) and the industries they work for.
This report investigates the income effects of the 2009 Toodyay bushfire on the income trajectory of residents of Toodyay – a small regional town in Western Australia with a population of 4,450 around the time of the bushfire. The fire conditions were some of the worst seen in Western Australia at the time, and burnt around 2,900 hectares, the equivalent of 2% of the Shire of Toodyay’s total area. While no casualties were reported, the total cost of damages was estimated at $100 million (FESA, 2010b).
From a policy perspective, this report contributes to a greater understanding of the potential economic effects of natural disasters on individuals and communities living in small regional towns within Australia (FIGURE 1). Toodyay is fairly typical of such small, regional Australian towns, having an ageing population within the 1,000–4,999 population range, and an economy historically linked to agriculture, mining and manufacturing; industries which are known to be sensitive to natural disasters (Ulubasoglu et al., 2019). Such towns (~1,700 in 2016) form 9.7% of Australia’s population and are mostly concentrated around Australia's eastern seaboard (ABS, 2018).
For Western Australia in particular, it is expected that agricultural businesses in currently marginal areas, such as the Wheatbelt region (in which Toodyay is located) are most at risk from climate change (Sudmeyer et al., 2016), and so deserve particular attention when considering disaster resilience in the state.
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