Floods threaten Victorian towns as economic impacts of Queensland disaster grow

Floodwaters have ravaged country Victoria over the weekend, with the town of Horsham preparing for the worst today as the Wimmera River is expected to hit its peak, while a total of 46 towns have already been hit, affecting over 3,000 people and 1,600 properties.

The disaster has struck the western district of the state as the clean-up effort begins in Queensland, where the economic ramifications of last week’s floods are beginning to surface. Deutsche Bank has also released a report warning inflation could rise as fruit and vegetable prices are sent skyward.

”Given Queensland is a key producer of supply-constrained commodities, we are more inclined to view the ultimate economic impact of these floods through the lens of an inflationary supply shock,” the report states.

The death toll of the floods has now reached 18, after a middle-aged man was discovered yesterday in Queensland. Fourteen people are still missing.

The city of Horsham in Victoria’s west is in danger today, with emergency services workers expecting the worst floods in a century. The Wimmera River is expected to break its banks, peaking at levels seen last during the 1909 flood.

The floods also come after the city of Echuca was flooded over the weekend, with 170 residents forced to evacuate after the Campaspe River peaked. Evacuation warnings have also been issued for Panmure and Allansford.

Several other towns including Quambatook, Culgoa, Donald and Boort are also threatened by the rising Avoca River.

Overall, 3,500 people have been forced to leave their homes out of the 43 affected townships and cities.

SES incident controller Stephen Warren told the ABC this morning that over 100 homes in Horsham are expected to have at least partial water damage and that 500 other properties will be hit.

“It’s pretty serious. It will be a creeping flood, but certainly we need the community to be prepared for this,” he said. “We are expecting the waters to get into the CBD and there is a likelihood that Horsham will be split in two for a period of time.”

Rob Spence, chief executive of the Municipal Association of Victoria, also said the councils to be affected will require financial support from both state and federal governments. “A lot of the councils that are affected here are the poorest in Victoria,” he said.

So far no residents have been killed or reported missing, but emergency services workers have warned people to stay away from the floodwaters after 50 people had to be rescued after becoming stranded.

While the floods have been far less devastating than those seen in Queensland, premier Ted Baillieu has said that the heavy rainfall, which has also affected other areas including Ballarat and Creswick, will have an economic impact.

“We have to recognise across Australia there is going to be significant impact on agricultural production,” he said, adding it could hit the state’s budget. “This is obviously going to impact on the cost of living. I think there’s no doubt about it.”

And as the clean-up effort in Queensland begins, the economic impacts of the floodwaters is now becoming known. Treasurer Wayne Swan has said the financial repercussions of the floods could be devastating, with billions needed to replace infrastructure, millions awarded in support payments and temporary lodging for those residents without homes.

Insurance companies have also warned they will take a hit due to the thousands of claims to be lodged in the next several weeks.

Swan has said donations to appeals are needed “because in economic terms the scale of this disaster is probably the largest in Australia’s history”. Prime Minister Julia Gillard has added that, “the eventual cost will be vast, as will the contribution from the Australian government”.

Premier Anna Bligh has said over 500,000 square kilometres of the state had been affected, with two million people in disaster zones. The entire cost is expected to run into the billions, with over 28,000 homes needed to be rebuilt, along with many that require urgent repairs. Critical infrastructure in the Brisbane CBD will also need to be repaired.

The economic impact will also hit GDP, Deutsche Bank has warned in a new report. The bank claims 2011 first quarter GDP growth will lose 0.5 percentage points due to rain-related disasters – but it also warns inflationary risks will be much worse.

”We don’t, however, consider such estimates provide much guide to the ultimate economic impact of the floods,” the report said.

”Given Queensland is a key producer of supply-constrained commodities, we are more inclined to view the ultimate economic impact of these floods through the lens of an inflationary supply shock.”

The report also warns that “the clearest impacts should be seen in food prices – specifically fruit and vegetables as well as meat prices”.

Clean-up efforts have continued in Brisbane today, but large parts of the state remain in danger. Dirranbandi remains isolated, while Condamine is still off-limits for evacuated residents as the Condamine River is expected to peak.