Queensland Floods Hurt Growth

Queensland floods at the end of 2010 and beginning of 2011 hit the local economy, but their impact is still visible several months later, Australia wide.

They were devastating, with a huge part of the state being declared a disaster zone. They hurt families, damaged thousands of houses, infrastructure, manufacturing and crops.

For consumers, the immediate impact was the increased price of vegetable and fruit. As 90% of Australian bananas grow in Queensland, their price sky rocketed and to enjoy a kilo of the humble fruit you still have to fork out at least 12$, half a year later.

But have the floods affected the Australian dollar and the interest rates?

Peter can tell you more about the week ending 24 June 2011.

Floods Hurt Growth in Australian Economy

Pure FX - 24.06.2011.

It's been a tough week in the Australian economy. Perhaps most important, Westpac cut its annualised growth forecasts last month, taking them to 2.7% YoY in May compared to 5.3% YoY in April.

This reflects a decline in output following the Queensland floods earlier in 2011, in addition to a slowdown in global production. In consequence of this decline, economists are predicting that RBA Governor Glen Stevens will refrain from raising interest rates this month.

Looking outside Australia, sentiment in the last week has been dampened owing to the debt crisis in Europe, in which Greece struggles to remain solvent.

Should Greece default it could cause economic havoc, since banks across Europe stand to lose huge sums in Greek debt. This has hurt the Australian dollar, as a currency dependent on a strong global outlook.

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