Economics of East Coast Lows

Research results

A framework for assessing economic impacts of ECL events has been developed

When a severe ECL event occurs, we need to understand the direct damages to the immediately affected areas, but also importantly, parts of the economy not directly impacted by the adverse event but which might suffer losses as an indirect consequence. Examples of indirect costs include business interruption of a business whose supplier was directly impacted, or reductions in tax receipts received or numbers of tourists visiting the area.

A framework has been developed for evaluating the distribution of effects to determine the winners and losers at different levels (sectoral, business, household and geographic) throughout both the affected region and general economy. The framework is intended to allow government to generate a more thorough understanding of the economic vulnerabilities that exist within the Australian economy as a result of extreme ECLs and other natural disasters.

ESCCI-ECL Project Results

Generic framework to determine the economic impact on NSW locations from natural disaster events

This pilot study developed a generic framework to evaluate the distributive effects of a natural or man-made disaster event for both the affected region and general economy. The framework established adopts a ‘workflow’ approach to estimate the economic impacts of natural disaster events using a combination of data sources and models, most notably a ‘bottom up’ regional computable general equilibrium model.

The framework outlined in the figure below requires the integration of a range of data sources and models, including: event and hazard models, geospatial exposure data sets, catastrophe models, asset vulnerability and damage state and recovery analyses, and systems analysis of key infrastructure networks (e.g. energy, communications, water, banking and finance).

Framework for modelling the economic impacts of natural disasters in NSW (Roche and Waters, 2013)

The outputs from the framework highlight not just the damage to the immediately affected sectors of the economy but also the parts of the economy that are indirectly affected and also suffer reduced output as a consequence. The framework also provides insights into the relationship between economic impacts, the speed of recovery and the role of government. Impacts are characterised in dollar terms and in terms of impact on employment.

The framework outputs can be used to help optimise the re-allocation of recovery services after an adverse event to minimise impacts on regional output and employment. This framework can also be used to: evaluate different recovery policy options such as a flood levy or mitigation options prior to an event, boosting community resilience; distinguish between the impacts of small and large-scale disasters; and to evaluate plausible scenarios, historic events and events as they unfold, all in current dollars.

References

Roche, K. and Waters, D. (2013). Generic framework to determine the economic impact on NSW locations from natural disaster events, Risk Frontiers Report prepared for the NSW Office of Environment and Heritage, July 2013.

Roche, K. and Waters, D. (In preparation August 2015). Generic framework to determine the economic impact on NSW locations from natural disaster events. In preparation for submission to the Australian Meteorological and Oceanographic Journal.