Abu Dhabi, UAESaturday 22 February 2020

Australian businesses to rise from the ashes of a season charred by bushfires

Tourism and farming sectors are some of the worst affected, with many companies writing of almost 90% of their income this summer

 A New South Wales Rural Fire Service (NSW RFS) firefighter back burning on Long Gully Road in the northern New South Wales town of Drake, Australia, in September 2019. The bush fires continued to rage for several more months. EPA 
 A New South Wales Rural Fire Service (NSW RFS) firefighter back burning on Long Gully Road in the northern New South Wales town of Drake, Australia, in September 2019. The bush fires continued to rage for several more months. EPA 

The whole summer has been a write-off” is the sentiment coming out of Australia following one of the worst bushfire seasons on record.

“Everyone is really hurting,” says Jodie York, who runs a fishing charter business in the small East Gippsland town of Mallacoota, which was at the epicentre of the devastating blazes in the state of Victoria. “Businesses are [finding] it tough, especially the accommodation [providers],” Ms York adds.

Like so many other townships in the affected areas of New South Wales, Victoria, Queensland, South Australia, and the Australian Capital Territory, the coastal town of Mallacoota – popular for boating, swimming and surfing – relies heavily on visitors during the summer to carry it through the leaner winter months.

“East and Central Gippsland tourism businesses were hit hard by the effects of the bushfires,” says Destination Gippsland chief executive Terry Robinson. “Many have reported losing 90 per cent of their trade during the first two weeks of summer, with the state government estimating an economic impact of at least A$65 million (Dh159.3m) in lost tourism in East Gippsland for January.”

It is a familiar story for operators and producers in the states outside Victoria, too, with the fires destroying 10.7 million hectares of land, razing 2,000 homes, and killing 25 people.

“Year-on-year reservations are down,” says Shane O’Reilly, managing director of the 94-year-old O’Reilly’s Rainforest Retreat in the Gold Coast Hinterland. “Our concern is for autumn, which usually is a busy time of the year … our [booking] numbers are not indicating that it will be just yet.

“Our day visitor trade has been noticeably quiet in the past four months people are unsure of the safety of the bush,” says Mr O’Reilly, whose family pioneered ecotourism in Australia in 1915, when they began hosting visitors to the now World Heritage-listed Lamington National Park.

“Australia’s tourism industry has taken a massive hit,” agrees Australia’s Federal Tourism Minister, Simon Birmingham. “Tourism businesses are feeling the pressure as tourists delay or cancel their travel plans, even in many areas that have not been affected.”

Tourism accounts for 3.1 per cent of Australia’s gross domestic product and one in 13 people rely on a job in the sector. With the country anticipating a drop in the nine million visitors it welcomes annually, who boast a collective spending power of up to A$30bn, government and industry are in an uphill battle.

In a bid to assist, the federal government has injected A$2bn in bushfire relief funding, while Tourism Australia has been forced to shelve its A$38m global “Philausophy” campaign – featuring Kylie Minogue and rolled out in the UK on Christmas Day – and replace it with a “Holiday Here This Year” local promotion. Destination NSW and The South Australian Tourism Commission have jumped on the domestic bandwagon too, introducing their respective “Now’s The Time to Love NSW” and “#BookThemOut” campaigns.

Tourism is not the only industry suffering, though, more than 100,000 livestock have perished and as many as 480 million wild animals (including a distressing number of koalas and kangaroos) were killed or displaced.

“It has been a devastating start to 2020 for many red meat and livestock producers,” says Jason Strong, managing director of Meat and Livestock Australia. “The extent of the full impact to livestock is unknown and will take time to understand. Our latest information is that 9 per cent of the national cattle herd live in regions that have been significantly impacted and a further 11 per cent in regions partially impacted.

“For sheep, 13 per cent of the national flock live in regions that have been significantly impacted and a further 17 per cent in regions partially impacted,” he adds.

An image from the 'Now’s The Time to Love NSW' campaign. Courtesy: Destination NSW
An image from the 'Now’s The Time to Love NSW' campaign. Courtesy: Destination NSW

“Because the bushfires came on top of the drought, the effect on farmers has been quite devastating,” sayd Donna Carrier, owner of award-winning cafe Bent on Food in the NSW enclave of Wingham and a member of the Destination North Coast tourism board. “Many have sold off their cattle to the abattoirs and small producers have not been able to water crops, so the lack of local produce is evident.”

Ms Carrier, whose business is down between 25 to 35 per cent this year, says it is only in the past few weeks that she has noticed a return in tourists.

Despite this, economists are forecasting the fiscal impact will be minimal, with the spillover effect and consumer confidence causing most concern. The central bank is forecasting that Australia’s economy will expand by 2.7 per cent this year and 3 per cent in 2021. During a speech at the National Press Club last week, Reserve Bank of Australia governor Philip Lowe said Australia had turned a corner following a “rough period”.

“The economic impact of the fires in the areas affected is very large. There have been very significant disruptions to normal activity in these areas and there has been large-scale destruction of homes, farms and businesses as well as public infrastructure,” he said.

“In assessing the impact of this on the Australian economy as a whole we have taken into account that there will be a material rebuilding effort and that government grants and insurance payments will assist many people,” he said.

“On this basis, our assessment is that GDP growth for 2020 as a whole will be largely unaffected.”

In the short term, however, Mr Lowe said there will certainly be an effect on the December 2019 and March 2020 quarters. “We estimate that the effects of the bushfires will reduce GDP growth by around 0.2 percentage points across the two quarters.”

Yet many grassroots producers such as Ralph Wilson are trying to figure out what to do next. “I don’t think we’ll get back to where we were before the fires,” the Wilgro Orchards owner tells The National.

Mr Wilson, who has lived in Batlow, New South Wales, for 45 years and operated an apple farm for 36 of them, says: “No one can recall a fire event that’s caused anywhere near the destruction that this fire event has caused.

“It will take a long time to recover. The district will be down about 25 per cent overall. Our issue is that if we replant, it takes between seven and 10 years before we get a positive cash flow out of that, and it costs a lot of money to do it. So we feel at this stage we’re probably not going to do a lot of replanting, we’re going to concentrate on the fruit we have saved.”

Batlow produces around 7 per cent of the national apple crop, so Mr Wilson says the losses there are unlikely to have a huge impact on supply.

It’s all about keeping things going now, and there is plenty to do. “All our boundary fences were burnt out and our neighbours have got cattle and sheep so we have had to put up new boundary fences to try to stop them from getting into the orchards. Even things like kangaroos are around the orchard because everything else is burnt out.”

Despite the obvious challenges, it is not lost on Mr Wilson that others have suffered greater losses than he has. Globally renowned tourist operators such as Selwyn Ski Resort in the Snowy Mountains and Southern Ocean Lodge on South Australia’s Kangaroo Island have been destroyed, but hope to rebuild.

Our issue is that if we replant, it takes between seven and 10 years before we get a positive cash flow out of that

Ralph Wilson, owner, Wilgro Orchards

It’s impossible to know whether the horror season is completely over, and the battle just got more challenging for the tourism sector with the outbreak of the coronavirus.

On February 1, Australia issued a two-week travel ban on all foreign nationals arriving from China, which was the biggest source market for short-term visitors in 2018-19, according to a November report by the Australian Bureau of Statistics. Visitors from China hit a record high of 1.4 million in the year to November and now make up 15.4 per cent of the total. Chinese nationals are also the biggest spenders, accounting for 27 per cent of total spending by tourists in Australia, ratings agency Moody’s Investors Service warned.

Although the country’s banks have a fairly “small” exposure to tourism-related sectors, a prolonged slump in the sector, combined with a further dampening of consumer sentiment could hurt the broader economy, leading to higher loan losses for the banks, the agency said.

“Consumer confidence in Australia is already subdued because of concerns about the global economy and moderating domestic conditions. Since June 2019, the Reserve Bank of Australia has cut the official cash rate three times by a total of 25 basis points, and further cuts are widely expected by the market for 2020,” Moody’s said.

Updated: February 11, 2020 05:01 PM

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