CoPS/IMPACT Working Paper Number G-299

Title: The 2019-20 Australian Economic Crisis Induced by Bushfires and COVID-19 from the Perspective of Grape and Wine Sectors

Author: Glyn Wittwer


The unprecedented bushfires from September 2019 to January 2020 in south eastern Australian resulted in 34 deaths and destroyed homes, farmland, infrastructure, crops and conservation land. Even though most of the capital damaged was away from urban areas, substantial impacts resulted in urban areas including Newcastle, Sydney, Wollongong and Canberra, due to smoke pollution. Now the recovery phase is being hindered by the global COVID-19 pandemic.

This study uses an aggregation of TERM-WINE, a multi-regional, dynamic model of Australia, to examine the impacts of bushfires and the pandemic on the Australian economy. It places some emphasis on the grape and wine industry. In a number of respects, the industry is a loser in the crisis, due to direct destruction of vineyards and wineries from bushfires, and in some regions from smoke taint. On-premise consumption of wine will be curtailed by social isolation responses to COVID-19. At the same time, the response to the crisis may increase off-premise wine consumption.

It would appear that the modelled duration of the COVID-19 induced economic crisis in this study is optimistically short. Nevertheless, the bushfires plus a severe disruption for four months due to the pandemic are sufficient to reduce national economic welfare by $105 billion in net present value terms. This excludes estimates of the value of conservation land and fauna destroyed by bushfires. This provides a context for the magnitude of the appropriate fiscal response of the Federal Government.

JEL classification: Q11; Q15; C68

Keywords: regional bushfire impacts; COVID-19 economic impacts; welfare

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