$13 Billion Drought Threat: El Nino Hits Australian Economy Hard

Australia's economy could suffer significant losses due to the strengthening El Nino phenomenon. According to Commonwealth Bank analysis, the country's GDP is expected to be around 0.45 percentage points lower than it would be without the drought.

El Nino has already been affecting farmers on the east coast of Australia, particularly in northern NSW and Queensland. The climate phenomenon is expected to worsen over the coming summer and into spring, which could lead to severe impacts on the 2027 crop. Farmers are reducing their planting areas and changing their cropping mix to less water-intensive grains such as wheat and barley.

The drought has already led to higher prices for meat, particularly beef, due to record export demand from the US. The Reserve Bank of Australia is concerned that El Nino could further hamper its mission to get inflation back to 2.5 per cent. If the recent outbreak of H5 bird flu spreads to commercial producers, egg prices could jump by 60 per cent and poultry by 20 per cent.