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Black Saturday Bushfires’ economic legacy

Research by Deakin Business School will help policymakers improve planning for disaster prevention and assistance.

When bushfires ripped through the heart of Victoria on a scorching Saturday a decade ago, the impact was likened to 1500 Hiroshima-style bombs exploding across the state.

In one of the world’s worst bushfire events ever recorded, the state’s Black Saturday Bushfires claimed 173 lives, burnt almost half a million hectares of land, and destroyed thousands of homes and buildings. 

While the initial devastation costs were estimated in months, the more hidden, enduring economic losses are still being counted.

Ten years on, what economic legacy did Black Saturday leave the individuals and communities in its wake? And how can this knowledge better protect us in the future?

Deakin Business School researchers Professor Mehmet Ulubasoglu and Ms Farah Beaini have been working with the Australian Government’s Bushfire and Natural Hazards Cooperative Research Centre on a project that looks at the long-term income effects on people who lived in the bushfire disaster zones. 

While it’s relatively straightforward to add up the tangible costs (the assets that hold a market value price such as property and infrastructure), estimating the long-term economic impact on individuals is far more challenging. Calculating the full cost of a disaster such as the Black Saturday Bushfires depends on a chain of influences such as geography, population and economic sectors. 

Until now, there’s been a research gap in understanding the impact across each sector.

Using the 2006 and 2011 Australian Longitudinal Census Dataset, the researchers have been able to determine the geographical variations of the disaster’s severity that’s measured and matched to incomes and demographics.

Our methodology is based on a difference-in-differences approach that compares the incomes of individuals living in disaster hit areas – before and after the catastrophe – with those of individuals who live in the neighbouring areas with no bushfire exposure.

Prof. Ulubasoglu explains.

By examining real-life case studies across 19 sectors, the research has revealed how, over time, the calamitous event rippled through communities and the broader economy. Prof. Ulubasoglu further adds that

As well as examining  the average income loss in the disaster-hit areas we also examined different demographic groups such as gender, age, low income, middle income, high income individuals, homeowner status, and looked at how individuals in each sector were affected.

Not surprisingly, the research showed that in the short-term, the Black Saturday Bushfires had a significant negative effect on individuals’ incomes and that some groups – such as low income earners (18% income loss), agricultural (-31%), retail sector workers (-13%), and those who decided to leave the bushfire hit areas (-19%) – were the most severely affected. 

Prof. Ulubasoglu says that the economic resilience (the ability to return to pre-disaster income) of disaster-hit individuals was dependent on them having the right skills, an economy with diverse employment offerings, and the availability of government assistance.

This means we’ve been able to identify the vulnerable groups worst hit by the disaster according to demographic, socioeconomic backgrounds and employment sectors.

With the frequency and cost of natural disasters predicted to increase, it’s research like this that plays a crucial role in how governments allocate future disaster funding.

A huge amount of data has been collected and this information will help policymakers make decisions.

says Prof. Ulubasoglu.

For example, if there’s a $100,000 in a budget, should it be spent on a fire truck or educating people about the prevention of bushfire? These are policy, or decision making, problems and what governments need is the evidence to make these decisions appropriately. Our job is to provide the evidence.

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