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Flash floods hit Australian city

10 January 2011, 11:00

Sydney - Residents of low-lying parts of Australia's third largest city, Brisbane, sandbagged their homes against rising waters on Monday as torrential rain exacerbated record floods that have paralysed the coal industry in the northeast and now threaten tourism.

Prime Minister Julia Gillard insisted the cost of the floods would not delay a return to budget surplus in 2012-13, but JP Morgan predicted the disaster would crimp growth this year and could delay another increase in interest rates.

Weather officials issued a severe weather alert, warning of flash flooding and worsening river floods in Queensland state's heavily populated southeast and the centre of the country's lucrative Gold Coast tourist strip.

"People need to think about how to get out and if you don't need to travel, stay off the roads," said Police Chief Superintendent Alistair Dawson.

The worst floods in 50 years, affecting an area the size of France and Germany combined, began last month and have severely cut Queensland's $20bn coking coal export industry, starving Asian steel mills of coal and pushing up world prices.

The floods have caused an estimated $6bn in damage and economists say they will cut Australia's economic growth in 2011 and heighten inflation as food prices rise and reconstruction gets under way in the nation's second largest state.

Gloomy forecasts

"With more rain falling it could be months before the floodwaters clear and the extent of the damage to essential infrastructure is known," said JP Morgan's chief economist Stephen Walters.

JPMorgan on Monday cut its GDP growth forecast for 2011 to 3.3% from 3.7%, raised its inflation forecast to 3.8% from 3.2%, and pushed out the likely timing for the next interest rate hike to May from February.

"Even inflation-conscious RBA (Reserve Bank of Australia) officials won't hike with Queensland under water," said Walters.

Gillard announced more flood aid on Monday, but added the floods would not derail an expected return to a budget surplus in 2012-13.

"From the start of November we have seen extreme weather events in many parts of the country. The flood crisis is still emerging, so we don't know how many communities will be impacted by these floods," Gillard told a news conference in Canberra.

But Gillard added: "The Budget will return to surplus in 2012-13. That will require us to make some hard choices, and we will make those hard choices."

Towns cut off

More than 200 000 people and more than 10 700 properties have been affected in the Christmas-New Year floods, which have killed four people.

The weather bureau forecast monsoon rains would continue for the rest of the week, giving flooded towns little respite.

The fresh heavy rains were causing flash flooding, quickly cutting off some small towns and flooding homes and businesses.

"The State Emergency Service advises that people in the affected area should avoid driving, walking or riding through flood waters, take care on the roads, especially in heavy downpours and avoid swimming in swollen rivers and creeks," said the Bureau of Meteorology's severe weather warning.

A major concern now is the ground is so waterlogged the heavy rains are unable to be absorbed and full rivers, creeks and man-made watercourses are bursting their banks.

About 116 000 megalitres of water a day was being released from Brisbane's Wivenhoe Dam, which may cause road closures, said local authorities. The heavy rains had also forced authorities to release water from other near-full dams around Brisbane and the Gold Coast, further exacerbating the floods.

Roads, rail restricted

Queensland Tourism said the heavy rains and flooding would have a negative impact on the state's tourism industry but that it was too early to quantify the impact, adding areas around the Great Barrier Reef in the far north were untouched by floods.

The majority of the state's tourist operators remained open, it said, noting that while some roads and rail links were restricted, only one of the state's 20 airports was closed.

"There is a little cancellation coming through due to the perception things are not open and a little drop in day traffic from Brisbane," said Queensland Tourism's Leanne Coddington.

Floods have paralysed operations that produce 35% of Australia's estimated 259m tons of exportable coal. Australia contributes two-thirds of global coking-coal exports, needed to make steel.

Global miners Anglo American , Rio Tinto , Xstrata and BHP Billiton , have all been hit by the floods, and all have made force majeure declarations, which release firms from delivery commitments.

Flooding has begun to recede in the main Bowen Basin coal region, but many mines remain flooded and will take weeks to drain and resume full production. While some rail links between mines and the ports have resumed, others remain under water.

Coal production hampered

Coal stocks were running low at the key coal port of Dalrymple Bay, but it was receiving enough to keep loading ships, while the port of Gladstone said it may be days to weeks before it starts getting coal supplies back to normal.

"All the systems apart from the Blackwater (rail line) are operating so we are just waiting for that floodwater to recede," said a QR National railway spokesperson. "When the flood waters come down we will have a good opportunity to have a look at what's underneath and see what the recovery will be."

Roughly 8% of the world's thermal coal production - used in power generation - has been temporarily eliminated by the flooding, according to Australia & New Zealand Bank analyst Mark Pervan.

Analysts expect steel coals to rise as much as a third to $300 a ton in the aftermath of the floods, sweeping thermal coal prices higher in the process.

Asian steel-makers are anxious over Australian supplies, worried the disruptions could outlast their stockpiles, which typically hold around a month's worth of consumption.

In 2008, flooding stalled some mines for as long as six months, but others began producing within six weeks.

- Reuters


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