As communities recover from ex-Tropical Cyclone Alfred, its estimated $1.2 billion economic cost will put pressure on the federal budget and inflation, the treasurer will warn.
Jim Chalmers will use a speech in Brisbane on Tuesday to preview the budget which will be handed down next week, ahead of the federal election.
He's expected to reveal Treasury's initial estimates, which show an immediate hit to Gross Domestic Product from Alfred of up to $1.2 billion.
This could cut one quarter of a percentage point off quarterly growth, and increase pressure on inflation.
"We are still getting a handle on the economic fallout, but it will be substantial," Chalmers will say.
The Commonwealth is working with the states to provide around $30 million in immediate recovery costs to repair roads and infrastructure, while also assisting those affected through hardship payments and allowances.
"This budget will reflect some of those immediate costs and we’ll make sensible provisions for more to come," he will say.
"I expect that these costs and these new provisions will be in the order of at least $1.2 billion, a substantial amount of money and that means a big new pressure on the budget."
These additional costs are expected to take the government's disaster support to $13.5 billion — up from $11.6 billion included in its Mid-Year Economic and Fiscal Outlook (MYEFO).
Chalmers will say around five million Australians were in harm's way at one stage during Alfred, which put almost two million homes at risk.
His speech is also expected to detail possible economic consequences of the global escalation in trade tensions.
Politicians urged against 'election sweeteners'
It comes as the Deloitte Access Economics' Budget Monitor, released on Monday, has forecast a $26.1 billion underlying cash deficit and revenue downgrades of $11.3 billion over four years.
The projection is slightly smaller than the $26.9 billion deficit predicted in the December MYEFO, but report co-author Stephen Smith remained concerned about the deterioration of the budget bottom line.
"[This should be] a reality check for politicians wanting to announce election sweeteners in the weeks ahead," he said.
"The long-term budget projections show deficits as far as the eye can see and ineffective spending is the last thing Australia needs."
Since MYEFO in December, the government has already announced more than $18 billion in new spending, including its $8.5 billion boost to Medicare, student debt relief, $7.2 billion for the Bruce Highway, and more.
— With additional reporting by the Australian Associated Press
