Economic Analysis: The Effects of Drought on Australia's Economy

This essay provides an economic analysis of the Australian drought, focusing on its impact on the agricultural sector and the broader economy. It highlights how droughts lead to decreased agricultural supply, causing the supply curve to shift left and resulting in increased prices for agricultural goods. ...Read More

0Running head: ECONOMICS
Economics
Name of the student
Name of the university
Author note

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Table of Contents
Introduction................................................................................................................................1
Body...........................................................................................................................................1
Conclusion..................................................................................................................................3
Referenced list............................................................................................................................5

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The Australian drought
Introduction
A drought is a kind of natural disaster that takes place due to the below average
precipitation of any kind of the given region which result to prolonged shortage of the water
supply. Farmers are known to have faced ruins in various places of the New South Wales and
Queensland. Huge parts of the eastern Australia have been in droughts which took place for
seven years with dry conditions which will comprise of the federal as well as state measures.
Body
The drought had been mostly dry in nature compared to the previous years. One of the
senior climatologist states that the areas which experiences some of the significant drought
are specially the regions of eastern South Australia, North west Victoria and New South
Wales. Most of the parts of the central as well as the eastern New South Wales have known
to experience below average rainfall since the last April (Cox, 2019). In the previous year the
dry conditions have mostly spread for covering the most inland parts of the state. Although
rain over the past few weeks in the western part of Australia had made the condition bearable
in some of the areas. Parts of Albany in the south still remained dry (State of the drought:
How bad is it and why has it been so dry?.2019). The June had been one of the driest months
on record for a period of over for areas in New South Wales which also includes upper
Hunter, parts of Illawarra along with the southern highlands with an area in the central west.
The worst affected areas were the parts of New South Wales. After the drought of 1902,
Australia had known to suffer this kind of major drought. The reason behind such dry drought
is because of the absence of rain for several months. Moat of the rain only took place in the
tropics which lead to this kind of drought in parts of New south wales. There was also

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absence of any major feeds from the Indian ocean moisture from the north west approaching
fronts or places covering the east coast lows in the drought affected areas. Although it rained
heavily on the coast of the Newcastle, it is not affected the inland or the southern part of new
castle. There was however no effect on the inland and south of the Newcastle. Another the
reason is that the recent winters had also been quite stronger than the usual sub-tropical ridge
over the southern Australia. The winter was quite severe and harsh which also resulted in
drought (Cox, 2019). There had been decline in the rainfall also in the past fifty years where
there was a decline of about three millimeters as year. A lot of places which are on the south
east are on the track for the driest months. The reason for this dry weather is a big ridge of the
high pressure that is sitting over the eastern Australia.
Figure 1Supply curve shifts to left

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In case of drought the agricultural sector faces a huge loss in the economy. For this
reason, the supply of the agricultural crops decreases because of the increase of dry barren
lands due to droughts (State of the drought: How bad is it and why has it been so dry, 2019).
The supply curve of the agricultural crops therefore moves to the left and the quantity of the
goods supplied also increases. Since the supply curve shifts to the left the equilibrium which
suggests decrease in the supply, it leads to rise in the price of the goods. The agricultural
goods therefore will become expensive in nature. The equilibrium point therefore moves up
from e to e1. The economic impacts of drought can cost people as well as money. Farmers
tend to lose a huge amount of money when drought will be destroying the crops. When the
water supply will be too low, farmers will have to spend more money on the irrigation in
order to draw a greater number of wells.
The government have known to fund more than $1.8 billion for the boost.
Government of Australia had provided huge number of droughts for the states affected by
drought (Drought funding gets $1.8bn government boost. 2019). Ssixty drought-affected
councils across western Queensland and New South Wales have been provided with $1m
each by the federal government for spending on the trucking in drinking water to building
new community facilities. The government is also known to double the amount where the
farmers can borrow from the low interest loans from the banks. Total amount of loans
provided ranged from from $250m to $500m.
Conclusion
Drought is known to affect the lives of many people since water is an important part
of all our activities. It also affects the environment in many ways. The economic impacts of
droughts are those which can even cost people or money. Large numbers of farmers known to
lose money when drought will be destroying crops. Drought therefore also leads to rise in the

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price of goods. Social impacts of drought are ways that drought affects people’s health and
safety. According to the media reports it have been found out that the effects of drought in
Australia had been quite severe. The drought has been the driest in the past fifty years.
Although the government have taken huge efforts to help the people suffering from drought
specially those of the farmers. The government of Australia have known to provide huge
amount of loans to them in order to help the farmers.

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Referenced list
Cox, L. (2019). 'Australia doesn’t realise’: worsening drought pushes farmers to the brink.
Retrieved from https://www.theguardian.com/environment/2018/jun/10/australia-
doesnt-realise-worsening-drought-pushes-farmers-to-the-brink
Drought funding gets $1.8bn government boost. (2019). Retrieved from
https://www.theguardian.com/environment/2018/aug/19/drought-funding-to-get-
18bn-government-boost
Hubbard, G., Garnett, A., Lewis, P. and O’Brien, T. (2015) Essentials of Economics, Pearson
Australia: Frenchs Forest
State of the drought: How bad is it and why has it been so dry?. (2019). Retrieved from
https://www.abc.net.au/news/2018-06-11/drought-how-bad-is-it-and-why-has-it-been-
so-dry/9826130

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