THE Australian dollar dipped to a three-week low as economists warned Australia's trade surplus would deteriorate while rising floodwaters continued to shut mines, destroy infrastructure and ruin crops.
UBS resources analyst Tom Price said if the rain stopped now it would still take "two to three months just for the coal industry to get back to its regular production". He estimated lost production of about $2 billion.
IG Markets strategist Ben Potter said the uncertainty hanging over the economy and sharemarket had increased significantly over the past 24 hours as the Queensland floods took a turn for the worse.
"It's going to have huge impact on the Australian economy; even more so now that major population centres have been severely damaged and are under further threat," Mr Potter said.
"Exports from Queensland, most notably coal, will continue to suffer immensely; nobody knows if these mines will be out of action for two weeks or six months.
"We're talking about more than 40 per cent of global seaborne coal trade. That's a huge disruption to an already tight market, and that's not even looking at the cost to rebuild and repair all the damaged infrastructure."
Trade figures released yesterday showed the country's surplus (the excess of exports over imports) narrowed in November to $1.93 billion, down from $2.56 billion in October, as the value of coal exports dropped.
Citigroup economists said damage from the deluge to coking coal mines, agriculture and infrastructure in Queensland could cut exports by more than $1 billion a month.
Australia's dollar fell to a low of US98.49¢ on concern the floods will slow the economy by hurting exports, which account for about one-fifth of Australia's gross domestic product. On New Year's eve the currency was fetching US102.31¢.
Investors are now cutting bets the Reserve Bank of Australia will raise interest rates at all in the first half of 2011.
Paul Brennan, a senior economist at Citigroup, said the likelihood that the floods will have an impact on exports makes the case "more compelling" for the RBA to keep rates on hold for "at least a few more months".
He noted however that there would be "some offset from higher commodity prices as a result of the reduced supply of the affected commodities".
Wesfarmers, owner of the Curragh mine, yesterday said that it had won an increase in price settlements of 12 per cent to $US221 a tonne for the first quarter as a result of the recent Bowen Basin flooding.
Ratings agency Moody's said Queensland has lost eight million to 15 million tonnes of coal trade as open-cut pits flood and transport routes are cut off.
Transporter QR National's shares fell 9 cents or 3.25 per cent to $2.68 after it was forced to suspend services to mines west of Brisbane and thermal coal miner New Hope Corp has suspended operations at its mines north-west of Brisbane. Its shares fell 13 cents or 2.6 per cent to $4.92 yesterday.
