Mining companies have announced that they won't be able to meet contracts for coal, Australia's biggest export, due to the flooding in Queensland state while farmers there are counting crop losses that could push up world food prices.
The floodwaters that swamped entire neighborhoods in Brisbane, the state capital, receded Friday, leaving behind a thick layer of putrid sludge that covered streets and thousands of houses. More than 30,000 homes and businesses were flooded with muddy water and officials warned some residents their homes were so badly damaged, they'd need to be destroyed.
The flooding is a particularly cruel blow to farmers, many of whom had hoped for bumper crops after much of Australia emerged from its worst drought in more than a century. The effects are being felt as far away as China, where prices for the coal used in steelmaking are on the rise and hampering government efforts to control rising inflation.
John Bishop, a tall and burley 66-year-old farmer, pointed to where a crop of lettuce remains hidden under a foot (30 centimeters) of water in the Lockyer Valley, which is west of Brisbane and provides much of Queensland's fresh produce. Elsewhere in the valley, water melons are rotting in the ground and soaked lucerne - a high quality feed for livestock - will have to be trashed.
Bishop says some farmers anxious to begin working their sodden land have been told by police to hold off until a search for the bodies of missing local residents is completed.
Weeks of relentless rains and flooding across Australia's northeast have left 26 people dead. Another 53 people are still missing. Most of the people unaccounted for are from the Lockyer Valley and the nearby city of Toowoomba, where a sudden downpour on Monday caused a flash flood likened to an inland tsunami.
Bishop's farm on Tent Hill is on the valley's higher ground and escaped inundation. But farmers like him with salvageable crops will struggle to truck them to market with local roads washed out and bridges damaged.
He said any more heavy rain on the sodden soil would be catastrophic for the valley where his family has farmed since 1939. "We're hardy stock in this valley," he said. "It'll take time, but we'll recover."
Even more frightening for farmers is the Bureau of Meteorology's prediction that rain could continue until the end of March due to the cool conditions in the central equatorial Pacific Ocean associated with the current La Nina - a weather system known for producing heavy rains.
Flooding rains on Friday spread farther south along the Australian east coast, forcing thousands of people to be evacuated from their homes in Victoria state and the island state of Tasmania.
Some towns were all but abandoned as major flood alerts were issued for five rivers in Victoria and residents were evacuated from three towns in northwest Tasmania where an entire summer's average rain fall was recorded in a single day, authorities said.
The overall cost to Australia's 1.3 trillion Australian dollar ($1.29 trillion) economy from the Queensland floods could amount to as much as $13 billion, or 1 percent of gross domestic product, if infrastructure damage is severe, JP Morgan economist Stephen Walters wrote in a research report.
Some economists are already trimming the forecasts for economic growth this year. Bank of America Merrill Lynch has cut its forecast to 3 percent from 3.3 percent. JP Morgan Securities cut its prediction to 3.3 percent from 3.7 percent.
The deluge has hit mines that provide much of the global supply of coal, forcing giants like Rio Tinto, BHP Billiton and Anglo American to rely on a legal clause that allows them out of contracted sales in the case of natural disasters or other unforeseen catastrophes.
Contract prices for steelmaking coal have been set at $225 a ton (0.9 metric tons) in the first quarter of 2010 but are forecast by analysts to rise to around $300 a ton later this year because of the flooding.
Analysts at research and stock brokerage firm CLSA Asia-Pacific Markets predicted that floods would remove 11 million tons (10 million metric tons) of Australian steelmaking coal from the world's supply in the first three months of the year.
Liu Feng, a strategist with Central China Securities in Shanghai, said China's own coal producers will be able to fill the gap that results from suspended Australian exports. "But the coal price in China will be pushed up in a short term," Feng said.
The Australian Bureau of Agricultural and Resource Economics and Science, the federal government's main forecaster on the farming and mining industries, said the flood would put upward pressure on international food and energy costs although it is too early to calculate Australia's export losses.
ABARES chief commodity analyst Jammie Penm said his bureau had predicted last month that, with the drought retreating, Australia's agricultural produce - 60 percent of which is exported - would increase from AU$41 billion in the last fiscal year to AU$45.6 billion in the current fiscal year ending June 30, 2011.
That figure will now have to be revised down when ABARE releases its next forecast on March 1.
Coal exports earned Australia AU$34.5 billion last fiscal year and ABARES predicted last month that higher prices due to soaring world energy demand would lift earnings to AU$50.6 billion in the current year.
Jim Devine, spokesman for the state mining association Queensland Resources Council, said communication difficulties due to flooding meant a clear picture of when mine exports might normalize would not emerge until next week.
McGuirk reported from Canberra. Associated Press business writer Kelvin Chan in Hong Kong and researcher Yu Bing in Beijing contributed to this report.