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Australia’s unprecedented bushfires will have a modest impact on the country’s economy, federal government and insurers — but an increase in climate-driven natural disasters reveals the threat of larger, long-run effects, says Moody’s Investors Service.

In a new report, the rating agency said that the economic impact from Australia’s massive bushfires is limited so far, as the fires have been primarily located in sparsely populated areas.

The direct fiscal costs are forecast at less than 0.1% of Australia’s GDP in 2020 and 2021. Moody’s has revised its GDP growth forecast for Australia down slightly to 2.1% in 2020.

The economic impact of the fires is also expected to be limited, but the rating agency expects “more material costs” over time as “climate change leads to more frequent and severe natural disasters.”

“The catastrophic fires highlight that the P&C insurance industry is at the forefront of environmental risk,” said Frank Mirenzi, vice president and senior credit officer at Moody’s.

“The industry is exposed to the economic consequences of climate change, primarily through the unpredictable effect of climate change on the frequency and severity of weather-related catastrophic events, such as hurricanes, floods, convective storms, drought and wildfires,” Mirenzi added.

Moody’s noted in separate reports that governments and residential mortgage-backed securities also face growing risk from climate-related disasters.