Earlier this week, Westpac suggested the fires may cost the Australian economy $5 billion in direct losses and cut up to 0.5 per cent off economic growth.
But Professor John Quiggin says the losses would likely balloon as the damage continues to add up across major parts of the economy and the crisis continues.
He said impacts on public infrastructure, agriculture and tourism could additionally cost tens of billions of dollars in each sector due to damage and lost business.
Today he told AAP even slight decreases to international tourism would have a big impact.
"Supposing we lost 10 per cent of our tourism market over the next five years internationally, there would be $10 billion [lost] there," he says.
"We've had the entire world seeing for months on end that we have this catastrophe going on and the government doesn't have a clue what to do about it."
While more difficult to quantify, Prof Quiggin says the effects of smoke pollution on health and the destruction of ecosystems could be huge.
He says when using standard health valuation measures the financial cost of premature deaths due to smoke could be billions.
"There's a technique we have which says the government will spend $4.2m on health if that will prevent one premature death," Prof Quiggin says.
"So in some sense, 1000 deaths would cancel out $4 billion in public health spending."
He says the establishment of a national response would also be a hit to the economy.
"We're going to have to develop a national capacity to deal with this kind of disaster and that will be costly," he says.
Westpac has also said the economic costs of the health effects from the smoke pollution are harder to quantify but could be significant.
While the cost of the fires is expected to be enormous, S&P Global Ratings says the bushfires posed no danger to the AAA credit ratings of the Federal Government and the States of NSW or Victoria.
The federal government has pledged a $2 billion relief package to be injected into a national bushfire recovery fund over the next two years.
It includes such measures as grants for farmers, funding for local councils, immediate disaster assistance and support for counselling services.
