Local economic activity is key to disaster resilience in much of the world. Without the flows of money generated by such activity, the ability to continue living, let alone recover, is limited. The long-term reality for the survivors of local communities is the struggle to rebuild their lives and livelihoods. In Phuket and the surrounding region most money is generated by tourism. However, the bulk of this money leaks out of the local and Thai economies benefiting people overseas rather than in Phuket. We suggest that this is a characteristic of the formal or documented economy, while the informal or undocumented economy keeps money in local hands. The recovery of the informal economy in Phuket has been largely ignored by tsunami recovery plans. Despite an acknowledgement that the informal economy supports about 30 per cent of workers in the tsunami affected area, most of the post-impact initiatives to lure the tourist dollar back have focused on the formal sector. This paper examines the dynamics of the local economy both formal and informal, and suggests that maximum benefit would be gained by putting more effort into the informal. The implications for Australia are that disaster recovery should concentrate on restoring local economic activity— and in many areas, especially rural areas, should consider the importance of the informal sector for local livelihoods.