Inefficient, not Sustainable - PC scathing of Australia's natural disaster funding arrangements

Posted on 23 Sep 2014

Current government-led natural disaster recovery funding efforts are "not efficient, equitable or sustainable" and are prone to "cost shifting, ad hoc responses and short-term political opportunism" according to a scathing draft Productivity Commission report.

The draft report lists a series of key problems which hamper communities' recovery from natural disasters - both immediately after the event and then in the medium to longer term.

  • Governments generally over-invest in post-disaster reconstruction, and under-invest in mitigation that would limit the impact of natural disasters in the first place. Natural disaster costs have become a growing, unfunded liability for governments, especially the Australian government.
  • Current government natural disaster funding arrangements are not efficient, equitable or sustainable. They are prone to cost shifting, ad hoc responses and short-term political opportunism.
  • Governments have a role in providing emergency relief payments to individuals who have been seriously affected by natural disasters, to avoid immediate economic and social hardship. Reducing duplication, inconsistency, inequity and inefficiency in the provision of such relief is needed.

Recommendations

The draft report also made a number of recommendations to improve disaster recovery funding, including grants funding, in Australia. They include:

  • Federal Government post-disaster support to state governments needs to be reduced, and support for mitigation increased. Some budget provisioning is also needed.
  • The Commission's preferred funding reform option is to provide a principal level of support to states commensurate with relative fiscal capacity and the original "safety-net" objective, with the option of top up insurance for those states that require it.
  • States need to shoulder a greater share of natural disaster recovery costs to provide them with more autonomy and a sharper incentive to manage, mitigate and insure these risks.
  • Federal Government mitigation funding to states should be increased.

The inquiry also called on the government to improve in terms of developing policies that "allow people to understand natural disaster risks and have incentives to manage them effectively."

It also highlighted the key role personal insurance played in disaster recovery.

The draft report was open for public comments throughout October, with the final report due in December 2014. Read more here.

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