The cost of natural disasters in Australia is 50% more than previously estimated– $9bn in 2015 – and is set to increase to $33bn by 2050 even ignoring the effect of climate change, according to two reports commissioned by the Australian Business Roundtable for Disaster Resilience and Safer Communities.
The reports included the first analysis of the economic costs of social impacts of natural disasters, and concluded they cost the economy more than tangible impacts like damage to property.
Among the tangible costs, the biggest occurred when critical infrastructure was damaged. Despite this, there was no formal requirement to consider resilience when making decisions about building infrastructure.
The reports said more investment was needed at times other than in the immediate aftermath of a disaster, with funding also required for community and infrastructure resilience, as well as longer-term social care.
The reports follow others by the Productivity Commission and Infrastructure Australia which also recommended more money be spent on resilience than recovery, which the government has been reluctant to implement.
“The reports show the long-term cost of the social impact of natural disasters on our communities and economy, and the benefits of embedding resilience into planning decisions for critical infrastructure,” said the managing director and CEO of insurer IAG, Peter Harmer, on behalf of the Roundtable.
“We need to do more to help our communities prepare for and recover from disasters. Sadly the devastation of bushfires, flood and earthquakes on our communities can last for years, if not decades.”
One of the two Deloitte Access Economics reports examined the social impacts of disasters and focused on three case studies: the 1989 Newcastle earthquake, 2009 Black Saturday bushfires and the 2011-12 Queensland floods.
In each case it found the cost of social impacts, such as increases in family violence and mental health problems due to stress, outweighed the economic impacts of having to rebuild infrastructure. However, some social costs could not be measured, which meant that the true cost was more than the study found.
Looking at the 2011-12 Queensland floods, some of the social costs it identified included:
- The exacerbation of diabetes and cardiovascular disease, and the development of stroke resulting from the floods was about $430m.
- Research suggesting a link between natural disasters, stress and family violence led to an estimate that increases in family violence cost $720m.
- The lifetime cost of mental health issues resulting from the floods was estimated at around $5.9bn.
It also found some of the social impacts might affect women more than men, leading to the suggestion that responses should be gendered too, citing the example of Firefoxes Australia, which provided social support to women following the Black Saturday bushfires.
Noel Clement, Australian Red Cross director of Australian Services, said the costs could be reduced by investing more in community resilience before disasters, as well as on psychological and social services that extended beyond the immediate aftermath of the disaster.
He said any community program that helped neighbours to know each other could help, since they would then be more able to help one another when disaster struck.
“Governments, business and communities need to work together to address the medium and long-term social impacts of natural disasters through further investment and research into community resilience programs,” Clement said.
The second report examined the impact of natural disasters on infrastructure and how it could be avoided.
It found that about $450m was spent each year by governments restoring critical infrastructure, a figure that would rise to $17bn by 2050.
Despite $1.1tn likely to be spent on critical infrastructure between now and 2050, it said there was no formal requirement to consider resilience to disasters when making decisions about building infrastructure.
It found that government planning processes should include a requirement to consider resiliance. But that was not only the responsibility of governments.
Paul O’Sullivan, chariman of Optus, which is a member of the Roundtable, said Optus spent more than $1bn annually on infrastructure.
“As we have undertaken our own climate change review, it is clear that there is a need for stronger central coordination across government and other infrastructure providers, and an opportunity to embed resilience into government policy and planning activities. The report issues practical guidelines to address this.”
The reports warn that they have not included the effects of climate change, which is expected to increase the frequency and severity of natural disasters in Australia.
In May 2015, the Productivity Commission delivered a report into natural disaster funding, finding it was not currently “efficient, equitable or sustainable”.
“Governments overinvest in post-disaster reconstruction and underinvest in mitigation that would limit the impact of natural disasters in the first place. As such, natural disaster costs have become a growing, unfunded liability for governments,” it said.
It recommended mitigation funding be increased by $400m a year, and expressly warned against “cherry-picking” some recommendations from the report, since they formed a cohesive package.
When asked whether the government would be implementing the recommendations, a spokeswoman for the minister for justice, Michael Keenan, said the government did not plan to implement the shifting of funding from disaster recovery to disaster mitigation, which she described as “severe cuts to recovery funding”.
“The government is consulting with the states on proposed reforms to disaster funding arrangements, in particular around a new model for funding the restoration of essential public assets.”
“As consultations are ongoing, the timing for the release of the government’s response is yet to be settled,” the spokeswoman said.