Inquiry to Consider Commonwealth Funding Cuts for Natural Disasters

A Productivity Commission inquiry into funding arrangements for natural disasters is considering recommendations to substantially reduce the level of Commonwealth financial support for disaster reconstruction costs.

Until now the Commonwealth has played a major role in providing funding and other support to help the states and territories provide urgent assistance to communities affected by disasters. Under the Natural Disaster Relief and Recovery Arrangements (NDRRA) the Commonwealth currently reimburses up to 75 per cent of a state or territory recovery bill. Since 2009 the cost to the Commonwealth under these arrangements has been approximately $12 billion.

The Productivity Commission inquiry, however, will consider a recommendation by the National Commission of Audit that the Disaster Recovery Allowance be abolished and replaced with a grant to the states and territories of 25% to 33% of estimated reconstruction costs.

In a submission to the inquiry, the National Sea Change Taskforce argued that local government authorities do not have the resources or capacity to increase their share of post-disaster recovery costs. The submission notes that coastal councils already lack the capacity to finance infrastructure shortfalls through existing sources such as grants and rates.

Taskforce Chair Barry Sammels said the impact of natural disasters is of particular concern to coastal communities. “As the tier of government with the least access to resources, local government is faced with complex governance and institutional arrangements which currently act as a barrier to effective emergency management and mitigation,” he said.

“Rather than shifting a greater proportion of post-disaster recovery costs on to state governments and councils, the Taskforce believes it would be more cost-effective and productive to increase investment in pre-disaster mitigation and resilience.”

He said the Taskforce supported the recommendation of the Australian Business Roundtable for Disaster Resilience and Safer Communities, which calls for the Australian Government to allocate $250 million a year for pre-disaster resilience. “As the Roundtable points out, this has the potential to generate budget savings of $12.2 billion for all levels of government and would reduce natural disaster costs by more than 50% by 2050,” he said.

Barry Sammels said it was difficult to see how shifting responsibility for the majority of post-disaster funding to the states, territories and local government was likely to work. “The Commonwealth collects the major share of taxation in Australia and is in a much better position to cover these costs than other tiers of government,” he said.

The timetable for the inquiry is extremely tight. The deadline for submissions closed on 6 June. A draft report is scheduled for release in September and the final report is due for release in December.
The terms of reference for the inquiry and background information is available at – http://www.pc.gov.au/projects/inquiry/disaster-funding