Inquiry Recommends cuts to Disaster Recovery Funding

The draft report of the Productivity Commission’s inquiry into natural disaster funding recommends reducing the Commonwealth share of disaster recovery costs from 75% to 50%, with the balance to be picked up by state governments.

The report, released on 25 September, also recommends that the Commonwealth substantially increase its funding to the states for mitigation works from the current level of about $40 million to $200 million annually.

disaster report coverCommenting on the release of the report, Commissioner Karen Chester said the inquiry had found natural disaster funding is currently biased towards rebuilding and needs to focus more on planning to reduce disaster risk and cost.

“Of the total natural disaster funds currently spent by the Australian Government, 3 per cent is on mitigation and 97 per cent is on post-disaster recovery,” she told ABC Radio. “We’d like to see that balance changed so the Australian Government spends about 20-25% of its budget allocation to natural disasters on mitigation.”

The Commissioners found the current Natural Disaster Relief and Recovery Arrangements create a financial disincentive for state and local governments to invest in mitigation and insurance. This is because they bear the full costs of those activities, whereas they only pay a fraction of the cost of restoring essential assets damaged by a natural disaster.

The report comments: the NDRRA is being accessed for small, routine weather events and is providing support to states with little demonstration that they have undertaken appropriate risk management and exhausted their own resources first. Instead of being an ’insurer of last resort’, for some government assets the Australian Government has become the ‘insurer of first resort’.

The reform options include a proposal to increase the threshold for ‘small disaster criterion’ payments from $240,000 to $2 million. However, under the preferred option the states could elect to purchase insurance for additional eligible expenditure, for example through lowering the ‘small disaster criterion’ or by increasing the Commonwealth share of reconstruction costs.

Among the issues of significance in the report, according to the Australian Local Government Association, is the proposal to increase funding for mitigation to $200 million year, with the funding to be matched. “This will have implications for councils and raise questions about the capacity to match increase funds,” a spokesperson said.

Barry Sammels, Chair of the National Sea Change Taskforce, welcomed the proposal to increase funding for mitigation works, but said further work was required to assess the full implications of the reforms for coastal councils. “We will be preparing a submission to provide feedback on the draft report,” he said. “We also intent to attend the public hearings to be held later this month.”

More information at – www.pc.gov.au/projects/inquiry/disaster-funding/draft