Preventing disaster from striking Australia’s economy

Dispatching an ambulance to the bottom of the cliff

Paul Barnes, Anthony Bergin, Robert Glasser

Economics and finance, Environment & energy, Government and governance, National security, Arts, culture & society | Australia

11 April 2019

Though the recent National Disaster Risk Reduction Framework may allow Australia to improve its response to climate change-related natural disasters, without introducing more pre-emptive measures, increased funding means very little, Paul Barnes, Anthony Bergin, and Robert Glasser write.

The $3.9 billion emergency response fund announced in the Morrison Government’s pre-election Budget will resonate with the tens of thousands of Australians who, over recent months, have suffered terribly from record-setting droughts, floods, and bushfires.

Under the new arrangements, the government would make available up to $150 million per year from the fund between 2019-20 to 2023-24 – as a top-up to existing support – following a significant and catastrophic natural disaster.

But providing support to communities after a disaster has struck is far less effective than decreasing their exposure and vulnerability to the natural hazards from the outset. The strong business case for investing in disaster risk reduction has been underlined for some time by groups as diverse as the Australian Productivity Commission and the Australian Business Roundtable for Disaster Resilience and Safer Communities.

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The US National Institute of Building Sciences, for example, found that every dollar invested in mitigation can save six dollars in future disaster costs.

Mitigation of disaster risk is particularly important for Australia because the country is highly exposed to hazards. For example, 20 per cent of its national GDP and 3.9 million of its population are in areas with high to extreme risk of tropical cyclones, and about 11 per cent of GDP and 2.2 million people are in places with high and extreme risk of bushfires.

The Australian Business Roundtable for Disaster Resilience and Safer Communities noted in their 2017 report ‘Building resilience to natural disasters in our states and territories’ that, without increased mitigation efforts, the total economic cost of natural disasters in Australia will grow from roughly $18 billion today to over $39 billion by 2050. The effects of climate change will increasingly compound these costs.

The recent and very significant ‘public’ intervention of 23 retired Australian Emergency Service leaders has added an operational view on the matter. It has demonstrated how an increasing frequency of extreme and extended climate change-related emergencies are placing lives, properties, and livelihoods at greater risk, as well as overwhelming the capacity of our emergency services to control the events and render communities safe.

Australian governments need to urgently move beyond an approach focused on funding disaster recovery efforts alone. Governments at all levels should be supporting efforts to limit the exposure and vulnerability of Australian communities to natural hazards through a renewed focus on land-use planning, zoning, flood mapping, and flood control measures.

This message is not new. Independent commentary in Australia as far back as 2008 highlighted the need to widen efforts on disaster mitigation and rethink assumptions about capability and capacity to deal with catastrophic disasters.

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We not only need to consistently ‘build back better’ after disasters strike, but must also ensure that recovery and restoration include an emphasis on resilient engineering design as part of infrastructure investments.

The historical tendency to repeatedly replace the same type of bridge or other infrastructure at a location where it has been regularly washed away makes little sense.

The private sector, particularly insurance and investment groups, tends to be more proactive than governments in thinking about how to mitigate the impact of disasters on their operations. Notable examples of industry effort include workgroups such as the Responsible Investment Association Australasia and the Investor Group on Climate Change.

These and other groups actively participate in the United Nations (UN) Environment Programme Finance Initiative on sustainable economic development and are active in developing an ‘Australian Sustainable Finance Roadmap’ to ensure alignment of the finance sector with the delivery of resilient and sustainable economic plans, including the Paris Agreement on Climate Change and the UN’s Sustainable Development Goals.

These activities by the finance and investment sectors represent a significant sea change nationally. Even the Australian Prudential Regulation Authority has emphasised that financial exposures from climate change, including disaster risk, are material, foreseeable, and actionable.

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Last month, Guy Debelle, the Deputy Governor of the generally conservative Reserve Bank of Australia, warned that climate change and resulting natural hazards increase the likelihood of non-linear impacts on the economy with potential consequences for financial stability.

Australia needs to adapt its policies to support a more comprehensive disaster management repertoire that incorporates, and ideally mainstreams, efforts to avoid or minimise disaster damage rather than the tendency to primarily provide emergency recovery funds.

Historically, Australia’s investments in mitigation have amounted to only three per cent of what it spends on the disaster response and recovery. Without a change in the right direction the emergency response funds announced in the Budget is just more icing on the same familiar cake.

But not all recent government efforts have been in a response-and-recovery mode. This past week has seen an almost silent launch of the long-awaited National Disaster Risk Reduction Framework from the National Resilience Taskforce (NRTF) within the Department of Home Affairs.

The Framework is designed to guide national, whole-of-society efforts to proactively reduce disaster risk in terms of the likelihood of disruptions and losses. This is centrally about mitigating exposure to hazards and reducing community and institutional vulnerabilities.

The NRTF Framework has three goals. It aims to reduce existing disaster risk, and to minimise creation of future potential for loss through decisions taken across all sectors. It also intends to equip decision-makers with the capability and information needed to reduce disaster risk and manage residual risk exposures.

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Further, achievement of these goals requires a focus on four main points. To better understand disaster risk exposures, to support more accountable decisions, and to enhance investment in mitigation actions make up the first three. The fourth is concerned with promoting better governance, ownership, and responsibility for achieving a reduction in the potential for losses and enhanced resilience.

The NRTF Framework is expected to be endorsed by ministers in mid-2019, with an annual ministerial statement on the status of disaster risk reduction to the Australian Parliament expected to be made then too.

We should do more than just provide details for an annual statement to Parliament. Central to a new policy playbook is taking the NRTF Framework and actively engaging in its implementation as a joint effort between local, state, and federal governments and the private sector.

Australia should invest in actively preventing losses from natural disasters where possible. The NRTF Framework provides informed and widely endorsed guidance that is aligned to current international better practice. Without far greater ambition on this front, merely providing $3.9 billion as a top-up to support natural disaster recovery efforts essentially amounts to dispatching an ambulance to the bottom of the cliff.

This article is co-published with the Australian Strategic Policy Institute.

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