Since 2005, Commonwealth expenditure on disaster relief was $24 billion, while spending on disaster resilience was just $500m
New research shows that extreme weather events over the past 12 months cost every Australian household an average of $1,532.
Commissioned from think tank the McKell Institute by the Insurance Council of Australia (ICA), The Cost of Extreme Weather shows that over the last 10 years the average annual household cost of extreme weather has been $888, but that this figure is expected to jump to more than $2,500 a year by 2050.
The big jump in the 2021-22 average household cost is largely attributable to the cost of the record-breaking February-March floods, and includes government expenses paid for through taxes, insurance costs, uninsured damage, and increased prices due to supply chain shortages.
Key findings include:
- Since 2005, Commonwealth expenditure on disaster relief was $24 billion, while spending on disaster resilience was just $500m – or around two per cent of all expenditure
- By 2050, Australian households will be paying $35.24 billion every year (in 2022 dollars) for the direct costs of extreme weather
- In 2021-22, insurers paid $6.41 billion from more than 380,000 claims across multiple events, which was $3.9 billion more than the previous 12 months
- The February-March flood has so far reached $5.28 billion in insured losses from more than 233,000 claims and is the costliest natural disaster in the country’s history after the 1999 Eastern Sydney Hailstorm ($5.57 billion in insured damages normalised to 2017 values)
- The local government area that suffered the greatest loss from this year’s floods was Brisbane, at $1.38 billion, followed by Lismore at $508 million
- The incurred loss per adult was $20,000 for Lismore, compared to $1,500 for Brisbane
- Claims from Lismore averaged almost $80,000, Ballina $64,000, Byron and Richmond Valley both around $50,000, and Brisbane around $30,000.
More resilience funding needed
Andrew Hall, CEO Insurance Council of Australia said the new data was a “stark reminder of the urgent need to invest in strengthening our communities against worsening extreme weather”.
“Over the last decade the percentage of all spending in resilience and mitigation has declined in comparison to the money spent on recovery and clean-up, and this is again a reminder why we need the change in policy thinking.”
The Federal Government has introduced legislation to invest $200m a year in resilience measures through its Disaster Ready Fund.
ICA is calling on states and territories to match this funding to protect communities from worsening extreme weather.
“They should also act now to reform state taxes on insurance products as an immediate measure to make insurance more affordable and lift the level of cover against extreme weather events,” added Hall.
Michael Buckland, CEO McKell Institute said: ”The 2022 floods along Australia’s East Coast not only impacted millions of people and cost more than $5 billion in insurance damages, but they also showed that even individuals who were not directly impacted by the event bear the economic and social cost.
“Every Australian pays for natural disasters through the rising cost of produce or shouldering the tax bill for recovery.
“The direct costs from extreme weather events are estimated to grow by more than five per cent above inflation and reach more than $35 billion by 2050.
“In just under three decades Australian households will be paying more every year for the direct costs of extreme weather events and the wider economic costs will be even greater.”