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Natural disasters to cost Australia $33 billion per year by 2050


Two new reports by the Australian Business Roundtable for Disaster Resilience and Safer Communities have found that the economic costs of disasters in Australia are at least 50% greater than previously estimated and are expected to increase from $9 billion to $33 billion per year by 2050.

Wednesday March 2, 2016

Natural disasters to cost Australia $33 billion per year by 2050
Credit: iStock.com/Thomas Hogg

The reports, The Economic Cost of the Social Impact of Natural Disasters, and Building Resilient Infrastructure, deliver the first economic analysis of the social impact of natural disasters, and the benefits of ensuring infrastructure assets are more resilient to extreme weather events. They build on the previous work of the Roundtable to call for a better way to prepare for natural disasters.

Australian Red Cross Director of Australian Services, Noel Clement, said the framework developed in The Economic Cost of the Social Impact of Natural Disasters revealed the true cost of natural disasters was at least 50% greater than previously estimated.

"This report is the first time that analysis into the economic cost of the social impacts of natural disasters has been conducted, filling a critical gap in the research on the medium and long-term impact of disasters on our communities," he said.

"More than 20 communities like Yarloop in WA and Wye River in Victoria have suffered the devastating impacts of disasters in the short period since October 2015. We've all seen the physical impacts of these events on news feeds; lost homes, public infrastructure damage and scarred landscapes. But what's often less evident is the social impact. The release of this report clearly and persuasively demonstrates the devastating, complex and long term social impacts of disasters, that communities like Yarloop, Wye River and many others are now facing as they work to re-build and recover."

"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."

The report found that when social impacts such as mental health issues, chronic disease and alcohol misuse, are included, the total cost of natural disasters would average $33 billion per year in real terms by 2050.

The Building Resilient Infrastructure report found that $17 billion will need to be spent on the direct replacement of critical infrastructure such as roads, railways and hospitals up to 2050, as a result of natural disaster events. The report provides guidance and a set of principles for government and business to integrate disaster resilience in infrastructure planning, appraisal and approval processes.

The Australian Business Roundtable for Disaster Resilience & Safer Communities was formed in 2012 and includes the CEOs of Australian Red Cross, IAG, Investa Office, Munich Re, Optus and Westpac as its members. The roundtable aims to influence public policy via evidence-based reporting on the unsustainable cost of disasters on life, property and the economy.

 

Key findings and recommendations

The Economic Cost of the Social Impact of Natural Disasters

Key findings:

• The true cost of natural disasters is at least 50% greater than previously estimated when social costs are incorporated.
• When both financial and social costs are included, it is estimated the total cost of natural disasters in Australia in 2015 exceeded $9 billion, or 0.6% of GDP. This is expected to double by 2030 and to reach an average of $33 billion per year by 2050.

Report recommendations:

• Pre and post-disaster funding should better reflect the long-term nature of social impacts.
• A collaborative approach involving government, business, not for profits and community is needed to address the medium and long-term economic cost of the social impact of natural disasters.
• Governments, businesses and communities need to further invest in community resilience programs that drive learning and sustained behaviour change.
• Further research must be done into ways of quantifying the medium and long-term costs of the social impacts of natural disasters.

Building Resilient Infrastructure

Key findings:

• More than $450 million was spent by Australian governments each financial year on restoring essential public infrastructure assets following extreme weather events between 2002-03 and 2010-11. This equates to about 1.6% of total public infrastructure spending.
• $17 billion (in net present value terms) will need to be spent on the direct replacement costs of essential infrastructure impacted by natural disasters between 2015 and 2050.
• Total spending on infrastructure between now and 2050 in Australia is projected to reach approximately $1.1 trillion.

Report recommendations:

• Infrastructure planning processes to be improved to integrate resilience in government and industry decision making by adopting the principles for resilience.
• Improve incentives through policy change and funding arrangements that ensure disaster resilience has been considered and incorporated, where appropriate, into infrastructure planning.
• Invest to strengthen the technical capacity of practitioners to identify, analyse and evaluate the costs and benefits of resilience options.

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