Productivity Commission report on Disaster Funding a real problem

The recently released Productivity Commission draft report on Natural Disaster Funding (available here) should be, and no doubt already is, of great concern to State and Local Governments. Under the present Natural Disaster Relief and Recovery Arrangements (NDRRA) the Federal Government meets up to 75% of the cost of disaster recovery. For some time the States and Local authorities have been complaining about the fact that NDRRA funds have been made available only for “like-for-like” replacement costs. That has inevitably resulted in infrastructure being repaired, at great cost, only to be damaged again in the next event. Clearly some means of mitigation should be built into disaster funding so that we are not continually rebuilding the same buildings, roads, wharves etc. The Productivity Commission’s report is quite right to highlight this issue and to suggest an increase in mitigation spending.

However, where the real problem with the report exists is that the Commission is also recommending the Federal Government cut their disaster funding contribution from 75% to just 50% now. In the past 5 years this change would have required something in the order of $4bn additional funding coming from somewhere else. This, of course, simply means that the additional costs will be worn by State and Local authorities. Clearly, in the case of a major event the Local Authority (and in all likelihood the State) will be unable to meet the huge costs involved. Insurance is either impossible, or impossibly expensive, to obtain.

By suggesting cuts to NDRRA funding and an increase in mitigation spend simultaneously the Commission appear to have got their timings badly askew. Surely it is true that mitigation spending now will decrease the need for disaster recovery expenditure later (that’s the point); but that will only be true once the mitigation measures have already been taken, and not before. What we need is an increase in spending to speed up mitigation now; that will then result in decreased recovery spending in the future at which point State and Local Authorities (who will have been incentivised to rebuild more intelligently by realisation of the funding changes to come) will be in a better position to take on a greater portion of the load. To penalise State and Local Authorities for not mitigating in the past, when the funding rules stopped them from doing so, is absurd.

All of the NDRRA-funded rebuild after Cyclone Yasi in our part of the world was on a “like-for-like” basis. Little or no mitigation was built into the projects since the guidelines did not permit it. How then is the Local Council supposed to rebuild to a higher standard after the next (inevitable) cyclone, with less funding?

The Commission’s focus on mitigation is to be welcomed and their suggestion that the Federal Government should be required to carry less of the burden of recovery is sensible. However, these changes must be made in sequence. First we need to see the mitigation in place, before we can expect to see the burden on the Commonwealth decreased.

It makes no sense for a Federal Government which claims to be “for the regions” to accept recommendations which, if implemented, would almost certainly see the complete collapse of smaller Local Authorities in disaster effected areas.

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