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Federal Budget provides $1.2 billion to build resilience

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The Federal Budget has allocated $1.2 billion for measures to improve resilience, including the Government’s new mitigation program and spending on natural disaster responses.

The budget provides $615.5 million over six years for the Preparing Australia mitigation program, announced last week, and includes $280 million over three years for projects in bushfire affected areas.

A new Australian Climate Service to improve the ability to anticipate and prepare for more extreme weather events due to a changing climate, and to inform risk reduction and resilience investments has been allocated $209.7 million.

The National Recovery and Resilience Agency, which will oversee the mitigation program and catastrophe responses, will receive $61.1 million over four years and $22.9 million a year ongoing.

The pilot program to fund cyclone risk mitigation works for strata title properties in north Queensland, being implemented with the state government, receives $40.3 million over three years.

The Insurance Council of Australia (ICA) says the budget represents an historic commitment to funding resilience and mitigation, and follows industry calls for such spending for more than a decade.

To gain maximum return from the investment, state and territory governments should match the federal funding in their own jurisdictions, it says.

“Treasurer Josh Frydenberg’s third budget is good news for delivering a community more resilient to the risks of natural disasters,” ICA CEO Andrew Hall said today.

“The Productivity Commission’s estimate that 97 per cent of all disaster funding in Australia is spent after an event, with just three per cent spent on mitigation measures ahead of a disaster, shows that the Federal Government’s commitments are an historic first step towards redressing that imbalance.”

The budget allocates $2.4 million next financial year for Treasury to establish the taskforce that will consult industry and experts on the design and implementation of the Government-backed reinsurance pool for cyclone and related flood damage.

The Government said last week it would provide a $10 billion guarantee for the pool, aimed at the region above the Tropic of Capricorn and due to come into effect in July next year.

“The reinsurance pool will be designed to be cost-neutral to government over time, based on the predicted cost and frequency of cyclone events,” the budget papers say.

“The estimated value and range of calls on the guarantee is unquantifiable at this stage of policy development. Further modelling on the potential costs of the guarantee will be undertaken before July 1 2022.”

The Actuaries Institute says insurance pools can reduce premiums but need to be implemented alongside forward looking building codes and land use planning and investment in climate risk mitigation.

“The Government is to be commended for taking steps to help Australians protect themselves against the risk of shock events, such as natural disasters,” Actuaries Institute CEO Elayne Grace said today.

“Actuaries recognise that solutions require sustained and considered involvement across a broad range of stakeholders. But it is important we also get further commitment to forward looking land use planning and building codes, and climate risk mitigation.”

The National Insurance Brokers Association says after a difficult economic period during the pandemic, the budget indicates a transition to ensuring the recovery.

“Measures including tax cuts for small businesses, incentives to invest in your business, significant support for regional areas, targeted industry packages and more will not only help insurance clients but also broking businesses,” CEO Dallas Booth said.