Attorney-General Robert McClelland says the Federal Government has not ruled out mandating that homes and businesses in high-risk flood areas must buy cover for flood, and may subsidise cover if necessary.

Speaking at an Institute of Actuaries flood resilience seminar last week, he said the Government will first focus on increasing the pool of insurers offering flood cover. But if some areas are deemed uninsurable, “it may well become a role for Government to look at what it can do to step in and either subsidise or cover that”.

He says the Government wants to implement a “solid direction” on flood insurance before next summer.

“A lot of thinking” is occurring at Government level as to whether the current disaster arrangements take the right approach, as the amount of money spent in Australia on risk mitigation for natural disasters is of “no comparison” to the after-the-event funding required.

He says the $110 million provided by the Federal Government over four years to the states and territories for disaster mitigation under the Natural Disaster Resilience Program is dwarfed by the $6 billion the Government will spend on disaster response and recovery this year.

“The Australian taxpayer has become the default insurer of last resort to these natural disasters,” he said. “It is my submission that is not sustainable and must be addressed.

“There is strong evidence that we need to invest more on the mitigation side of the ledger to reduce the expenditure on the recovery side. If you look at what we are putting into mitigating as opposed to what is going out after the event, there is absolutely no comparison.”

Mr McClelland says every dollar invested in risk mitigation saves at least two dollars in recovery costs.

He also believes a balance needs to be struck between providing people with assistance and encouraging greater resilience in the community when dealing with natural disasters.

“We need to consider whether the current approach to relief and recovery assistance is actually reducing the impact of disasters,” he said. “It is counter-productive if government assistance acts as a disincentive to people taking steps to build their own resilience.”

Under present natural disaster relief and recovery payment arrangements, the payment for home contents in most states is about $8000. “If you were a renter, why would you bother taking out insurance?”

Changes to disaster relief funding that could be considered include making relief payments an advance on future tax returns, or attaching conditions that they be spent on home repairs, insurance or mitigation measures against future disasters.