The Productivity Commission is to hold an inquiry into national disaster funding arrangements.

It will examine all national spending and the effectiveness of support for mitigation, while identifying ways to reduce impacts on communities and secure sustainable recoveries.

“We’re hoping it will get under way by the middle of the year,” a spokesman for Justice Minister Michael Keenan told insuranceNEWS.com.au.

Emergency funding arrangements fall under Mr Keenan’s portfolio.

Terms of reference have yet to be announced, but Treasurer Joe Hockey is writing to the Productivity Commission to finalise them.

Meanwhile, Prime Minister Tony Abbott will write to state and territory leaders calling on them to sign a new partnership agreement for the Natural Disaster Resilience Program that will contribute $52.2 million over the next two years.

The Federal Government will also consult with states on the Productivity Commission inquiry’s terms of reference. Emergency services ministers across the country have backed such an inquiry.

Canberra acknowledges that most current disaster funding models are weighted towards immediate response and recovery, instead of longer-term resilience.

The Federal Government supports states through the Natural Disaster Relief and Recovery Arrangements, and individuals through the Disaster Recovery Payment and Disaster Recovery Allowance.

The Insurance Council of Australia has welcomed the inquiry and says it will assist if requested. It wants recovery funds dedicated to such preventative infrastructure as levees, barrages, floodgates and improved drainage.

The council has also called for the Productivity Commission to report annually on the effectiveness of government disaster relief payments.

The Australian Business Roundtable for Disaster Resilience and Safer Communities says the inquiry is a response to one of its white papers, which estimates the cost of disasters can be halved if governments invest in cost-effective disaster preparedness and resilience.

The paper predicts the cost of natural disasters in Australia will rise from $6.3 billion a year to about $23 billion in 2050 without pre-disaster investment.