Leading insurer Suncorp is calling on the next Federal Government to invest in mitigation and resilience projects to protect regional communities from economic ruin following natural disasters.
A report released today by SGS Economics & Planning, and Suncorp shows a disaster’s initial impact on the economies of regional cities and towns can be equivalent to a major employer leaving the town, but insurance payments help to mitigate the initial effect helping the town to recover over the long-run.
The report, Economic Recovery After Disaster Strikes, investigates the experience of three recent natural disasters; Cyclone Debbie (QLD & NSW in 2017), Tathra bushfires (NSW 2018) and Hobart flood (TAS 2018), to provide a comparison of the economic impact of disasters based on size, location and population density.
Suncorp Insurance CEO, Gary Dransfield, said the report reveals the true impact of natural disasters, and the role of insurance to assist Australia’s regional cities and towns to recover.
“Some regional communities may never recover from a natural disaster without insurance, so we must work to ensure people are protected. The Report found, following Cyclone Debbie, without Suncorp’s insurance payouts the Whitsundays would have suffered a permanent loss of 23 per cent GDP,” Mr Dransfield said.
“More than one in 10 Australians live in small regional towns, and many more in regional cities, yet despite the increasing risk, the Federal Government continues to invest 97 per cent of disaster funding in clean-up and recovery, rather than prevention.
“Very little funding is directed towards preventing natural disasters or making homes, businesses or communities more capable of withstanding the impact of fires, floods or cyclones – despite the Productivity Commission recommending in 2014 that the Federal Government should invest $200 million a year in mitigation.
“The next Federal Government needs to treat natural disaster mitigation and resilience projects as investments critical to the economic future of our country, otherwise millions of Australians will remain at risk.
“Only through committed action that builds resilience and reduces the increasing impact of severe weather events can we also shift the dial and make insurance more affordable for regional Australians.”
Australia’s 1,700 towns with populations of less than 10,000 are the most exposed to the economic impacts of natural disasters. Regional cities with larger economies, such as Lismore, Mildura, Busselton, or Port Pirie, are also seriously at risk.
In regional Australia, insurance payouts not only benefit individual policyholders but have a flow on effect that stabilises the local economy after a disaster, with the economic stimulus promoting a more rapid return to normal economic activity,Suncorp Insurance CEO, Gary Dransfield
“This is why Suncorp is always looking for ways to fairly pay claims, not deny them. We know the faster we can inject funds the stronger the recovery will be for our customers and the communities in which they live.
“As we’ve recently seen following the Townsville floods, quickly paying claims, engaging local builders, using local trades and suppliers not only rebuilds people’s homes and businesses faster, but injects vital economic vitality into damaged communities.”
Between 2016 and 2018 there were over 120 natural disasters in Australia that attracted government assistance . These disasters disrupted local communities, destroyed and damaged homes, business premises, and economic and social infrastructure.
In addition to the destruction of physical assets, natural disasters disrupt the normal economic production which takes place within a region. Retail businesses are closed, workers can’t get to the office, crops are destroyed, and factories sit idle without raw material.
Report co-author Terry Rawnsley, Principal and Partner at SGS Economics & Planning, said the speed of the disaster response, and injection of funds, were critical to the strength of the long-term recovery.
“If people see recovery occurring quickly after a natural disaster, it boosts confidence and encourages people to stay. We know once people leave it is very hard to get them back, forever changing the community,” Mr Rawnsley said.
“The impact of a major natural disaster to a regional city or town is like a factory or mine closing – this has a range of flow on effects with widespread and long-term impacts across the whole economy and community.
“The report found the Tathra bushfires on the New South Wales South Coast hurt the local economy by an estimated $207 million, or a 33.7 per cent decline in local GDP. This was a significant economic impact, largely driven by disruption to the town’s key tourism sector.
“Conversely, when Hobart was hit by flooding one year ago, the economic impact was estimated to be a $908 million reduction in local GDP, however as a larger city the economy is more diversified and therefore much more resilient.”
“Our changing climate will see the increasing prevalence and severity of natural disasters, which means there is a growing risk of Australia’s economic performance being undermined.”
About SGS Economics & Planning SGS Economics and Planning is an independent consulting business with a social purpose. A certified B Corporation, SGS works to shape a more equitable, prosperous and sustainable world. SGS’s multidisciplinary team of economists, planners, mathematicians, researchers and data scientists explore and create solutions to pressing social, economic and environmental issues. This independent insight helps businesses and governments make evidence-based decisions and confidently plan better places, communities and economies.