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Natural disasters to cost Australia $1.2 trillion over four decades

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The cost of natural disasters to the Australian economy will almost double by 2060 even under a low emissions scenario, and $1.2 trillion in cumulative costs is likely over the next 40 years, Deloitte Access Economics estimates.

Deloitte forecasts natural disasters will sap the Australian economy of at least $73 billion a year by 2060, up from $38 billion annually on average now, due to three main cost drivers: population growth, climate change and rising property values.

Two thirds of natural disaster costs will be incurred in Queensland and NSW over the next four decades as warming oceans push tropical cyclones and associated floods further south.

The findings are presented in Deloitte's “Update to the economic costs of natural disasters in Australia” report, commissioned by the Australian Business Roundtable for Disaster Resilience & Safer Communities which includes IAG and Munich Re as members.

Significantly greater costs associated with growing populations and major river flooding are also forecast for Melbourne and Brisbane.

“Coastal population centres in South East Queensland and North East NSW will experience some of the highest increases in costs as they become more exposed to tropical cyclones and floods,” Deloitte says.

A low emissions scenario is “increasingly unlikely to be realised,” it says, while warning that a high emissions scenario introduces an additional $125 billion in costs over 40 years and urging that it is “imperative” that a low emissions future be realised to offset climate change influence on the frequency and severity of natural disaster events.

“Delaying action will ultimately mean paying more later as the costs from natural disasters increase,” it said.

Under a climate scenario of 3 degrees Celsius above pre-industrial levels just after 2060, the estimated cost of natural disasters to Australia was $94 billion a year, 29% higher than under a low emissions climate scenario.

The Roundtable has released five independent research reports that quantify the financial and social costs of disasters and recommend national investment in disaster resilience and mitigation activities as the most effective way to protect people and communities.

Last year, natural disaster costs were around 2% of Australia’s Gross Domestic Product. Under a low emissions scenario in which timely action sees emissions reach zero by 2100, Deloitte forecasts the annual cost will still rise to 4% of Australia’s 2020 GDP.

IAG MD and CEO Nick Hawkins says the forecasts reinforce that action to limit climate change must be coupled with interventions to better prepare communities via a collective effort from government, businesses and the community.

“The Roundtable members are seeing firsthand the impacts of more extreme, more frequent weather events on Australians, and this latest report provides further evidence that we must all continue to invest in increasing resilience to protect communities and ultimately, save lives,” Mr Hawkins said.

Deloitte’s forecasts include smaller natural disaster events which are not always captured by insured-loss data, and consider how costs vary under different future temperatures scenarios.

Click here to read the full report.