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Liberty Specialty Markets

Where's the money? Budget's empty answer to insurers

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The Insurance Council of Australia (ICA) has slammed as “short-sighted” the Morrison Government’s decision not to prioritise mitigation spending in the wake of the Townsville floods.

There is virtually nothing for resilience measures in last night’s federal budget, despite repeated pleas from ICA and other stakeholders for more investment in resilience, especially in disaster-prone regions.

A Productivity Commission recommendation that a minimum of $200 million be invested each year in mitigation and resilience projects was ignored.

ICA believes some of the $3.9 billion allocated for the new Emergency Response Fund, which was set up to handle future natural disasters, could have been used for mitigation works.

“The failure of governments to treat flood mitigation and resilience projects as critical investments in the economic future of natural disaster-prone communities is short sighted and disappointing,” the ICA says.

“Just six weeks after Townsville and parts of central Queensland were hit by catastrophic floods that caused billions of dollars in insured and uninsured losses, the Coalition has again failed to provide a vision or a sustainable solution for millions of Australians who live in disaster-prone regions.”

In addition to the $3.9 billion Emergency Response Fund, the Government plans to put a similar amount into the new Future Drought Fund and provide a further $3.3 billion to support flood-affected residents.

“None of this money appears to be directed towards preventing natural disasters or making homes and businesses more capable of withstanding the impact of floods or cyclones,” the council says.

According to the 2019/20 budget paper, $130.5 million will be set aside over five years to reduce the risk and impact of disasters.

The Actuaries Institute has also expressed its disappointment at the Government’s failure to heed its call for increased mitigation spending.

“As called for in the institute’s pre-budget submission, we urge the Government to develop policies to improve resilience and to fund mitigation and adaptation measures supported by comprehensive cost-benefit analyses,” CEO Elayne Grace said.

“The institute was disappointed that there were no additional measures announced in the budget to mitigate climate change or to improve the nation’s general resilience against natural disasters.”

Increased funding for the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) has the support of ICA and other financial industry bodies.

ASIC will receive an extra $404.8 million and APRA another $151.7 million.

“In this budget, the Government is ensuring the financial system regulators have the resources they need to expand their capability to deliver on their new responsibilities and new enforcement and supervision approach,” the budget paper says.

The paper says an independent inquiry will be set up in three years to assess if the financial services industry has implemented the recommendations made by the Hayne royal commission.