Disaster mitigation economic opportunities for Australia

The author has just experienced a Northern NSW flood. This time we were lucky, but other locations in Northern NSW and Southeast Queensland were not. Prior to this, there was major flooding in North Queensland, and more flooding is currently underway. Before that, there were major bushfires in Victoria, South Australia, and Western Australia. More floods and bushfire disasters loom, with bushfires likely to worsen due to dense regeneration from previous intense bushfires and increasing eucalypt decline.

This review considers the economic opportunities related to Australian disaster management.

Economic opportunities in relation to Australian disaster management

A series of economic opportunities are outlined below in relation to disasters in Australia.

1. Reform disaster funding arrangements

The first economic opportunity is for government to reform natural disaster funding arrangements, which are inefficient, inequitable, and unsustainable. These are prone to cost shifting, ad hoc responses, and short-term political opportunism, as outlined in the Menzies Research Centre (2020):

Despite this relentless commitment to inquiries, in 2014, a report released by the Productivity Commission into Natural Disaster Funding Arrangements found that government natural disaster funding arrangements had been inefficient, inequitable and unsustainable. They are prone to cost shifting, ad hoc responses and short term political opportunism.

The Productivity Commission lamented that the funding mix was disproportionately recovery-based and did not promote mitigation. It observed that the political incentives for mitigation were weak, since mitigation provides public benefits that accrue over a long-time horizon, and that over time this would create entitlement dependency and undermine individual responsibility for natural disaster risk management.

At that time, it said, mitigation funding amounted to only three per cent of what is spent on post-disaster recovery and recommended that the Australian Government should gradually increase the amount of annual mitigation funding it provides to state and territory governments to $200 million.

The author proposes a complete shift in disaster funding focus—from recovery to mitigation—supported by substantial increases in mitigation investment and a comprehensive review of risk-based approaches.

2. Capture significant budget savings

Targeted mitigation spending can yield large budgetary savings. The Menzies Research Centre (2020) notes:

A paper commissioned by the Australian Business Roundtable for Disaster Resilience & Safer Communities estimated that expenditure of $5.3 billion (in present value) to 2050 would generate budget savings of $12.2 billion for all levels of government, including $9.8 billion for the Commonwealth. With targeted mitigation spending, Commonwealth and State/Territory government expenditure on natural disasters could be reduced by more than 50 per cent by 2050.

Annual funding of $200 million is insufficient to achieve meaningful mitigation or savings. A scattered and underfunded approach cannot address the scale of the problem.

3. Optimise mitigation for efficiency

Disaster mitigation should be approached thoroughly and nationally. Swanek (2024) noted:

Each $1 invested in disaster preparation saves $13 on average in economic costs, and reduces damage and cleanup after a disaster.

Similarly, the American Progress Organisation (2019) found:

Every dollar spent on disaster preparedness can save $4 in disaster response and recovery. In Colorado, a few million dollars in fire breaks and prescribed fires saved almost $1 billion in property during the 2018 Silverthorne wildfire.

Porter et al. (2021) reported even higher ratios in Canada: new builds (30:1), retrofitting (14:1), and national programs (4:1). In Australia, mitigation can save at least $2 for every $1 spent—without even counting broader social and economic benefits.

4. Avoid the costs of massive disaster impacts

The 2019–20 bushfires were estimated by AccuWeather to cause $110 billion in total damage and economic loss.

The estimate is based on independent methods to evaluate all direct and indirect impacts of the fires using a variety of sources.

Even lower estimates suggest a $20 billion impact. These figures highlight the enormous potential savings from mitigation. For example, during the 2018 Buffalo Fire in the U.S., fuel reduction projects saved an estimated $913 million in homes and infrastructure. In the 2012 Waldo Canyon Fire, similar efforts preserved a neighbourhood worth over $75 million.

5. Reduce repeat disaster costs

Repeat disasters such as the Lismore floods and recurrent bushfires show the inadequacy of current mitigation efforts. A proactive approach is needed to stop these cycles of damage and recovery.

6. Set minimum standards for mitigation

Minimum standards should be established for bushfire and flood mitigation. For example, states could be required to conduct prescribed burning on 5–8% of forests annually, with cumulative targets over five years (25–40%). Flood-prone towns and cities should have mandated, co-funded mitigation strategies with clear timelines and accountabilities across all levels of government and insurers.

7. Introduce federal incentives

Federal incentives should encourage states to meet mitigation standards. Current arrangements effectively subsidise poor practices, with minimal prescribed burning and inadequate preparedness. Funding should be linked to performance-based metrics for fire and flood readiness.

8. Revive historic cost-sharing models

Return to the 1960s model of shared funding—one-third federal, one-third state, one-third local government—with contributions from the insurance industry. This model delivered effective infrastructure and could support disaster mitigation projects nationwide.

9. Address insurance and levy cost inflation

Rising insurance premiums, emergency services levies, and stamp duties are unsustainable. Governments must intervene where premiums become unaffordable, tying mitigation to affordability and relief mechanisms.

10. Maximise prescribed burning to reduce suppression costs

Prescribed burning significantly reduces costs and risks. In the case of the 2021 Dixie Fire in California, nearly $700 million was spent on suppression—resources that could have been more effectively used in advance. Boer et al. (2009) showed that prescribed burning reduces unplanned bushfire extent and frequency in Western Australia.

Funding and benefits of an improved approach incorporating economic opportunities

The economic opportunities and efficiencies of expanding disaster mitigation in Australia are huge. It just takes government will, innovation, vision, protecting communities and firefighters, and looking out for their interests.

Surely good, effective governments, oppositions and fire agencies would capture these economic opportunities and obtain all the long-term benefits of this.

Benefits of an expanded federal, state and local disaster mitigation program to tackle disasters over the next 6–9 years across Australian landscapes include:

• Obtaining higher returns on investment than other projects
• Reduced individual bushfire disasters and associated costs, budget impacts and community/firefighter and ecosystem impacts
• Reduced ongoing repeat disasters and associated costs, reduced budget impacts and community/firefighter and ecosystem impacts
• Reduced community bushfire deaths and safer firefighting
• Assisting regional economies
• Reducing insurance premiums and uninsurance
• Improved preparedness for war and terrorism
• Reduced greenhouse gas impacts of intense bushfires
• Reduction in the consequent wetter year impacts post intense bushfires, as outlined by Fasullo et al (2023)