The cost of replacing essential infrastructure damaged by disasters will reach an estimated $17 billion in the next 35 years, according to the latest set of reports from the Australian Business Roundtable for Disaster Resilience and Safer Communities.
The reports, Building Resilient Infrastructure and the Economic Costs of Social Impact of Disasters, outline the costs associated with replacing essential infrastructure damaged by disasters and provide an overview of the direct costs of physical damage within the total economic cost of disasters.
In 2015, the total economic costs of disasters exceeded $9 billion, a figure that is projected to double by 2030 and reach $33 billion per year by 2050 - funds that could be spent elsewhere on other major national projects.
During the Roundtable's launch of the reports at Parliament House last month, risk expert and CEO of reinsurer Munich Re, Heinrich Eder, noted that these projections are based only on economic and population growth. They do not even include the increasingly detectable effects of climate change.
These are big, and socially traumatic, numbers. Long-term they have the same sort of potential to create holes in national and state budgets as our ageing population does—the subject of repeated Intergenerational Reports and eventual decisions about adjusting retirement age.
It is clear that investing much more in disaster resilience as a nation will reduce physical damage, avoid social disruption and trauma, and lessen this capricious burden on state and national budgets.
In fact, estimates suggest that well-targeted investments in resilience could result in significant savings for the Australian Government.
Currently, the Government spends $560 million per year on recovery, but only around $50 million per year on building disaster resilience. A well-targeted investment in resilience could reduce spending on recovery by as much as $10 for every $1 invested.
And these savings could be applied elsewhere - from individual home owners, to investors in major buildings and precincts through to all levels of government.
Last year at CSIRO, we carried out a study for state and federal governments on the whole disaster resilience system, gathering and synthesising the knowledge and views of people responsible for different aspects of disaster response and resilience at all levels in the public, private and community sectors.
Our research identified the need for change, particularly in issues close to areas of operation or influence. Across all interviews, a common thread emerged of a system (see diagram) in which almost every part needed action. Often, individual actions needed were not big, but if only one was completed, it could be undermined by lack of action elsewhere in the system.
For example, in the building and construction sector, the Roundtable's report points to one part of this system: traditional cost-benefit analysis methodologies simply lack guidance on taking account of the systemic benefits of resilience, such as accounting for the benefits of less disruption to business when an electrical substation is destroyed by floods. But our report suggests the problem is deeper – even at the scale of a single major building or precinct, consider the following issues:
- The nation’s building standards, as promulgated through the Australian Building Codes Board (ABCB), are minimum standards rather than aspirational, so the minimum is what is normally built. Changes to the standards are often resisted by industry because of the increased up-front costs.
- Some large companies (e.g. in construction and mining), that also invest in and manage long-lived infrastructure, understand the benefits of spending a bit more at the time of construction to save greatly on lifetime operating costs, especially repairs and downtime during and after disasters.
- However at a local level, much of the industry and their investors do not recognise these benefits. This is because the business case for proactive investment in resilience has not been made in the local detail that they need, such as the benefits and costs of raised floors for a building facing flood risks in their own region.
- In some areas we know the costs and benefits of building resilient infrastructure. For example, thanks to the work of the James Cook cyclone testing facility, we know cyclone-proof building codes work in north Queensland amount to significant savings in avoided damage. Similarly, thanks to the work of CSIRO and others, our knowledge is growing about what is needed to make houses more fire resistant. But there is no systematic database of resilience measures with a consistent, accessible analysis of their costs and benefits in different regions of Australia. The Queensland Reconstruction Authority has notably embarked on systematically collecting this sort of cost and performance data, but that approach is needed more widely.
- At a householder level, insurance premiums are increasingly discriminating on the basis of household disaster risk but there is no targeted advice to help policy holders know what to do to reduce their premiums. For home security, insurers tell people what to do to reduce premiums, such as adding locks or security systems, but there are few comparable signals for for disaster resilience.
- Overall the evidence base on the costs and performance benefits of more fit-for-purpose buildings and resilient communities needs to credibly inform the higher level fiscal case to State and Commonwealth treasuries. We probably need an Intergenerational Report style analysis of the risks to the federal budget in the absence of action. If accepted, this would help governments to drive more proactive investment in disaster resilience in their own spending and partnerships. It would also help to change aspects of the policy environment, for example by allowing (or requiring) the ABCB to identify aspirational as well as minimal standards.
The above issues are interlinked and, as such, should be addressed in a coordinated way across the whole disaster resilience system.
Our report identifies a number of other issues including some procedural ones that would help coordination. Important among these is the need to deeply institutionalise a disaster resilience community comparable to that for disaster response. The decision-making processes across the stakeholder system are very diffuse for disaster resilience, and there are usually no clear responsibilities, especially for the type of linked decisions mentioned above. This contrasts with the disaster response community; when a disaster occurs, emergency services pull together extraordinarily effectively with all levels of government, communities and the private sector.
A comparably close-knit community is needed for disaster resilience, but the players are not the same. The emergency services need to be a part of this community, but it has to reach into the construction and investment sectors, and into completely different areas of government policy such as those managing infrastructure public-private partnerships, environment, community health and well-being, and Treasury departments. What is more, resilience needs sophisticated decision-making models that take into account not only the costs of actions but their expected benefit to all parts of society. This is so priorities can be identified and low-return high-risk actions avoided.
A challenge to developing this disaster resilience community is that resilience is a slow-burning issue, not a hot forest fire, so persistence and focus and collaboration must be maintained over decades. This requires different institutional arrangements to those that are serving the disaster response community well.
We face a future where the frequency and severity of disasters is increasing rapidly. Government, community and business can all gain enormous benefits from improving disaster resilience. But this requires coordinated action across multiple issues, supported by an effective and empowered disaster resilience community.