Today, Deloitte Access Economics released the special report: Update to the economic costs of natural disasters in Australia, commissioned by the Australian Business Roundtable for Disaster Resilience & Safer Communities (the Roundtable).
Since its formation in 2012, 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.
This latest report updates and builds on the Roundtable’s previous estimates of the costs of natural disasters with new, more comprehensive data and extends the analysis to estimate costs under different climate change scenarios.
Key findings from the report
The report shows that today, natural disasters cost the Australian economy $38 billion per year on average. Even under a low emissions scenario, this cost is estimated to increase to $73 billion per year by 2060. This is significantly higher than the $39 billion by 2050 per year we reported in 2017.
In 2020 annual average costs of natural disasters are only 0.02% larger than the low emissions scenario. But under a high emissions scenario – where emissions reach 3⁰ Celsius above pre-industrial levels just after 2060 – the estimated costs per year are $94 billion. That represents a 29% increase relative to the low emissions scenario.
Even if a low emission scenario is achieved, the cost of natural disasters is forecast to be $1.2 trillion in cumulative costs over the next forty years.
The report also shows some parts of Australia will be more impacted that others. Two thirds of the costs from natural disasters will be in incurred in QLD and NSW over the next forty years as they become more exposed to tropical cyclones and floods, as warming oceans enable tropical cyclones to move further south.
Costs in Melbourne and Brisbane will also increase significantly, as major rivers in these cities alongside growing populations will lead to greater costs associated with flooding for Melbourne and tropical cyclones and floods for Brisbane.
IAG data provides a deeper understanding of costs
The new data informing this report includes IAG’s detailed modelling of average annual damages for domestic homes across Australia – and insights from our joint research with the National Center for Atmospheric Research which estimates the average annual damages at different temperatures rises.
This data made it possible to:
- estimate costs at a local level, allowing for a more granular understanding of the impact of natural disasters, and include both insured and uninsured losses in estimates of housing asset losses.
- include smaller natural disaster events that are not captured by the ICA database (previous reports and estimates were based on ICA catastrophe data)
- consider how costs vary under different future temperatures scenarios, which can be used to predict future damages under different climate scenarios.
More investment in mitigation needed
At a time when Australia is facing more frequent, more severe weather events, and the country is looking more deeply than ever at resilience following the devasting Black Summer bushfires, this latest research strengthens the case for resilience. IAG and all the Roundtable members, believe action to limit climate change must be coupled with interventions to better prepare communities and this continues to require a collective effort from all levels of government, businesses and the community.
We’re encouraged by the action governments at all levels have taken to integrate natural disaster resilience into the future planning for Australia’s cities, towns and regions. And we continue to focus on collaboration across governments, regulators, the insurance industry and communities to building our resilience to natural disasters.
Download the report
For more information visit australianbusinessroundtable.com.au