As many of you will be aware, at the request of the Treasurer Joe Hockey, the Productivity Commission has undertaken an investigation into the efficacy of Australia’s natural disaster funding arrangements.
In particular, the Commission has analysed the quantum, coherence, effectiveness and sustainability of current Commonwealth, state and territory expenditure on natural disaster mitigation, resilience and recovery.
The recommendations of the Commission will have significant impacts on State and Local Governments if adopted with significant reductions in the level of Federal funding assistance and increased trigger amounts for disaster events.
The Institute of Public Works Engineering Australasia (IPWEA) attended two public hearings, and also had the opportunity to meet one-on-one with the Commissioners in Melbourne.
IPWEA & IPWEA Queensland also collaborated to provide a joint submission on the Productivity Commission’s September 2014 Draft Report. The submission can be found online.
IPWEA acknowledges the financial pressures placed on all levels of government by natural disasters through the increasing frequency and severity of events, in particular the period between 2009 and 2013 where in the order of $14 billion in expenditure occurred due to flood events in Queensland.
However, IPWEA strongly opposed the funding reform recommendations in the draft Productivity Commission report which would see funding contributions from the Federal Government for eligible events reduced from 75 percent to 50 percent and small disaster criterion increased from $250,000 to $2 million.
The funding reforms will shift an increased portion of the cost of disaster events to State Government and Local Government and result in no real savings or reductions in Natural Disaster costs.
This is not a practical or sustainable approach as State and Local Governments do not have the capacity to absorb this additional funding burden, either directly or through ‘top up’ insurance schemes.
Such a significant cost shift would only be sustainable if the current vertical fiscal imbalance between the States and Australian Government was addressed through broader taxation reforms or alternate Australian Government funding programs to the States.
As neither Council nor the State Governments will have the resources or financial capacity to respond to significant disaster events, the actual outcome achieved through the reforms will be that damaged infrastructure will not be reinstated, State and Regional economies will not recover, and the quality and resilience of our essential infrastructure will be eroded over time with potentially irrecoverable consequences.
The Commision’s final report should remove recommendations that focus on ‘cost shifting’ and risk transfer and focus on improving outcomes from the current National Disaster Relief and Recovery Arrangements (NDRRA),
increasing mitigation initiatives and providing increased flexibility to State & Local Governments.
Our submission included a number of initiatives which would support this approach.
- removal of prescriptive, input-based conditions including restrictions on the use of local government employees’ labour (day labour)
- increased flexibility to State Government and Local Government and increased efficiency through changes to processes for estimating damage and consistent data collection
- better guidance at a national level on suitable ‘current engineering standards’ applicable to restoration of essential public assets (REPA)
- subject to current funding arrangements being maintained, allocation of restoration costs for major, discrete, non-linear assets (e.g. bridge structures) based on asset replacement value
- increasing the proposed $200M annual allocation for mitigation work to $500M per annum, supplemented by State and Local Government funding contributions
- rather than REPA funding being tied to damage rectification on a specific essential public asset, allowing REPA funding to be allocated on a ‘best for network approach’ to maximise network resilience and efficiencies
- a coordinated national approach to flood modelling and hazard mapping, coordinated by the Australian Government with support and input from State Governments, Local Government and the private sector
- providing local governments with a statutory exemption from liability for natural hazard management for reasonably based decision-making and actions
- Local Government improving asset management practices by fully integrating disaster management within asset management practices and placing a greater focus on network resilience.
The final report from the Productivity Commission is anticipated within the next few weeks.
IPWEA will continue to advocate for our members and seek a sustainable and sound approach to NDRRA funding going forward.
