Natural disaster and drought payments should be overhauled as they may stop communities from preparing for the impacts of climate change and could be a significant future liability for the federal government, according to a new report by the Productivity Commission.
In its final report on climate change adaptation, the commission also called on the government to ditch its plan to require insurance companies to provide flood cover to all households unless it could show the community benefits outweighed the costs.
The release of the report came as a new report by researchers from RMIT University found climate change and rising sea levels could benefit some Australian ports by reducing the need for dredging.
In its report, the Productivity Commission underlined an inadequate focus by the federal government on preparing for natural disasters. It highlighted that while it spent $5.6 billion on disaster recovery and rebuilding in 2011, only $27 million was spent on disaster-mitigation works.
It also warned that current Natural Disaster Relief and Recovery Arrangements requiring the Commonwealth to pick up a large portion of state and territory government disaster recovery costs reduce their incentives to properly insure for extreme weather events and undertake disaster-mitigation measures.
As a result, it called for an independent review of the NDRRA.