Natural Disaster Costs in Australia

Liam Dhillon
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Liam Dhillon: Monash University

Warwick-Monash Economics Student Papers from Warwick Monash Economics Student Papers

Abstract: As climate change continues to amplify the incidence of extreme weather events, policymakers are increasingly cognizant of the mounting financial burdens brought by a warming world. This paper examines the costs which have followed natural disasters in Australia between 1970-2022, utilising data from the Insurance Council of Australia and the Australian Institute for Disaster Resilience. The financial impact of disasters is estimated by applying loss ratios to insurance claim data and overlaying mortality and injury costs. An autoregressive integrated moving average model is then applied to forecast these costs out to 2030. The results show an average annual cost of between $2.9 billion to $6.7 billion between 1970-2022 and highlight the tendency for large-scale events to drive the majority of losses, with events in the top decile of costs accounting for 68% of all losses incurred in the period. The scale and volatility of costs following extreme weather events reinforces the need for both physical and fiscal preparedness of governments in meeting the economic challenges presented by climate change.

Keywords: Climate Change; Global Warming; Natural Disaster; Economic Costs; Disaster Management; Climate Policy; Environmental Policy JEL classifications: Q51; Q54; Q58 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:wrk:wrkesp:58

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