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The cost of extreme weather

Building resilience in the face of disaster
Insurance Climate change Extreme weather events Disasters Bushfires Floods Australia

According to the International Disasters Database, in 2021, 432 catastrophic events were recorded globally, which is significantly higher than the average of 357 annual extreme weather events recorded between 2001-2020. Floods dominated these events, with 223 recorded in 2021, up from an average of 163 per annum between 2001-2020. The Australian East Coast Floods in 2022 not only impacted millions of people and cost over $5 billion in damages, but they also showed that even individuals who were not directly impacted by the event bear the economic and social cost. These impacts range from the rising cost of produce to shouldering the tax bill for recovery costs.

Not only that, but according to our research direct costs from extreme weather events are estimated to grow by 5.13 per cent each year (before inflation) and reach $35.24 billion (in 2022 dollars) by 2050. In 2050 Australian households will be paying an average of $2,509.16 every year for the direct costs of extreme weather events. The wider economic costs will be even greater.

Report structure:

  • Part 1 of this report looks at the latest literature on climate change and outlines the well-established link between climate change and the increased frequency and intensification of extreme weather events.
  • Part 2 examines the direct economic costs to the Australian people, both in terms of insurance and government expenditure.
  • Part 3 looks at the indirect costs, with a focus on the 2022 East Coast floods.
  • Part 4 concludes that if we are to mitigate the rising costs of extreme weather, the federal government should focus more on resilience and future-proofing.
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