Regarding Richard Farmer’s chunky bits (Crikey, yesterday, item 11), Farmer seems a little confused about disaster insurance if his small item on the flood levy is anything to go by.
I was particularly puzzled by the unsubstantiated claim that my “insure-at-all-costs approach (his words, not mine) would mean higher total cost to taxpayers than the current government self-insurance system.” How, by any sensible reckoning, can he make that claim?
For a start, Queensland is not “self-insured”. If it was, it wouldn’t need $5.8 billion from Commonwealth taxpayers. There is another term for Queensland’s so-called “self-insurance”, Richard. It’s called “not having insurance”. Queensland currently has a fund of about $700 million, which is well short of the almost $8 billion it would require if it were not for the federal government’s funding of $5.8 billion, leaving Queensland to fund only $2 billion given the current federal/state disaster relief arrangements that splits a recovery bill 75-25 respectively. And the problem with the current arrangements is that 75-25 split applies regardless of whether a state has insurance or not.
Victoria also got flooded, but because it has insurance, the cost to the taxpayer will be a fraction of what it would have been had the Victorian government not sensibly taken out disaster coverage. Premier Bligh claimed on ABC TV’s Q&A last week that disaster insurance was not available for Queensland. It’s a strange thing to say given that insurance was available to Queensland.
A decade ago, Queensland was offered multibillion dollar disaster insurance for its infrastructure, including roads, for two events per year. The cost was less than $50 million a year, but ultimately the Queensland government decided to gamble all our money. We lost. The Queensland government has argued disaster insurance didn’t represent good value for money. The question is, who for?
It might be cheaper for Queensland to gamble with federal money, but it has left Australian taxpayers with a repair bill that is billions of dollars more than it needed to be. Sure, Queensland treasury gets to save $50 million a year. But now we have a situation where the federal taxpayer has to find 120 times that amount to honour the ludicrous state and federal funding arrangements. And when you look into those arrangements, the deal gets even sweeter for uninsured Queensland, and a lot worse for the responsible governments that do have disaster insurance such as Victoria, New South Wales, South Australia, West Australia and the ACT. That’s because under GST arrangements Queensland gets up to 80 cents in the dollar back of that 25% share it has to pay through increased GST revenue.
So state governments that took out insurance lose GST money in order to prop up a state government that didn’t bother to take out insurance. Do Richard and the Queensland government know something about insurance that the rest of us don’t know? Or does it just come down to the fact that under the current arrangements, the feds are required to write out a blank cheque to states and territories even if they refuse to do the right thing?