Increasingly frequent and severe natural disasters over the next 40 years will pose significant risk to the economy, a federal government forward-looking report has warned. 

“Impacts include the loss of economic activity, infrastructure damage, and higher insurance costs,” the Intergenerational Report says. 

“Growing disaster risk is driving higher insurance premiums and reduced insurance affordability and accessibility, particularly in high-risk areas.” 

The report flags the need for “effective intervention” to address catastrophe risk or premium affordability and other economic pressures will worsen. 

At present government disaster assistance is primarily provided through the Disaster Recovery Funding Arrangements program. 

“The costs associated with disaster response, recovery and reconstruction will continue to rise as the severity and frequency of natural disasters increases,” the report says. 

“Without effective intervention, the rising cost of disasters will place additional fiscal pressure on the budget over time, including through the DRFA and other channels. 

“Investment in disaster risk reduction and resilience will be critical to reduce losses, improve insurance affordability and support faster recovery.” 

The report prepared by Federal Treasury examines Australia’s economic trajectory and the transitions that will define the next 40 years. 

Artificial intelligence is one of many areas covered, with the report saying the technology will be a “defining influence” on the economy. 

“AI can now complete a wide range of cognitive routine and non-routine tasks to a level that surpasses human-level performance benchmarks and its capabilities are expected to keep advancing at a rapid pace,” the report says. 

“The economic and social impacts of AI will be profound, but their nature and magnitude will depend on how broadly and deeply AI is adopted, Australia’s position in global supply chains and specific AI use cases.” 

Click here to read the report.