Proposed federal government changes to the Disaster Recovery Funding Arrangements could cost Queensland $500 million a year, according to the state.

The planned 50:50 funding arrangement does not recognise the severity or frequency of disasters in some states, say state budget papers released last week.

Canberra plans to replace the DRFA with a new Disaster Recovery Funding Framework that it says will be simpler and fairer, and ensure funds flow more quickly after an event.

This “comes at the expense of Queensland”, the budget papers say.

The federal government currently contributes up to 75% across the disaster recovery program.

The 50:50 set-up “would have cost the state around an extra $500 million each year on average to respond to recent events”, the Queensland government says.

Councils with limited revenue and high exposure to recurring damage are likely to defer repairs to roads, bridges and community assets, particularly in regional and remote areas, it warns.

The budget estimates DRFA payments of $3.86 billion will be received from 2026-27 to 2027-28, primarily for disasters last year and this year.

In his budget speech, state Treasurer David Janetzki said inexplicable changes to natural disaster funding came after a year in which 74 of the state’s 77 local governments had disasters declared.

The budget papers also show insurance duties raised $1.63 billion in 2024-25 and an estimated $1.73 billion this financial year. They are forecast at $1.83 billion in 2026-27.

The Insurance Council of Australia notes Queensland accounted for more than $4.1 billion of a total $4.8 billion in insured losses from extreme weather last year.

It has welcomed the state’s investment in disaster reconstruction but says mitigation spending is the way to reduce insurance premiums over the long term.

An immediate way to cut premiums would be abolishing stamp duty on insurance products, ICA says.