Peter Martin Economics correspondent
March 1, 2013
It's as audacious as a raid could be. In order to find $100 million to extend dam walls in Sydney and Brisbane, the Gillard government is raiding the equivalent of its coffee jar.
Even better, it is taking out more than it needs - $150 million, directing the extra $50 million to cutting its deficit. Who could possibly complain?
"A whole lot of suits in Switzerland" is how one government source puts it.
Julia Gillard ... pledged $50 million to lift the Warragamba dam wall. Photo: Harrison Saragossi After the September 11 US terrorist attacks in 2001, the Howard government rammed through the Terrorism Insurance Act. Australian insurers were refusing to insure big city buildings against the same sort of attack here. The act forced them to offer the insurance and forced them to contribute to a newly established Australian Reinsurance Pool Corporation, which would meet the claims.
Backed by an Australian government guarantee of $10 billion, the corporation has been buying international insurance, spending $75 million a year.
No more. Its $75 million a year contributions will stop for at least two years. Instead they will be paid to the government as extra dividends (on top of a special dividend announced in the last budget). It will bank $25 million a year and spend $50 million a year on worthwhile projects such as extending dam walls.
The Insurance Council of Australia welcomes the spending because it will make it easier to insure homes at risk of flooding.
"It will certainly reduce the upward pressure on premiums," said Rob Whelan, the council's chief executive, on Thursday.
Looked at another way, it is a heist from the central business district (which houses the buildings at risk of terrorist attack) to the suburbs at risk from the Warragamba Dam. It's sneaky, its popular and it will save money.
