April 15th 2006

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Articles from this issue:

COVER STORY: Uranium export deal rewards China

EDITORIAL: Globalism: Australia at risk

SPECIAL FEATURE: Sujiatun Camp inmates murdered for their body parts

CANBERRA OBSERVED: What Labor will do about uranium mining

ECONOMICS: Should the Australian dollar fall below US 40 cents . . .

AFTER CYCLONE LARRY: Inadequate infrastructure and disaster insurance

AUSTRALIAN CAPITAL TERRITORY: Bid to elevate status of same-sex unions

TAXATION: NSW Liberal MP calls for tax reform for families

FAMILY LAW: Divorcing dads let down again

STRAWS IN THE WIND: Count your fingers after you shake hands / Dragon's share / Moralists with ghoulish interests

REGIONAL ECONOMIC POLICY: A single currency for East Asia? (Part 1)

JAPAN: Quiet revolution in Japan's strategic thinking

SCIENCE: Scientist calls for death to humanity

Superior tradition of social democracy (letter)

Beazley's downside (letter)

BOOKS: DO NOT DISTURB: Is the media failing Australia?, edited by Robert Manne

BOOKS: SHENANIGANS on the Ovens goldfields: the 1859 election, by Antony O'Brien

Books promotion page

Inadequate infrastructure and disaster insurance

by Peter Westmore

News Weekly, April 15, 2006
Inadequate rural infrastructure and lack of disaster insurance for farmers have compounded the plight of Cyclone Larry's victims, writes Peter Westmore.

Following Cyclone Larry's devastating path through North Queensland, it is now obvious that existing infrastructure, including guaranteed electrical power, is inadequate, and many farmers face ruin because the insurance industry does not provide crop insurance.

The loss of electricity has not only affected homes, but perhaps, more importantly, has paralysed industries, including dairying, which are totally dependent on it.

In cyclone-prone areas, the power supply lines between major towns and cities should be underground, to prevent the type of disruption which has occurred around Innisfail and the Atherton Tablelands, in North Queensland.

In the United States and parts of the Caribbean, including Barbados, underground power cables are being installed to protect the power grid from the effects of hurricanes.

An underwater cable, using the same technology, is currently used to carry Tasmanian hydro-power across Bass Strait to Victoria.

Underground cables have been around for decades. Holland decided to move power cables underground in 1970. About 21 per cent of the 250,000 km of power lines in the United States are already underground.

The higher cost of transferring power underground can be mitigated by also shifting underground telecommunications cables (including telephone and data cables for high-volume internet traffic).

However, following the privatisation of Queensland's power companies, it is unlikely that there will be sufficient interest in the more costly underground cables unless the Queensland and Federal Governments become involved.

A separate issue has arisen in relation to insurance for farmers.

Several years ago, the insurance industry and the Federal Government decided that "multi-peril" insurance - the class of insurance that covers crops in events like cyclones - is not sufficiently profitable. That evaluation extends across the country, including Victoria.

As a result, Australian taxpayers could pay more than $1 billion to compensate cyclone-ravaged Queensland farmers who could not insure their crops because the insurance industry refused to cover them.

Those in need

The Prime Minister, Mr Howard, has indicated that assistance payments to Queensland could top the $1 billion figure. "We are not going to have a situation where our generosity to others is greater than our generosity to those of our own who are in need," he told Sydney Radio 2GB host Alan Jones.

"This is a natural disaster that nobody can prepare for. Nobody can effectively, in a business sense, insure against them," Mr Howard said.

But a spokesman for horticultural group Growcom said that Growcom had developed a crop insurance product in the 1990s as a vehicle to reinvigorate debate about multi-peril insurance. He said it failed when the Federal Government refused to intervene when claims outstripped reserves. "They just didn't step up to the plate," said spokesman Mark Panitz.
After Cyclone Larry: A plantation
owner with his devastated
banana crop.

Mr Panitz said about 4,000 jobs would be lost in the area as a result of the cyclone. Most - perhaps the entirety - of the $350 million banana crop is believed destroyed. He also expected orchards of paw paws, avocados and other tropical fruits to have been devastated.

A spokesman for the Insurance Council of Australia, Rod Frail, said a Federal Government investigation into multi-peril insurance had concluded that farmers were not capable of paying the premiums deemed necessary to justify the risk.

The comments came in the wake of a record season for insurers. Net after-tax profit for insurers in the 12 months to September 30 was $5.5 billion.

Sugar-farming peak body Canegrowers estimated the damage at 10 million tonnes of sugar cane - 25 per cent of the nation's production. The cane would have produced 500,000 tonnes of sugar, worth $200 million.

While Australia lacks disaster insurance, the United States, Canada and other comparable countries have established comprehensive government-backed disaster insurance for farmers.

The United States offers crop insurance through both state and federal governments, which subsidises crop insurance to ensure that it is made available by the insurance industry.

The Federal Crop Insurance Corporation was established in the US to help farmers survive major crop loss. Multiple-peril crop insurance policies are available for most crops.

The Rural Community Insurance Service in the US states that "with federal incentives that significantly reduce premiums, crop insurance is one of the wisest purchases a producer can make."

Following Hurricane Katrina, which devastated coastal regions in Louisiana and neighbouring states, there have been calls for the expansion of existing insurance programs.

Australia should re-examine the issue, to ensure that there is adequate disaster insurance for farmers, and to encourage farmers to put aside money to meet these emergencies.

  • Peter Westmore

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