Monday, January 21, 2013

Bushfires. Good money after bad?

Australia spends too much money trying to prevent fires and, if it spent less, it could actually save more lives, according to a controversial study by a leading insurance researcher.

Conceding the findings for such a "sensitive" and emotive matter may upset some and anger others, Dr Brian Ashe says a rational analysis of the $12 billion in annual funding for fire prevention backs his case.

Dr Ashe works with the insurance industry funded Risk Frontiers centre at Macquarie University. He gained his doctorate studying the cost of fire.

Writing in the Australian National University journal Agenda he says the total cost of fires in Australia amounts to around $18 billion per year. But most of that cost is in safety measures and responding to fires. The cost of injury, lost lives and lost property amounts to only 9 per cent of the total - $1.7 billion.

Australia's fire fatality rate is “already low by international standards” at 0.6 deaths per 100,000 of population and has proved “resistant to increasing expenditure on fire management and protection”.

Dr Ashe surveyed 26 fire professionals and found none believed further spending would result in a net economic gain. All but four believed Australia would be better off if it spent less attempting to prevent fires....

“This is a very sensitive matter and really what we're looking to get is the best out
of our investment,” Dr Ashe told Fairfax Media. “We just have to be careful that we don’t put too many resources into one hazard.”

Dr Ashe said if $4.5 billion of the money spent on fire safety was returned to businesses and consumers as tax cuts instead health and nutrition would improve, saving lives. His modelling suggests such a tax cut would save between 90 and 225 lives per year, which coincidentally is close to the total number of lives lost to fire each year.

“When you take money out of the economy or out of people’s pockets there is an impact in terms of their health and safety,” Dr Ashe said. “I don’t know where the balance is, but I think it is a debate that needs to be had. You can’t keep throwing money at an issue, you need to be a bit more sophisticated about it.”

Microeconomist Stephen King agrees. Dean of the faculty of business and economics at Monash University Professor King says when politicians make decisions perceptions can be as important as realities.

“Political reality can mean government spending doesn’t satisfy what the economist would say were desirable rules to follow, or may follow information that’s maybe in the benefit of the politicians rather than the best expenditure if a longer term view was taken,” he said.

Dr Ashe believes the media’s coverage of fires fans perceptions of risk. A study he completed after the 2009 Victorian bushfires showed a jump in estimates of the risk of death from fire were exaggerated, something he blames on the reporting.

“What happens all the time is events like this occur, there’s demand for more resources and generally more resources are provided.”

Around 114 lives are lost each year from fire, 14 of them from bushfires.

Dr Ashe conceded more might be lost to fire if less was spent preventing fire, but he said the case wasn’t open and shut.

“Take the current fires and the losses, say recently in the northern NSW. I think there were 30 buildings lost. What about if we didn’t put any effort into trying to prevent that happening. Would we still lose 30 buildings or would we lose 60? I know it’s very difficult and I’ll probably be shot down for saying it, but these are the questions that need to be asked,” he said.

Nicholas Gruen, a former presiding commissioner at the Productivity Commission said he was uneasy applying cost-benefit techniques to fire prevention.

"Safety is value-based and takes as its object not just the minimisation of harm, but its elimination," he said. "It's like the Hippocratic Oath of doctors. If you ask the safety practitioners in most large private sector companies what their objectives are, they will say that any deaths are unacceptable – their target and their intended result is none at all. Economists should be careful thinking their idea of costs and benefits is such a deep insight."

A spokesperson from the Attorney General’s department responded by saying the government made “no apology for investing in the protection of lives and helping Australian communities prevent, prepare for and recover from disasters”.

With Marian Borges, in today's Sydney Morning Herald and Age

Related Posts

. We think the flood levy is doing us good

. The Tsunami. What's the true worth of a human life?