Josh Frydenberg has flagged he is “open” to further market interventions making insurance more affordable, but says more preparatory work will need to be done before the Morrison government would extend its $10bn cyclone reinsurance pool in northern Australia to cover more natural disasters.
In an interview with Guardian Australia ahead of the budget on 29 March, the treasurer said he was conscious that a changing climate rendered insurance problematic in some parts of Australia.
Frydenberg said the cleanup after catastrophic flooding in New South Wales and Queensland would be a focal point in his pre-election economic statement. Asked whether he would extend the current reinsurance scheme in line with a recent call from the scheme’s principal architect, the veteran Liberal Warren Entsch, Frydenberg said: “There’s more work to be done.”
“I’m open to finding ways to make insurance more accessible and affordable,” the treasurer said.
“I’m conscious that many people in flood- and fire-prone zones are either underinsured or not insured at all because the cost of insurance can be prohibitively high.”
Asked whether he was happy with the reinsurance model, which had been controversial with both the insurance sector and Australia’s consumer regulator before its ultimate adoption by the Coalition, Frydenberg said: “It’s early days but it’s been well received and there was a lot of work done.
“But I’m not creating expectations. There are questions about how to make that workable, so we’ll have to get further work done.”
Legislation giving effect to the current proposal, which covers cyclones and related flood damage, has already passed the House of Representatives and is expected to clear the Senate during budget week.
The scheme is supposed to be operational by July. The current reinsurance pool model for cyclones and related flood damage covers residential, strata and small business property insurance policies in northern Australia.
Entsch, the north Queensland MP, told Guardian Australia earlier this month recent disasters, including the recent floods, had made the case to apply the government guarantee more broadly a “no-brainer”.
The Morrison government is hoping the looming March budget will create a political springboard into the election the prime minister will call shortly after. A raft of polls suggest Labor would win an election held today.
The economic statement is expected to contain cash payments providing cost-of-living relief for low and middle income earners, as well as spending on security and defence and on local manufacturing and regional infrastructure, including new hydrogen proposals for the energy transition.
With fuel prices soaring, and other consumer prices on the rise, the government faces political pressure to assist households given wages growth is persistently sluggish. The government favours short-term cash payments to help with rising petrol and grocery prices in order to avoid building structural spending into the budget bottom line.
Asked whether the Reserve Bank of Australia could lift interest rates while Australia was on an election footing, Frydenberg said that was ultimately a decision for the central bank. But he said the RBA, based on its public commentary, would be monitoring inflation and employment and looking for signs of wages growth before increasing the official cash rate.
With the latest labour force statistics confirming Australia’s unemployment rate fell to 4% in February, down from 4.2% in January and its lowest level since 2008, the government will attempt to engage disadvantaged and disengaged young Australians in labour market readiness programs. The budget will contain a $46.8m pre-employment program for people between the ages of 15 and 24.
The government says the program will provide community-focused interventions including training and work experience.
In another pre-budget announcement, the government has also earmarked about $75m in additional support for travel agents and tour providers, following pandemic-related disruptions. The tourism minister, Dan Tehan, said the targeted program would “support travel agents and tour arrangement service providers to meet ongoing costs of running outlets, continue to process rebookings and provide high-quality customer service to their customers”.
Asked whether the government was serious about moving past fiscal support for businesses hard hit by the Covid-19 pandemic even if new variants necessitated a public health response – a position Frydenberg has publicly signalled – he said the days of “large economy-wide-scale support has ended”.
