The Australian Government should fund natural disaster recovery by:
• cost sharing with state and territory governments for community recovery and reconstruction of essential public assets at a rate of 50 per cent above an annual expenditure threshold
• providing funding based on assessed damages and benchmark prices
• providing an option for state and territory governments to purchase ‘top-up’ fiscal support at an actuarially fair price.
Australian Government involvement should be triggered where an annual (financial year) cumulative expenditure threshold of 0.45 per cent of total state government revenue is met, on an accrued basis. A small disaster criterion of $2 million (indexed over time) should be applied to events at the state or territory level.
The Australian Government should also establish a transparent mechanism for exceptional circumstances fiscal support in the event of extraordinary and catastrophic natural disasters that clearly overwhelm a state or territory’s medium-term fiscal capacity.

Recommendation 1