Government support and action for economic recovery must consider:
- Market failure: Intervention is required where market failures exist or market capacity is exceeded.
- Economic vitality: Economic activity underpins economic and community recovery.
- Community-led action: Community strengths and assets need to be acknowledged and built upon.
The impacts of an emergency or economic shock are many and varied. In considering economic recovery, the primary role of government is to work alongside businesses and the community to revitalise the affected economy, including helping to address the consequences of an emergency or economic event on individuals and households, businesses, industry, tourism and the broader economy17.
The growing frequency of natural disasters in Australia is resulting in a substantial increase in public funding for relief and recovery activities. This in turn has led to greater scrutiny of the nature, level and sustainability of direct support for affected businesses and communities, most notably exemplified by the Productivity Commission Inquiry into Natural Disaster Funding Arrangements18. Although the Productivity Commission argues that in general, businesses are responsible for managing the risks they face, there are a number of justifications for government intervention in economic recovery:
- Market mechanisms that support disaster recovery may not fully address the economic impacts, which can be far-reaching and longer lasting than the immediate and direct damage to individual businesses and economic infrastructure.
- The degree to which a disaster impacts economically on a location varies considerably due to the spatial, social and economic characteristics of that location.
- There is a strong link between business recovery and overall community recovery.
- A combination of economic recovery responses by government that complement market mechanisms for managing and mitigating risk can create more effective economic and community recovery and resilience.
- Sound decision making following an emergency improves longer term recovery outcomes.
See Appendix 1 for a fuller discussion of the role of government in supporting economic recovery.
From this discussion, a number of guiding principles can enhance the effectiveness, efficiency and equity of economic recovery responses. To pursue a shared vision for a safer and more resilient community, the role of government in supporting businesses, industry and local economies to encourage long-term economic sustainability will complement short-term economic recovery adjustments made by market mechanisms.
Businesses are responsible for using market mechanisms to manage and mitigate risks arising from emergency events and economic shocks
Government may support business impacted by an emergency or economic crisis; however, its economic recovery response should not replace or distort available market mechanisms. Nor should it provide disincentives for businesses to take responsibility for risk mitigation and business continuity arrangements.
Government intervention to support recovery will be considered where the economic impacts extend beyond the capacity of market mechanisms or where market failures exist
All relief and recovery agencies should be aware of, and consider as part of their decision-making processes, the economic consequences (positive and negative) of their activities. In order to prevent any unintended consequences, recovery planning requires coordination across all four recovery environments of social, natural, built and economic and the capabilities required of recovery managers to understand the interconnections between the four environments.
Indirect, intangible and longer-term economic impacts of an emergency event or economic shock are less likely to be addressed through market mechanisms and monitored at a community or regional level
Indirect and intangible, longer-term economic impacts of an emergency event or acute shock at a community or regional level are less obvious and therefore less likely to be addressed through market mechanisms. Accordingly, the economic recovery response should be largely focused to where the economic impacts of events extend beyond the capacity of market mechanisms or where market failures exist.
Where trauma exists, the economic recovery response will extend beyond the provision of information to provision of mechanisms that help to understand information and ensure informed decision making
This requires an understanding of the recovery journey of communities and a recognition that communities are not homogeneous and not all individuals are able to recover along the same timelines. This will mean that long-term planning for economic recovery should be closely aligned with the outcomes of social recovery.
Economic vitality principles
Government and emergency management agencies will be aware of the economic consequences of their actions and implications across all pillars of recovery
Recovery planning capabilities should be coordinated across all recovery environments and with an understanding of the interdependencies between built, economic, natural and social pillars. Lessons of the past should also be embedded into current practice to prevent unintended and/ or negative economic consequences.
Local business, industry and community are critical to understanding the economic impacts of an emergency event and ensuring the effective targeting of economic recovery actions
Activities should be responsive and flexible, engaging communities and empowering them to move forward through pre-existing groups, committees and networks. Economic recovery responses should align with the pre-existing relevant strategic, economic development, or emergency recovery plans. This is consistent with National Principles for Disaster Recovery:
- understand the context
- recognise complexity
- use community-led approaches
- coordinate all activities
- communicate effectively
- recognise and build capacity.
Government interventions will recognise the interrelationship between economic and overall recovery in communities
Community recovery can be accelerated and strengthened by timely, fair, equitable and flexible economic and business recovery interventions. Impact and needs assessments inform the changing needs of communities over time and the complex nature of community recovery. Where residents are displaced, there may be an increased focus on timely re-establishment of businesses or availability of workers. This must be considered alongside the economic profile of the area, including competitive advantages and any underlying issues.
Recovery agencies should seek to utilise, where possible and timely, local businesses in the delivery of recovery activities and/ or avoid, where possible, recovery actions that replicate services provided by local businesses.
Community action principles
Economic recovery responses are place-based and tailored to the economic and social characteristics of the affected location as well as the nature and scale of the event experienced
A place-based approach will:
- enable communities to deliver local solutions to local problems by bringing together local people, organisations, businesses and government
- leverage existing networks, activities and services already working within that community and strengthen community resilience into the future.
Interventions should focus both on ensuring the continued operation of directly affected businesses as well as maintaining economic activity for indirectly affected businesses. Activities should avoid masking deep-seated and ongoing impacts such as population decline and uncompetitive business performance.
Government interventions should recognise the interrelationship between economic and community recovery
Community recovery can be accelerated and strengthened by timely, fair, equitable and flexible economic and business recovery interventions. Recovery agencies should seek to utilise, where possible, local businesses in the delivery of recovery activities and/ or avoid, where possible, recovery actions that replicate services provided by local businesses. Events that result in a high level of resident displacement may require an increased focus on timely re-establishment of businesses.
Local participation and community are critical in enabling a clear understanding of the economic impacts of an emergency event and ensuring the effective targeting of the economic recovery actions
To the extent possible in the circumstances, local participation should:
- be through pre-existing groups, committees and networks
- seek to ensure that economic recovery responses align with the pre-existing relevant strategic, economic development, or emergency recovery plans
- a recovery group or engagement mechanism with representatives from local government, businesses, industry and employee groups that provide advice and direction on local recovery needs can also be a tool to ensure a two-way channel for communication and feedback on recovery actions.
The economic recovery response should incorporate a resilience framework
Emergency Management Victoria released the Community Resilience Framework and Resilient Recovery Strategy. This work encourages planning for resilience, placing community at the centre and identifies dynamic and diverse local economies as being key to building resilient communities. A focus on employment, skills and business continuity planning broadly aligns with existing community and regional development principles used to support economic growth and sustainability.
17 Emergency Management Victoria, 2018. Emergency Management Manual Victoria. [Online] Available at: www.emv.vic.gov.au/policies/emmv [Accessed 05 May 2020].
18 Productivity Commission, 2014. Natural Disaster Funding Arrangements, Inquiry Report no. 74, Canberra. [Online] Available at: https://www.pc.gov.au/inquiries/completed/disaster-funding/report/disas… [Accessed 05 May 2020].