Comparison of the Impacts of Cyclone Tracy and the Newcastle Earthquake on the Australian Building and Insurance Industries

Abstract

Cyclone Tracy and the Newcastle earthquake were two of the largest natural disasters to impact Australia during the past 40 years. Each was an unexpected event, they resulted in similar overall damage costs, and they both had significant impacts on the building and insurance industries. However, although extensive recommendations for changes in building practice were made in the reports on both events, Cyclone Tracy caused far greater changes in building practice than did the Newcastle earthquake. Cyclone Tracy also had a much bigger impact on the insurance industry. Another significant difference was that building costs almost doubled in Darwin following Cyclone Tracy, but hardly changed in Newcastle following the Newcastle earthquake. In respect of building practice it is suggested that the greater influence of the Commonwealth Government in Darwin at the time of Tracy was a major factor in driving the resulting Australia wide changes in building practice. In respect of the insurance industry the lessons learned from Cyclone Tracy lessened the impact of the Newcastle earthquake, although the latter was the catalyst for a major change in the way catastrophe insurance risk is assessed in Australia. The differences in post-event building costs are attributed to differences in the supply and demand for building services following the events. The analysis of comparative costs also revealed major anomalies in the current published data on the costs of both events and revised estimates of these are presented.