NSW Floods | a delicate balance

NSW Floods | a delicate balance

By March 25, 2021Climate Risk, News

Dam-ned if you do, dam-ned if you don't

In the past 24 months New South Wales has been whipsawed by droughts and floods. Unfortunately it is a matter of when, not if, we will face these problems again. As the changing climate increases the likelihood of high temperatures, drought, and extreme precipitation, we face an increasingly difficult balancing act between the need to maintain adequate water supplies and protection against flooding.

Satellite images of Port Macquarie before and during the flood event

(Source: captured by radar data from the European Union Earth Observation Programme's Sentinel-1 satellite)


The role of climate cycles and the impact of climate change

Australia’s climate follows a pattern of well-established climate cycles. El Niño – Southern Oscillation (ENSO), the Indian Ocean Dipole (IOD), and the Southern Annular Mode (SAM) influence both temperature and rainfall patterns. In 2019, a climate phenomenon where warmer water moved away from Australia towards Africa in the Indian ocean (a strong positive IOD) was at its strongest in 60 years, while the SAM was negative and ENSO was neutral. This combination fuelled the hot and dry conditions experienced in the summer of 2019-20.

In September 2020, the Bureau of Meteorology (BoM) declared that Australia was heading into La Niña conditions combined with a mildly negative IOD, which usually lead to an increased likelihood of rainfall and flooding. Finity research in the figure above shows the relationship between ENSO, IOD, and flood/bushfire.

While the proximate trigger for Australia’s extreme weather is often one or more of these cycles, climate change may be influencing both their likelihood and intensity. The Australian Actuaries Climate Index (AACI), which tracks extreme weather occurrences over time, shows a historical increase in several flood-related metrics such as extreme precipitation and sea level (see figure below). Furthermore, forward-looking climate models predict occurrences of extreme ENSO and IOD events are likely to double or more under certain future conditions. Given the historical relationship of these cycles to the water supply and large catastrophe losses, this is a cause of concern.

Figure 2: Australian Actuaries Climate Index (Source: Finity analysis, https://www.actuaries.asn.au/microsites/climate-index)


The human factor

Flood risk is a major challenge because it involves not only volatile weather patterns and climate effects but also human factors such as decisions around where we build, how we mitigate, the amount we invest in infrastructure, and when we release water from dams. Several recent events illustrate the human factor in floods:

  • The Queensland floods of 2011 also occurred during a La Niña where intense rainfall followed a period of drought, leading to rapid rises in dam levels and subsequent flooding. Significant controversy surrounded dam management.
  • Also in 2011, Thailand experienced unseasonably high rainfall resulting in reservoirs exceeding their threshold storage and rivers bursting their banks. The Thai damage was exacerbated by land management, lack of preparation for such an extreme event (partly reflecting a lack of flood model coverage), and competing objectives of national and local governments.
  • In New York (Sandy 2012) and New Orleans (Katrina 2005), hurricanes buried cities in floodwaters. In New York, the placement of supporting equipment required for emergency backup power in basements which flooded resulted in power outages in hospitals and data centres, while in New Orleans levees and floodwalls failed.
  • In Houston (Harvey 2017), changes in land cover (replacing water absorbing bayous with non-porous roads and parking lots) contributed to flooding.

These events illustrate important human influenced aspects of floods, including risk awareness (Thailand), dam management (Queensland), infrastructure failure (New Orleans), aging infrastructure (New York), and changes in drainage and land cover (Houston).

Managing periods of drought and flood requires very difficult choices to be made. An obvious one involves water storage in dams. In 2019 drought conditions placed NSW dam levels well below 50%, as shown in the graph below. A strong east coast low in early 2020 led to a rapid increase in levels, with further rain through early 2021 leaving dams close to capacity. Since dams can fill quickly but only be safely emptied slowly, it is difficult to simultaneously protect against drought and extreme rainfall.


Figure 3: System water storage vs full operating storage (Source: Water NSW)

Tackling flood risk and many stakeholders

Many stakeholders are involved with flood risk, including farmers, builders, insurers, government, water authorities, Indigenous groups, not to mention the local population and wildlife. Managing flood risk requires a mix of scientific, engineering, economic, and social expertise.

As noted in our previous blog posts, mitigation gaps, the difference between the level of mitigation at the time of construction and what is later considered appropriate, can lead to significant insurance price shocks to consumers. For example, properties may lie in locations approved for construction decades ago but which are now understood to be in floodplains, requiring expensive elevation to keep risk to a level which renders insurance affordable. What to do about such properties is a vexing question involving value judgements about who should bear the costs of poor land use policies or a changing climate – all part of a larger conversation.

Where to from here?

Finding the right balance between various conflicting priorities is not easy. In this case we have several challenges, such as:

  • Water supply vs. flood control.
  • Preserving property values vs. generating subsidies for affordable insurance.
  • Cost of construction vs. protection against future potential climate risk.
  • Investment in flood control infrastructure vs. other public priorities such as schools.

As climate cycles become more intense and extreme events become more severe, we need to rethink how we approach flood risk. This includes developing a better understanding of the human behavioural and infrastructure components which amplify flood risk beyond weather and hydrology. This problem did not arise overnight and it will not be solved quickly. A comprehensive review taking a holistic view of risk and benefit over a multi-decadal time horizon is needed.

Listen to Rade Musulin discuss the NSW floods on ABC Radio National, Life Matters March 24, 2021.

To discuss the above article, contact the authors: 

Rade Musulin

Ph +61 2 8252 3378


Miheka Patel

Ph +61 3 8080 0900


For over a decade our Climate Risk Practice has provided clients with business solutions developed from our deep understanding of the physical and financial risks associated with natural perils such as storms, floods, bushfires and cyclones. Read more about our Climate Risk team.