Treasurer Jim Chalmers has confirmed that next week’s budget will deliver a deficit following two surpluses as the government spends big on disaster recovery.

Recovery provisions for ex-tropical cyclone Alfred and other natural disasters will hit the budget bottom line, Treasurer Jim Chalmers told ABC Radio on Monday.

“We will put an extra $1.2 billion in the budget. That means there’ll be about $13.5 billion all told when it comes to budgeting for rebuilding communities,” Chalmers told ABC radio.

“Remember, it wasn’t that long ago that our friends to the north of here were getting very substantial flooding as well. We’ve had a series of natural disasters. So, there’s about $13.5 billion in the budget [for disaster recovery.]”

The $1.2 billion would go towards rebuilding infrastructure damaged during ex-tropical cyclone Alfred, alongside disaster payments to support affected community members.

“It’s partly rebuilding bridges and footpaths and local infrastructure. I think a lot of people would have seen on the TV the destruction on the Gold Coast, for example,” the Treasurer said.

“A significant part of it is these hardship payments as well. Whether it’s the Hardship Assistance Payment or the allowance for people who are put out of work for a substantial period of time, there is a significant cost to that as well.”

The cyclone is expected to have caused more than $1.2 billion dollars in economic damage, wiping 0.25 per cent off Australia’s quarterly GDP growth.

According to the Treasurer, roughly 12 million work hours were lost across affected communities. Damage to farmland, housing and community infrastructure would also likely spark inflation in agriculture and construction.

Insurers warned that the heightened frequency of natural disasters has caused insurance premiums to rise, a trend which will worsen if action isn’t taken.

According to the Insurance Council of Australia (ICA), insurers received 63,000 claims following ex-tropical Cyclone Alfred, the majority related to food spoilage, wind damage and water ingress.

“It is too early to predict what impact it will have on premiums. However, the frequency and severity of natural disasters has increased in recent years and this is contributing to higher premiums,” the ICA said in a release.

“Insurers have been calling on governments to invest more in resilience and mitigation to protect the many Australians who are living in harm’s way and improve insurance affordability and availability.”

Tropical Cyclone Jasper cost insurers $409 million across 10,500 claims in 2023, and the 2022 floods cost $6.4 billion over 245,000 claims.

The financial hit from Cyclone Alfred is yet to be calculated. However, to curb the risk of ever-climbing premiums, insurers have urged the government to invest more in climate resilience and mitigation, including through the creation of a flood resilience fund.

“Around 1.36 million properties across the country face some risk of flooding, and it is estimated that half of these properties fall short of the flood resilience measures of modern planning and building standards,” the ICA warned.

Speaking to ABC Radio, Chalmers confirmed that disaster recovery measures related to the ex-tropical cyclone would come at a direct cost to the budget's bottom line.

“It’s off the bottom line,” he said, “because we’ve managed the budget responsibly, we can afford to pay for things which are really important, like rebuilding communities after natural disasters.”