Mr Morrison acknowledged the new spending would reduce the surplus, previously forecast to be $5 billion this financial year, but said this was not the priority.
“The surplus is of no focus for me,” he said. “What matters to me is the human cost and meeting whatever cost we need to meet.”
The government is yet to put an estimate on the economic damage from the fires, saying it is too soon with the emergency still underway, but has ruled out a levy to cover the cost of the reconstruction.
“This is an initial and additional investment of $2 billion. If more is needed and the cost is higher, then more will be provided,” Mr Morrison said.
“We will meet every cost that needs to be met, we will make every investment that needs to be made, both to assist the response to this crisis and the recovery needs that follow. That is clearly the priority now.”
The states will not be asked for matching funding for the federal projects, which could range from supporting a local tourism industry, council building works or mental health services.
With farmers and small business owners suffering a blow to their incomes and the loss of their assets, the government is promising to use the money to help employers keep operating.
As an example, Mr Morrison cited payments of up to $75,000 to primary producers and said similar grants had been “lifesavers” to farmers hurt by previous disasters.
The new fund will be separate from existing disaster assistance payments, such as cash outlays equivalent to Newstart for those who have been caught up in a disaster and which are available immediately.
Treasurer Josh Frydenberg said the indicative cost to the budget would be $500 million this financial year, followed by $1 billion in 2020-21 and $500 million in 2021-22, but he said more funding would be brought forward if needed.
The cost of the disaster recovery assistance for Queenslanders hit by Cyclone Yasi reached $5.6 billion over the years after the 2011 emergency, highlighting the potential cost to the Commonwealth beyond the new fund.
As well, the federal government will suspend debt recovery from welfare recipients in the targeted areas, while forming 20 small teams of public servants to be located with the ADF and help take questions about Centrelink payments and other help.
“We’ve already taken a number of decisions in this area to streamline those payments – it’s important that cash gets in people’s hands as soon as possible,” Mr Morrison said.
Mr Morrison announced the bushfire recovery fund a day after naming former Australian Federal Police commissioner Andrew Colvin to lead a new National Bushfire Recovery Agency on Sunday.
The Australian Tax Office will offer an automatic two-month deferral of payment and lodgement obligations for those in fire-affected areas, while the Australian Competition and Consumer Commission has set up a hotline for people worried about bushfire charity scams.
Mr Frydenberg will meet insurance company executives in Canberra on Tuesday to discuss their handling of claims from victims, but the meeting has caused friction over whether it is necessary when government officials admit they have few complaints from customers to date. Insurers have handled more than 6000 claims from bushfire regions in NSW, Queensland, South Australia and Victoria and estimate the insurance losses to be $431 million this bushfire season.
With the government under political attack over Mr Morrison’s holiday in Hawaii and social media advertising about his bushfire response, some insurers believe the meeting is being held only to project a sense of action on an issue that is under control.
Insurers have closed 93 per cent of the 30,000 claims from the Townsville flood last February, according to a brief sent to the government to fend off any attacks over the industry’s performance.
Mr Albanese criticised the communication breakdown between the federal and NSW governments over the defence deployment and said Mr Morrison should have acted more swiftly with a national response to the emergency.
“I do think from the beginning there should have been a national response that was agreed to by the Prime Minister on Saturday,” he said.
“I do think that’s why people have responded very negatively to the Liberal Party ad that was authorised by the Prime Minister on Saturday, which even had a button on it for donations, not to the bushfire recovery, but to the Liberal Party.”
Greens leader Richard Di Natale said the Prime Minister’s actions showed he did not understand the scale of the threat from climate change and bushfires.
“Some political leaders rise to a crisis, while others shrink away and show themselves to be unfit for the job,” Senator Di Natale said.
David Crowe is chief political correspondent for The Sydney Morning Herald and The Age.