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A new choice – Australia’s climate for growth

Weekly economic briefing

New research from Deloitte Access Economics shows that Australia’s economy – and $680 billion in economic potential – relies on climate action (A new choice - Australia's climate for growth).

The research is aimed at flipping the debate on how we discuss climate change to better consider the economic cost of not acting and the costs and benefits of taking action. Essentially, climate change is not a scenario – it is a reality which now must be reflected in the baseline for the economy. This new baseline for the economy has the damages from climate change built in and it shows the extensive, and confronting, costs associated with inaction, against a new growth recovery scenario of net zero.

The Australia-first analysis comes to some sobering conclusions, including:

  • Taken today, more than 30% of employed Australians and over 30% of national income sit in industries exposed to economic disruption and risk from climate change and unplanned economic transition
  • By 2070 – in the lifetime of Australians in their 20s, 30s and 40s today – the economic cost of doing nothing is an economy which is 6% smaller, a $3.4 trillion loss in GDP in present value terms, and with 880,000 fewer jobs
  • In contrast, a new growth recovery, delivering net zero by 2050 and consistent with keeping global warming to 1.5°C, could add $680 billion (in present value terms) and grow the economy by 2.6% in 2070, adding more than 250,000 jobs.

There isn’t a ‘no cost’ option. The report sets the benchmark of economic growth – one where damages from global warming are included – against which the cost of inaction or the costs and benefits of action should be assessed.

Principal report author, and Deloitte Access Economics lead partner, Dr Pradeep Philip, said:

The costs of climate change are still rising each year, as are the costs associated with reducing the risks it presents. Climate change is no longer a possibility. It is a reality. Doing nothing is now a policy choice, and it is costly. 

Business is increasingly leading the call for action on climate change, wary of the commercial and economic risks and beginning to understand the calculus of acting versus not acting. This is seen in a variety of areas. Increasingly, investors are calling out the carbon footprint of companies and demanding explanations from boards and management at annual general meetings. This is supported by shareholder activism, and consumer choices, demanding to know the carbon footprint of a company and its product, and that of the supply chain as well.

The report notes that policies aimed at strengthening economic growth can support low-emission pathways, and actions to stimulate investment in low-emission investments can strengthen economic growth job creation.