Posted: 28 Jan. 2020 5 min. read

New Normal

Weekly economic briefing

This summer’s ongoing bushfire crisis is a terrible human and ecological tragedy, and one which looks like leaving a lasting impact on the Australian psyche.

There is also a growing realisation that this is not a one-off – unfortunately we need to get used to these sorts of summers.

Whether or not action is taken to keep further climate change in check, for Australia the climate has already changed. Now, and for the immediate future, we need to be discussing adaptation and mitigation. Rebuilding and recovery efforts need to be carefully considered (where Australians are going to live, work and play), with a focus on greater resilience to an increasingly harsh climate.

Of course, the warnings have been there for a while. Ross Garnaut’s Climate Change Review in 2008, looking at the impacts of climate change on Australia and its economy, stated that the nation could expect lengthier and more intense fire seasons by 2020.

Australia’s economy has always depended on the climate. From the booms and busts of natural resources, to natural wonders drawing in flocks of tourists, and our vast agricultural plains that feed the world. This relationship has driven growth and shared prosperity – but it also leads to tension.

Our economy depends on the demands of the world and still earns big bucks from fossil fuels. Yet domestically, our landscape is significantly exposed to climate change. This summer’s bushfire crisis and increasingly extreme weather provides a stark reminder of that.

Equally, as economies around the world look to mitigate their risk and exposure to a warming world, this can lead to divestment and economic shocks for Australia. In November 2019, Sweden's central bank sold off bonds from the oil-rich Canadian province of Alberta, and Queensland and Western Australia because of their emission’s intensive economic activity.

It will become even harder for Australia’s economic policy settings to juggle the immediate costs of natural disasters, the shifting demands of markets and industry and the need to establish a truly sustainable growth path – one that mitigate the risks of a warming world. As economies and business look towards the future, there is a recognition that decisions made in the next two to three years are the ones that will shape the next 10-20.

Increasingly, business is recognising the challenge ahead. As global business leaders meet at Davos for the World Economic forum, Deloitte’s Industry 4.0 Global Readiness Report survey found nine of 10 business leaders say they expect climate change to have a negative impact on their organisations.

But there is some optimism at home. In the same survey, 41% of Australian businesses want to use new technologies to counteract the effects of climate change and positively impact society.

Australia is going to be one of the hardest hit wealthy economies from climate change. While that means we are already suffering greater human and economic costs, it also means that we can be a significant beneficiary of global mitigation efforts. That is particularly true because of our opportunities in renewable energy.

In the meantime, the failure of the world to comprehensively mitigate climate change and prepare economies for a warming world suggests this summer’s events are unfortunately not an isolated extreme, but part of a new normal.

More about the authors

David Rumbens

David Rumbens

Partner, Deloitte Access Economics

David is a macro economist with extensive experience in applied economic and quantitative analysis of the Australian economy, along with considerable experience in labor market analysis.  David is a regular commentator on macroeconomic trends, and prepares a weekly economic briefing newsletter.

Claire Atkinson

Claire Atkinson

Director, Deloitte Access Economics

Claire is a Director in Deloitte Access Economics’ economic analysis and public policy team with expertise in microeconomic analysis, economic scenario modelling and public policy reform agendas. Prior to joining Deloitte, Claire worked in the Queensland public sector focusing on economic and fiscal policy development. Claire is passionate about using economics to answer how structural change impacts society – leading projects across governments, the private sector and Australia’s major institutions. Claire’s body of research and analysis for clients focuses on economic transition, disruption to industry and the policy settings that minimise downside risks, while catalysing long-term economic gains.