Climate damage: Australia faces $7 trillion hit to standard of living

The worst is yet to come for Australians already suffering from climate change, with living standards forecast to take a $7 trillion hit between now and 2050.

Economic modelling by a network of 141 central banks including Australia’s Reserve Bank predicts a 14 per cent annual blow to the nation’s gross domestic product under existing global climate policy settings.

The “alarming new data” shows why Australia must switch to renewable energy and commit to a strong 2035 target for reducing emissions, Investor Group on Climate Change chief executive Rebecca Mikula-Wright said on Monday.

With climate change expected to significantly harm future well-being, the world’s central banks have been fine-tuning expected losses.

The current global policies scenario assumes that existing policies are preserved to 2050, leading to high physical climate change risks from three degrees of global warming.

With Australia hit harder than many others, the economy is expected to suffer extreme weather, damage to the nature, and a productivity hit to labour and land.

Australia’s Total National Income (standard of living) losses from climate damages are projected at $7 trillion between now and 2050.

Trading partners will also suffer significant economic damage, with neighbours across Asia likely to see a 16 per cent hit to GDP by 2050, according to the data.

The Network for Greening the Financial System models numerous long-term scenarios on the physical impacts of climate change under various assumptions.

As well as increased temperatures, a rise in sea levels and changes in rainfall, more frequent and more severe natural disasters are expected to cause business disruption and damage to property, and lower agricultural yields.

These events can impair asset value and increase underwriting risks for insurers, leading to higher premiums and the possibility of withdrawal of insurance coverage in some regions.

Under existing global policies, Australia can expect a per annum $147 billion reduction in the economy by 2030. By 2040, the hit to GDP more than doubles to $350 billion and grows to $656 billion by 2050. 

Living standards are also impacted, with per capita annual income falling by approximately $5000 by 2030 and $7300 by 2050.

Climate extremes have cost tens of billions over the past decade, disrupting communities and infrastructure and forcing governments to spend taxpayers’ money that could have been spent on schools, hospitals, childcare and other services, the investor group said.

Commonwealth-administered expenditure from FY19 to FY23 was $15.9 billion or around $610 person person to support ongoing climate disaster recovery efforts across Australia, according to the recent Colvin Review.

“Australians have much to lose from climate damages but we also have much to gain from using our world-leading clean energy resources,” Ms Mikula-Wright said.

Using some of the world’s best solar, wind and mining resources, green iron and other new exports could decarbonise around 10 per cent of global emissions, she said.

AAP