Anticipating future economic direction is getting a lot harder, as the federal Treasury’s crystal ball gazers – probably treasurer Josh Frydenberg too – must now be well aware.
Calculating long-term economic trends requires choices about the elements of a national economy: the things that affect it and those which don’t. Too many elements may deliver useless results, but a range that’s too restricted runs the risk of nasty surprises down the track. Like climate-induced disaster.
The 2021 Intergenerational Report (IGR) is the fifth in a series started by former treasurer Peter Costello, who wanted to understand the impact of an ageing population. The 2015 IGR under Joe Hockey looked at another Coalition focus, sustainable fiscal policy.
Mixed in with these earlier IGRs was a very different one released by Kevin Rudd’s government in 2010. This report did more than just mention climate as a factor in our economic future; it raised it to a level of importance not seen before or since.
Climate change, it said, “is the largest threat to Australia’s environment and represents one of the most significant challenges to our economic sustainability… The social and economic consequences of failing to act would be severe.”
The report continued: “As Australia will be one of the countries that are hardest and fastest hit, we must be part of an effective global response… Delaying action would impose on future generations the need for a sharp, more costly adjustment task.”
The action proposed back then, 11½ years ago, was national carbon pricing, implemented in 2012 by the Gillard government. It started to bring fossil fuel emissions down, but in 2014 Tony Abbott’s government got rid of it, and relegated climate change to a few paragraphs in the introduction to its 2015 IGR.
The Morrison government has learned from past Coalition mistakes to avoid the sorts of complete clangers we saw in the Abbott years, when carbon pollution was treated as imaginary or even as a positive environmental impact. But it has never taken those mistakes on the chin and opened itself up to the radical action that is now desperately needed.
For the first time under a Coalition government, this year’s IGR has referenced “the likely physical and social effects of climate change, the impacts of mitigation efforts and the benefits of early adaptation measures” as influencing future economies and budgets.
The report acknowledges climate change as a long-term economic factor. Innovations to help regions, towns and cities adapt to climate change, it says, “will require effective action by governments, businesses and communities, to keep the economy strong now and into the future”.
But unlike its 2010 predecessor it avoids any call to be “part of an effective global response”. It claims the government has made “a significant contribution to global emissions reduction efforts”, but points only to the rapid takeup of solar and wind energy as factors in this.
While recognising climate change as a rising risk to the economy, the IGR forecasts 40 years of growth, though at a lower rate than pre-pandemic. As to how we’ll achieve that while also adapting to climate change and lowering our already intolerable burden of atmospheric carbon, we remain in the dark.
A “technology investment roadmap” will be a focus of the government’s emissions strategy, says the 2021 IGR: Australia will rely on “opportunities … to expand into new energy exports, such as clean hydrogen.” This is no roadmap, just a vague wish-list, and a far cry from the leadership role in environmental and climate policy we once aspired to.
At the turn of the century, when Peter Costello started the IGR process, a degraded environment and a changing climate were already conclusive evidence that there was far more to wealth than money. But then and now, the Coalition has remained firmly focused on the old order of things.
The arrival of COVID-19 appears to have shocked Treasury’s financial analysts. The 2021 IGR finds the 40-year outlook “profoundly affected by the pandemic, which has caused the most severe global economic shock since the Great Depression.”
Warning signs were out there decades ago. The financial world has been living in its own reality since last century, when deregulated global commerce led to rising corporate power, gross social inequality and the money-grabbing madness around the 2007-08 global financial crisis.
The pandemic has massively disrupted daily life, the beating heart of any economy. But underlying that disruption is a vastly more important message about something far larger and more damaging, as the natural order that underpins everything we do threatens to fall apart.