Australian Economy

Australian Treasury to model climate change effects on economy

By Mia Hunt on 13/07/2022 | Updated on 13/07/2022
Men, one holding an umbrella, stand on steps surveying the damage caused by flooding after heavy rainfall in Australia

Flooding hit Sydney earlier this month after eight months of rainfall fell in four days, prompting 50,000 people to be placed on evacuation alert. Photo by Jesse Wagstaff via Flickr

The federal Treasury is to model the economic impacts of climate change on Australia for the first time in nearly a decade.

Treasurer Jim Chalmers has directed the department to look into the effects of climate change on the economy and budget as part of a wider effort to understand the risks posed to households, businesses, and key institutions.

The news follows the Australian federal election in May, in which the Labor Party ousted the Liberal/National Coalition after nine years in power. Climate change proved a major issue for voters, and the Labor party has made a slew of environmental and sustainability announcements since its election.

The Treasury was heavily involved in modelling climate change’s financial impact prior to the Coalition’s election under Tony Abbott in 2013.

Read more: Australia’s new government cements more ambitious climate change targets

“Labor committed to restoring Treasury’s role in modelling climate risks and opportunities for the Australian economy, and this work is already under way,” Chalmers said last week.

“Treasury is working closely with other departments to rebuild this capacity after years of neglect under the Coalition, and we’ll have more to say about this important work. Treasury’s modelling will help us chart a path that maximises jobs and opportunities for our country as we take advantage of this transformation.”

‘Taking climate change seriously’

Australia experienced its latest natural disaster earlier this month, when 50,000 people in Sydney were placed on evacuation alert after eight months of rain fell in four days. During a tour of flood-hit areas last week, prime minister Anthony Albanese said that while Australia had always suffered from natural disasters like floods and bushfires, they were now occurring more frequently and with greater intensity.

Read more: Australia reorganises departments to reflect new government’s priorities

“We need to act on climate change, we’ve been saying that for a long period of time. We need to make sure as well that we’re a part of global action because one thing that is true is Australia acting alone won’t be enough,” he said.

“We need to show leadership and encourage that action. And that is one of the reasons why my government is taking climate change seriously and engaging with the world to ensure that that global action steps up.”  

Last month, the Australian government formally pledged to reduce its greenhouse gas emissions by 43% below 2005 levels by 2030. The previous government’s target was 26-28%.

It has also committed to creating a new environment ‘super ministry’ as part of a raft of changes aimed at restructuring government to reflect its priorities.

Read more: Two ministers, one department: can Australia’s new environment super-department work?

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