Australia has been warned it risks ‘drifting into the future’ if it fails to respond to challenges in a fast-changing world
Australia is at a crossroads. Drift towards a future of slow decline economically and socially or, if action is taken now to address our most important challenges, create a future of greater prosperity for all, globally competitive industries and a sustainable environment.
That is the conclusion of a major report bringing together the thinking of more than 50 leaders in business, academia, NGOs and the community sector, working with the CSIRO to model alternative futures for Australia. The report is described as a “clarion call” for the nation.
The Australian National Outlook 2019, two years in the making, aims to “help kickstart a national conversation about where Australia is heading”, says its co-chair, Dr Ken Henry, the chairman of the National Australia Bank and former secretary of the Treasury department.
Participants met as a group with the nation’s leading science agency, the CSIRO, to identify the most critical long-term challenges facing Australia and what needed to change. They included senior leaders from Shell Australia, the Red Cross, McKinsey & Company, Australia Post, PwC, the Cochlear company, the Australian Bureau of Agricultural and Resource Economics and Sciences, the Grattan Institute, major universities, the Wentworth Group of Concerned Scientists and UnitingCare Australia.
Individuals included the former New South Wales premier Nick Greiner, former chairman of the Australian competition and consumer commission Allan Fels and co-chair of the report, the CSIRO’s chairman, David Thodey.
The report concludes that while Australia has enjoyed almost three decades of economic growth, with enviable social cohesion and strong institutions, it risks “drifting into the future” if it fails to respond to challenges in a fast-changing world. Those identified are the rise of Asia, rapid technological change, climate change and the environment, changing demographics, declining trust in institutions and business and strains on social cohesion.
To deal with them and reach its potential by 2060, Australia must make “key shifts” in five areas: an industrial shift, an urban shift, an energy shift, a land shift and a culture shift.
The director of CSIRO Futures, James Deverell, led the project and said the sense of urgency came from the participants, who gathered for eight workshops, beginning with around 100 priorities for Australia before identifying the most crucial.
“There was this strong sense that we need to take action now,” Deverell said. “The group sees this as a clarion call, a call to arms for action.
“When you look at the shifts, there’s a couple of things in common. One is the need to focus on the long term, that these shifts are going to play out over a generation or more, but that doesn’t mean we can kick the can down the road and ignore them. The other one is the need for strong leadership, for bold action.”
The report references the 1980s, when strong productivity growth was driven by a consensus on economic reform supported by both major parties, big business and unions.
The report does not give specific policy recommendations but suggests the “levers” the country needs to pull to get the best outcomes. One of its strongest conclusions is that there is no tradeoff between strong economic growth and transitioning to zero-emission renewable energy, an argument that has crippled political debate in Australia for more than a decade.
In both scenarios modelled by the CSIRO – slow decline or what the report calls outlook vision – almost all electricity is generated by renewables by 2060 due to drops in the cost of renewables and the decline in the demand for fossil fuels. The global disruption in the energy market is underway, so whether the Australian government encourages new coal-fired power stations or not, renewables will be cheaper and replace them.
In Australia, most of the transition will happen between 2020 and 2040 as ageing coal-fired power plants are retired and replaced with renewables.
“We’ve seen costs come down so much in solar and wind they are now the low-cost solution,” Deverell said. “Once you hit a certain level of renewables on the grid you need to add storage to the cost, but that’s factored into our modelling and we see the cost of storage coming down over time.”
Deverell said even if Australia continued its policy uncertainty around energy and environment policy, we would still get to almost 100% renewable energy by 2060 purely because of the market. But the warning to politicians and policy makers is that “the transition happens more slowly and ultimately it makes electricity prices higher”.
Thodey argues in the report that if Australia pulls the right levers, “it is possible to achieve higher GDP per capita (as much as 36%) while ensuring growth is inclusive and environmentally sustainable”.
“In a global context, strong cooperation on climate change and trade can deliver a better outcome for Australia without significantly impacting our economic growth, where before it may have been thought impossible.”
Domestically, the report says that whatever happens in the rest of the world, Australia can make big strides to reduce our emissions through improving energy productivity, which means using less energy for the same outcome.
Australia was weak compared with best practice internationally because it was not using the best technology available. It had the potential to become one of the most productive users of energy in the world through energy efficiency and electrification. Electric vehicles, for instance, are expected to be the cheapest form of transport after 2025 and would dominate sales by 2040.
Australia needs to prepare to adapt to global conditions whatever they are, but the biggest benefits will come if the world takes concerted action on climate change to limit global warming to a maximum 2C by 2100 rather than the catastrophic 4C rise if little action is taken.
If there is cooperative global action on climate change, Australia stands to be a big winner, the report finds. The CSIRO modelling indicates that “lower emissions from energy and greater sequestration on the land could enable Australia to achieve ‘net zero’ emissions by 2050 under the outlook vision”. Australia could capitalise on low-carbon exports such as hydrogen produced by renewable energy, countering the decline in global demand for our fossil fuels exports.
“Although other countries are also pursuing energy productivity and renewables, modelling suggests that Australia’s vast natural resources for renewable generation should lead to lower cost electricity in 2060,” the report says.
With reliable, low-carbon electricity and investor confidence in long-term policy, along with rising wages and improved energy efficiency, “by 2060 Australians are spending between 58% and 64% less on electricity as a proportion of income than they are today”.
Even if the world balks at strong action on climate change, Australia does better economically if it if embraces energy efficiency to reduce emissions.
The report’s proposed land shift would see a “stretch goal” of increasing agricultural productivity to 3% per year, meaning intensifying agriculture on the best land, using emerging technologies and boosting research and development. For instance, increasing productivity could result in revenue for crops such as winter cereals doubling by 2060.
Agriculture in Australia had not yet fully embraced the “digital revolution” and doing so would be a boon.
