Reserve Bank of Australia governor Philip Lowe has warned Australia is already paying the economic price of climate change, while calling for more policy certainty that would allow the nation to exploit “fantastic” renewable energy opportunities.
Speaking in Melbourne at the Australia-Canada economic leadership forum on Thursday, Dr Lowe said from the recent bushfires and drought to an impact on consumer sentiment, it was clear climate change was having an economic impact that would only get larger.
Dr Lowe said while central banks should “stick to their knitting” in areas such as the general economy, there was no way of avoiding the financial implications of climate change.
“Addressing climate change isn’t something that is any responsibility of the Reserve Bank of Australia, but what we do have a responsibility to do is to understand the economic and the financial implication of climate change,” he said.
“The economic implications are profound.
“The world is getting hotter and the climate is more variable. We’re seeing already in Australia, perhaps more than anywhere else in the world, the effects of that.”
Dr Lowe noted the drought was likely to cut Australian economic growth this year by a quarter of a percentage point, while the fires would cut growth by about 0.2 percentage points.
He said climate change was affecting insurance costs and the way the country generated and distributed power.
“Climate change is affecting the nature of production in Australia, the nature of investment, ultimately the nature of our exports,” he said. “At the moment, I think it’s affecting confidence of people and therefore ultimately spending.”
Dr Lowe said climate change would affect the value of assets. Some of those assets would be worth less or become stranded, while some would grow in value.
“When asset values change, the value of balance sheets change and that has financial implications for institutions and asset managers,” he said. “We’re not responsible for designing climate change policy, but we are responsible for understanding implications of it.”
The RBA has repeatedly warned about the low level of private-sector investment across the Australian economy.
Dr Lowe said policy uncertainty was affecting the renewable energy sector.
“The policy uncertainty is problematic I think everywhere, including in Australia,” he said. “There’s been very substantial investment in renewables in Australia. We have fantastic opportunities there to reshape our energy production system … but it would be enhanced with greater policy certainty.”