Wednesday, December 12, 2007

Bali, Climate Change and the Australian Economy 2

Continuing my musings on climate change and the Australian economy, if you look at many discussions they argue that the costs to Australia of our share of action to prevent climate change can be accommodated within increased economic growth. That is, our incomes will still go up, just at a lower rate.

But is this so? In my last post I pondered a little about a process that might lead to a permanent fall in Australia's real standard of living. I concluded:
In this scenario, the value of the Australian dollar has to fall to the point at which imports are reduced to the level that we can afford in the longer term. The effect could be a major, long term, fall in Australia's standard of living.
I see this as a very real possibility based upon the combination of the projected effects of climate change with the current structure of the Australian economy. If I am right, then we need to start thinking about our responses.
Now how might this happen? I am not trying to argue a case here, simply point to issues.

Back in October 2006, I put up a post called Water, Drought and the Environment - working from facts. As part of the preparation for this post, I looked at our export stats. What I found worried me.

I found that between 99-00 and 04-05 our exports of manufactured products had barely if at all grown in real terms.

Our exports of services had grown from $A28.6 to $A35 million, substantial, but hardly huge.
By contrast to both manufactures and services, our exports of primary products including mineral products grew from $A54.8 billion to $A77.7 billion.

So we can say that export growth in manufactures and services has lagged. I will check later developments at some point, but I doubt that the pattern has changed.

So what has this to do with climate change?

Coal at $A17.1 billion in 04-05 is the greatest primary products' export. The total would be higher today. Our exports here will obviously decline in a climate change world.

If we look at mineral products, a number are in decline (oil) or are threatened by climate change decline decline (alumina).

I do not have total numbers for agricultural exports.

At present, Australia feeds some 70 million people. If the worst case projections are to be believed, then our exports here are likely to decline very sharply.

Where will the replacement export income come from?

One possibility is uranium. On worst case climate change projections, our exports of uranium are likely to go through the ceiling in volume terms, more so in dollar terms.

Beyond that, I do not know. I suggest that we should start thinking about it.


This post is far too superficial, reflecting the fact that I wrote it in haste. While I am trying to pose questions rather than argue a case, it needs more evidence. I will try to add this later.

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