NAB News

A $435bn economic opportunity awaits Australia if it transforms its industrial base and establishes a clean energy platform to drive export growth in a rapidly decarbonising world.

A report commissioned by NAB from Deloitte Access Economics, called “All Systems Go: Powering Ahead”, says the opportunity is there for the taking with the right mix of policy, innovation and investment to trade competitively.

First, however, the country will have to meet its 82 per cent renewable-energy target for the national electricity market by 2030, reach interim emissions reduction targets and net zero by 2050, and implement already-announced decarbonisation policy initiatives.

An additional $120bn of investment will also be required to secure a competitive edge for Australia in key sectors of the net-zero global economy.

The sectors include green hydrogen to power vehicles, generate electricity and produce heat; renewable energy, and critical minerals such as lithium used in battery manufacturing.

“From 2030, Australia can take advantage of this transformation and surging global demand created by the need to rapidly replace emissions-intensive assets,” the Deloitte Access Economics report says.

“Increases in productivity and innovation across connected supply chains and emerging technological processes grows Australia’s green industrial export opportunities by $420bn by 2050.”

Powering ahead

Powering Ahead builds on “All Systems Go”, the first climate report by Deloitte for NAB in 2022, which said that the Australian economy needed to reallocate investment and structurally change to secure the economic dividend net zero offers.

The $435bn opportunity in Powering Ahead represents the net present value of the economy’s expansion in Gross Domestic Product (GDP) out to 2050.

Addressing the report, NAB chair Phil Chronican said Australia has two challenges: getting to net zero and replacing our existing export industries as global demand falls away.

“The harsh reality is that if we only hit our targets without replacing exports, we will become a materially poorer nation,” Mr Chronican said.

“All Systems Go: Powering Ahead demonstrates how we can go further and secure our nation’s prosperity by becoming a major exporter of what the world needs to decarbonise.

“Australia’s natural endowment of land, sunshine and wind puts us in a strong starting position.

“Significant coordination of public and private planning and investment is also required to transform and replace industries that have been at the centre of our historic economic growth and create a new green industrial base.”

“The scale, complexity and cost of the task at hand is profound and the time for achieving it is becoming increasingly pressurised.

“However, what this report makes clear is that the social, environmental and economic costs of inaction are far worse.”

Transition challenges

Powering Ahead supersedes the modelling used in All Systems Go, creating three different transition scenarios.

They are “low and slow” which assumes no further policy action and the world fails to achieve net zero by 2050; “today’s net zero” where Australia meets current targets and the world is net zero by 2050, and “competitive decarbonisation” where the nation increases investment and productivity in energy, green hydrogen and critical minerals and related metals manufacturing, leading to new export opportunities.

The challenge outlined in the report is that our prosperity has relied for decades on agriculture, tourism and emissions-heavy natural resources.

Deloitte Access Economics says the economic opportunity in a carbon-neutral world is “immense”, but the required transformation will be expensive, particularly in the short-term.

Mitigation and adaptation costs from the country’s high-risk exposure to climate change will also be elevated.

“With these structural challenges, Australia’s current industrial base as the enabler of the country’s decarbonisation efforts and a basis to grow exports in a net world’s isn’t very competitive,” the report says.

If this dynamic plays out, Deloitte says the transformation will fall short of what’s needed for the country to achieve its potential in an environment of surging global demand.

The net present value of exports out to 2050 could fall by $270bn under “today’s net zero” scenario compared to the “low and slow” baseline, reflecting a much wider malaise than a decline in coal export volumes.

According to the report, there will be a lack of competitiveness in clean energy manufacturing and slower growth in alternative exports beyond traditional mining.

Creating new growth

With the nation already on the challenging mission to reach its 2030 renewable energy and emissions-reduction targets, the real challenge and potential game-changer comes after that.

NAB chief executive Ross McEwan said Australia has made significant progress over the last 12 months but now needs to “build, build, build”.

“To do this, we need investment and labour to drive the projects and shorter lead-times, as well as improved consultation and a consistent national framework that delivers major green infrastructure projects that have widespread community support,” Mr McEwan said.

“Australia can reap the benefits of innovation and productivity growth that will lift Australia’s supply-chain competitiveness and put the country on a strong footing as our traditional exports are replaced.

“As Australia’s biggest business bank, we are here to fund the transition and support our customers with the capital they need to invest in new technology and ideas that future-proof their business and deliver new ways to grow.”

As the energy system and associated infrastructure is modernised, the Deloitte report says productivity and innovation across connected supply chains and technological processes in green industrial sectors could drive a $420bn surge in exports by 2050.

These exports not only replace output from emissions-intensive activity; they also create new growth.

Transgrid chief executive Brett Redman says in the report’s case study that transmission enables cheap, renewable electricity to flow to consumers, with more supply helping to lower high wholesale energy prices.

“A deep decarbonisation of our economy would see Australia harnessing our abundant renewable energy resources, large landmass, significant mineral ores and access to Asian markets to revitalise our industries, grow our economy and create thousands of new jobs,” Mr Redman says.

The services industry benefits, as well, from achievement of net zero emissions at a lower cost.

Deloitte says services are crucial in enabling decarbonisation and driving economic benefits, with services forecast to grow by $215bn by 2050 because of Australia’s stronger trade position.

See also:

• NAB’s media release
• NAB Chief Climate Officer Jacqueline Fox in conversation with Deloitte’s Claire Ibrahim

You can find out more about NAB and what we are doing to tackle climate change here.

You can read more NAB News articles related to climate change and Australia’s transition to a low carbon economy here.