Australia drought seen hurting GDP in 2019 - central bank
By Swati Pandey
SYDNEY, March 12 (Reuters) - An unrelenting drought in parts
of eastern Australia is expected to weigh on economic growth
this year even if average rainfall returns soon, a senior
central banker said on Tuesday.
The worst drought in living memory has already cut total
gross domestic product (GDP) by 0.15 percent, Reserve Bank of
Australia (RBA) Deputy Governor Guy Debelle said in a speech in
While the impact of climate change is usually most severe on
agriculture, global warming presents significant risks and
opportunities for a broader part of the A$1.9 trillion ($1.34
trillion) economy, he said.
In his speech titled 'Climate Change And The Economy',
Debelle said monetary policy was always focussed at analysing
and assessing a large number of forces.
"But few of these forces have the scale, persistence and
systemic risk of climate change," he said.
"What if droughts are more frequent, or cyclones happen more
often? The supply shock is no longer temporary but close to
permanent," Debelle added.
Australia suffered its third warmest year on record in 2018,
marked by drought and a prolonged bushfire season, with maximum
temperatures about 1.55 degrees C (2.8 degree F) above average
across the country.
"The challenges we have to address are to take the outcomes
from climate modelling and map them into our economic
modelling," Debelle said.
The RBA is consulting with businesses through its liaison
program, and in talks with climate modellers to inform its
monetary policy decision-making, he added.
Last year, the bank joined the Network for Greening the
Financial System, a group of central banks that are examining
The RBA's approach contrasts with a decade of political
deadlock over climate and clean energy policies in resource-rich
Australia, where coal is its biggest export earner.
The absence of a stable carbon policy over the past decade
has resulted in underinvestment in energy generation, which has
led to soaring power prices.
However, Debelle pointed to a pick-up in investment spending
on renewable energy in recent years.
"It has been big enough to have a noticeable impact at the
macroeconomic level and affect aggregate output and hence the
monetary policy calculus," he said.
"How these price and investment developments evolve over the
coming years is something we are playing close attention to,
given the importance of the cost of electricity in inflation
both directly to households and indirectly as a significant
input to businesses," he said.
($1 = 1.4148 Australian dollars)
(Reporting by Swati Pandey and Wayne Cole; editing by Darren
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