{"id":8135,"date":"2023-08-29T22:25:21","date_gmt":"2023-08-29T19:25:21","guid":{"rendered":"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/?p=8135"},"modified":"2023-08-29T22:25:23","modified_gmt":"2023-08-29T19:25:23","slug":"climate-change-and-central-banks","status":"publish","type":"post","link":"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/climate-change-and-central-banks","title":{"rendered":"Climate Change and Central Banks"},"content":{"rendered":"<div class=\"js-page-header\">\n<div class=\"box-article-info\">\n<p><strong class=\"rss-speech-speaker\">Michele Bullock<\/strong><sup class=\"footnote-reference\"><a id=\"r0\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#fn0\" aria-label=\"Go to endnote 0\">[<span class=\"star\">*<\/span>]<\/a><\/sup><br \/>\n<span class=\"rss-speech-position\">Deputy Governor<\/span><\/p>\n<p><strong class=\"rss-speech-occasion\">Sir Leslie Melville Lecture<\/strong><br \/>\n<span class=\"rss-speech-venue\">Canberra<\/span>\u00a0\u2013\u00a0<span class=\"rss-speech-date\"><time datetime=\"2023-08-29\">29 August 2023<\/time><\/span><\/p>\n<p><a class=\"anchor-audio rss-speech-audio anchor-external\" title=\"Link to the downloadable audio file of Michele Bullock's speech given on 29 August 2023.\" href=\"https:\/\/rba.livecrowdevents.tv\/SpeechbyMicheleBullockDeputyGovernor29august\" target=\"_blank\" rel=\"noopener noreferrer\">Audio<\/a><\/p>\n<\/div>\n<\/div>\n<div class=\"nav-page-contents collapsed\">\n<nav aria-label=\"Page contents\">\n<p class=\"title collapsed\" tabindex=\"0\" role=\"button\" aria-expanded=\"false\"><span style=\"font-size: 16px;\">Melville is of course renowned for his contribution to the establishment of central banking in Australia. On that front it is a challenging time as we seek to return inflation to target in a reasonable timeframe and to preserve gains in the labour market \u2013 something that I am sure Melville would have approved of. I will have plenty of opportunities to address these important issues over the months ahead. But in this memorial <a title=\"Senior Lecturer\/Lecturer: Department of Global Health\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/senior-lecturer-lecturer-department-of-global-health\">lecture<\/a> today, before I take up the position of Governor, I would like to address another critical issue regarding the future \u2013 climate change, its impact on the economy and implications for monetary policy.<\/span><\/p>\n<\/nav>\n<\/div>\n<p>Right up to the end of his long life, Melville was an avid consumer of news, not only economic and financial news, but also scientific news. He was noted for his preparedness to speak on contemporary policy issues, including those for which solutions were difficult and opinions divided.<sup class=\"footnote-reference\"><a id=\"r1\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#fn1\" aria-label=\"Go to endnote 1\">[1]<\/a><\/sup>\u00a0I therefore think Melville would have been very engaged with the issues I will address in this lecture.<\/p>\n<p>There is another, more personal reason why I feel particularly pleased to be giving this lecture. As you know, I was recently appointed the next Governor of the Reserve Bank of Australia \u2013 the first <a title=\"Grants for Female Early-Career Scientist\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/grants-for-female-early-career-scientist-2\">female<\/a> to hold this position. But from what I know of Sir Leslie Melville, he was ahead of his time in terms of recognising women economists. Soon after he was appointed the Bank\u2019s first Economist in 1931, he made the rather progressive move of recruiting (Mary) Willmott Debenham as the Bank\u2019s Assistant Economist.<sup class=\"footnote-reference\"><a id=\"r2\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#fn2\" aria-label=\"Go to endnote 2\">[2]<\/a><\/sup>\u00a0In what was standard practice at the time, Debenham had to resign after she married. Nevertheless, I like to think that Melville would be pleased to see that a woman has now become the Governor and that there are many excellent female economists in the Reserve Bank.<\/p>\n<p>Like the rest of the world, Australia\u2019s <a title=\"Technical Manager Climate Projects, Sustainable Technologies (ST) \u2013 Africa\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/technical-manager-climate-projects-sustainable-technologies-st-africa\">climate<\/a> is changing. Recent years have been warmer than any multi-year period on record, with more days of extreme <a title=\"2023 Heat Events Break Records, Not Rare Anymore\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/2023-heat-events-break-records-not-rare-anymore\">heat and intense rainfall events<\/a> (Graph\u00a01). In coming decades, Australia is <a title=\"Call for Projects 2023\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/call-for-projects-2023\">projected<\/a> to experience further increases in temperatures and intense rainfall events, while some parts of the country will receive less rainfall.<sup class=\"footnote-reference\"><a id=\"r3\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#fn3\" aria-label=\"Go to endnote 3\">[3]<\/a><\/sup><\/p>\n<div class=\"image-graph\">\n<figure><figcaption>\n<div class=\"title\">Graph 1<\/div>\n<\/figcaption><img decoding=\"async\" src=\"https:\/\/www.rba.gov.au\/speeches\/2023\/images\/sp-dg-2023-08-29-graph01.svg\" alt=\"Graph 1: Annual Mean Temperature Anomaly in Australia\" width=\"\" height=\"\" \/><\/figure>\n<\/div>\n<p>Policymakers, businesses and households, here and overseas, are increasingly taking actions to reduce <a title=\"Agriculture Dept. to Invest 0M in Measuring Greenhouse Emissions\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/agriculture-dept-to-invest-300m-in-measuring-greenhouse-emissions\">greenhouse gas emissions<\/a>. Around 150\u00a0countries have now pledged to reach net zero emissions \u2013 whereby emissions produced, and emissions removed from the atmosphere are in balance. These 150\u00a0countries make up 92\u00a0per\u00a0cent of global GDP and contribute 88\u00a0per\u00a0cent of total emissions.<sup class=\"footnote-reference\"><a id=\"r4\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#fn4\" aria-label=\"Go to endnote 4\">[4]<\/a><\/sup><\/p>\n<p>Climate change and the actions taken in response will have broad-ranging implications for the economy, the financial system and society at large. As the Review of the Reserve Bank has helpfully reinforced, climate change will have implications for price stability, employment and the stability of the financial system.<sup class=\"footnote-reference\"><a id=\"r5\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#fn5\" aria-label=\"Go to endnote 5\">[5]<\/a><\/sup>\u00a0As such, it is worth discussing how the Bank is considering the impacts of climate change on our policy mandates.<\/p>\n<p>I will start by <a title=\"CBD Events Discuss Inclusive Wealth, Nature-based Climate Solutions\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/cbd-events-discuss-inclusive-wealth-nature-based-climate-solutions\">discussing how more frequent and severe weather events<\/a> and the global transition to net zero could affect the setting of monetary policy. I will then talk about how we are monitoring the impact of <a title=\"Funding for Climate or Clean Energy Projects\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/funding-for-climate-or-clean-energy-projects-3\">climate<\/a> change as it relates to financial stability, and the work underway by Australian financial regulators to help financial markets and institutions to manage climate risks and opportunities.<\/p>\n<p id=\"climate-related-economic-and-financial-risks\"><strong>Climate-related economic and financial risks<br \/>\n<\/strong>Navigating uncertainty is an inherent part of the work of a central bank. But the uncertainty around climate change is particularly acute. There is not only uncertainty around exactly how the <a title=\"Funding: Climate-resilient Action in African Countries\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/funding-climate-resilient-action-in-african-countries\">climate<\/a> will change but also around how this will affect the economy and financial system. The timing and intensity of effects are uncertain, and these could be severe and irreversible if <a title=\"Climate Change\u2019s Social Tipping Points: For Better or Worse\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/climate-changes-social-tipping-points-for-better-or-worse\">tipping points<\/a> are reached.<sup class=\"footnote-reference\"><a id=\"r6\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#fn6\" aria-label=\"Go to endnote 6\">[6]<\/a><\/sup>\u00a0In addition, it is unclear how the policies, preferences and technologies associated with climate mitigation will evolve.<\/p>\n<p>The economic and financial risks arising from climate change are typically divided into two types:<\/p>\n<ul>\n<li><strong>Physical risks<\/strong>\u00a0\u2013 including both the impact of more frequent and <a title=\"Extreme weather events abound, leaving no escape from climate change\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/extreme-weather-events-abound-leaving-no-escape-from-climate-change\">extreme weather events<\/a> such as fires, floods, droughts and cyclones, as well as gradually emerging effects on temperature, rainfall and sea level.<\/li>\n<li><strong>Transition risks<\/strong>\u00a0\u2013 arising from the actions taken in response to climate change. These can include policy actions, technological <a title=\"Calling for innovative ocean-minded startups\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/calling-for-innovative-ocean-minded-startups\">innovation<\/a> or people\u2019s preferences, here and overseas.<\/li>\n<\/ul>\n<p>Actions taken to address climate change will ultimately reduce physical risks, but their timing and sequencing could increase some transition risks associated with a move to a lower emissions economy.<\/p>\n<p>These climate risks will affect the economy through several channels. Hotter temperatures and more extreme weather will disrupt businesses, damage property and lower productivity growth. Actions taken to reduce emissions may present adjustment costs, but they will also present opportunities. Indeed, while there is much uncertainty in this area, there is general agreement that a timely and orderly transition will be the less costly approach in the long run.<\/p>\n<p id=\"impact-on-the-economy-and-relevance-to-monetary-policy\"><strong>Impact on the economy and relevance to monetary policy<br \/>\n<\/strong>The Bank sets monetary policy according to a flexible inflation target of between 2\u00a0and 3\u00a0per\u00a0cent. To consider the implications of climate change for monetary policy, the Bank needs to understand how the physical effects of a <a title=\"Call for consultancy services: recruitment of experts to review and synthesise information on the nexus between climate change, forests and trees\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/call-for-consultancy-services-recruitment-of-experts-to-review-and-synthesise-information-on-the-nexus-between-climate-change-forests-and-trees\">changing climate<\/a> and the transition to a lower emissions economy will affect inflation and its determinants. Many of the physical and transition impacts of climate change affect the supply side of the economy. While monetary policy works primarily by influencing the level of demand and expectations of inflation, supply-side developments also need to be considered. As well as short-term effects on supply, climate change may also have an impact on longer run concepts like potential output and the neutral real interest rate, which can help to inform assessments on the appropriate stance of monetary policy.<\/p>\n<p>To illustrate these points, I\u2019ll step through some examples of how physical and transition risks are affecting the economy, and how we might think about these from the perspective of monetary policy.<\/p>\n<p><strong>Physical risks<br \/>\n<\/strong>In the short run, many of the physical effects of climate change can be treated as a negative supply shock. The standard view is that monetary policy should largely look through short-term supply shocks. For example, inclement weather might disrupt production or supply chains, resulting in a temporary increase in prices. But then weather conditions improve, production recovers and the impact on prices wanes. If inflation expectations remain anchored, inflation should return to target when the shock dissipates. However, if these disruptions become more frequent, severe or protracted due to climate change, prices could become more volatile, or if there are persistent adverse effects on productive capacity, remain higher for longer. The longer inflation is allowed to remain high, the greater the risk that expectations will drift higher, and the greater the real economic costs will be of <a title=\"Restoring Degraded Forests Could Bring Back Lost Rainfall, Cooler Temperatures\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/restoring-degraded-forests-could-bring-back-lost-rainfall-cooler-temperatures\">bringing inflation back<\/a> down.<\/p>\n<p>At the Bank, we are familiar with thinking about the impact of natural disasters on the economy and the implications for monetary policy. The\u00a0<cite>Statement on Monetary Policy\u00a0<\/cite>has included boxes on the impact of flooding in 2011 and 2022, and the impact of droughts and bushfires in 2020.<sup class=\"footnote-reference\"><a id=\"r7\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#fn7\" aria-label=\"Go to endnote 7\">[7]<\/a><\/sup>\u00a0These boxes document the effects of these events on the farm sector and the production of commodities, on transport and logistics, as well as the destruction of homes, businesses and infrastructure.<\/p>\n<p>Looking at past episodes for agricultural production, as an example, shows that some supply shocks dissipate quickly, while others can be more persistent. In general, agricultural production is well diversified across Australia, production cycles are short or there are alternative sources to be drawn upon. As a result, it is rare for a single commodity to suffer a prolonged large loss of supply and to have a persistent impact on prices.<\/p>\n<p>That said, the spike in banana prices observed following Cyclone Larry in 2006 and Cyclone Yasi in 2011 temporarily boosted measured inflation by around 0.7\u00a0percentage points on each occasion. This happened because bananas are mostly grown in only a few areas in North Queensland, have a relatively long production cycle and are not imported. On a longer and more widespread scale, drought conditions between 2018 and 2020 saw many parts of the country experience high temperatures and well below average rainfall. This reduced the domestic supply of some food items, placing upward pressure on cereal, milk and meat prices (Graph\u00a02).<sup class=\"footnote-reference\"><a id=\"r8\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#fn8\" aria-label=\"Go to endnote 8\">[8]<\/a><\/sup><\/p>\n<p>These examples are about cycles in the weather. Climate change, however, is a trend change. Longer run shifts in temperature and changes in <a title=\"Water, Climate, and Biodiversity\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/water-climate-and-biodiversity\">water<\/a> availability are likely to have implications for the viability of agriculture in some regions and for some crop types. Physical risks may, therefore, lead to structural changes in industry composition.<\/p>\n<div class=\"image-graph\">\n<figure><figcaption>\n<div class=\"title\">Graph 2<\/div>\n<\/figcaption><img decoding=\"async\" src=\"https:\/\/www.rba.gov.au\/speeches\/2023\/images\/sp-dg-2023-08-29-graph02.svg\" alt=\"Graph 2: Drought and Food Inflation\" width=\"\" height=\"\" \/><\/figure>\n<\/div>\n<p>Extreme weather events can also affect aggregate demand. Temporary disruptions or related uncertainty might lead to lower investment or household spending for a time, although spending could rebound if there is a need to rebuild infrastructure or residential or commercial property. This in turn, however, could divert investment from potentially more productive opportunities that could have been pursued in the absence of the disruption.<\/p>\n<p>More extreme weather events could lower employment if physical assets are destroyed and the capital stock is reduced. Higher temperatures could adversely affect the health of workers, particularly those working outdoors, and so weigh on productivity.<sup class=\"footnote-reference\"><a id=\"r9\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#fn9\" aria-label=\"Go to endnote 9\">[9]<\/a><\/sup>\u00a0Unemployment could be persistently higher if people are unable or unwilling to leave a region that has suffered from extreme weather and related job losses. Climate impacts vary significantly across regions \u2013 an impact may be small in aggregate, but extreme for a local <a title=\"Community rights and REDD+ in Indonesia\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/community-rights-and-redd-in-indonesia\">community<\/a>.<\/p>\n<p><strong>Transition risks<br \/>\n<\/strong>Turning to transition risks, mitigating climate change by putting in place policies to reduce emissions will impact the prices faced by households and businesses. This will lead to structural shifts in output and employment as some carbon-intensive economic activities become unprofitable and others eventually take their place. How smoothly these <a title=\"Re-advertised: Consultancy services to enhance African REDD+ implementation and policy change capacity.\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/re-advertised-consultancy-services-to-enhance-african-redd-implementation-and-policy-change-capacity\">changes occur will be important context for monetary policy<\/a>.<\/p>\n<p>It is important to note that monetary policy is not a\u00a0<cite>driver\u00a0<\/cite>of this transition. Fiscal and <a title=\"Call for Proposal: Analytical Study on National Energy Policy and Regulatory Frameworks\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/call-for-proposal-analytical-study-on-national-energy-policy-and-regulatory-frameworks\">regulatory policies<\/a> are better suited to the task of facilitating the transition to a low-emissions economy. The most helpful contribution monetary policy can make is to focus on maintaining stable long-term inflation expectations. This approach recognises the flexibility embedded in the inflation target, which means that monetary policy need not overreact to short-lived price shocks.<\/p>\n<p>The implications of the transition for the economy will depend on the specific policy measures put in place, changes in consumer preferences, the availability of technologies, and the timing and speed of the process. The phase-out of carbon-intensive production may reduce aggregate supply temporarily. But investment in alternative production methods will boost aggregate demand. Depending on how this transition plays out, if the net effect is to temporarily lower aggregate supply, this would put upward pressure on inflation.<\/p>\n<p>To illustrate the possible economic impacts of the transition, let us consider developments in electricity generation. Globally, policies are being put in place to lower emissions which will make it more expensive to use <a title=\"Record Trillion in Fossil Fuel Subsidies\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/record-7-trillion-in-fossil-fuel-subsidies\">fossil fuels<\/a> to produce electricity. In addition, costs of wind- and solar-generated electricity have decreased markedly over the past decade. As a result, renewables generation is growing rapidly, though from a low base. In Australia, electricity generated by renewables \u2013 hydro, wind and solar \u2013 has increased almost sixfold since 2006 (Graph\u00a03). The share of electricity generated from fossil fuels has declined from around 90\u00a0per\u00a0cent in 2010 to around 65\u00a0per\u00a0cent today.<\/p>\n<div class=\"image-graph\">\n<figure><figcaption>\n<div class=\"title\">Graph 3<\/div>\n<\/figcaption><img decoding=\"async\" src=\"https:\/\/www.rba.gov.au\/speeches\/2023\/images\/sp-dg-2023-08-29-graph03.svg\" alt=\"Graph 3: Electricity Generation by Renewables in Australia\" width=\"\" height=\"\" \/><\/figure>\n<\/div>\n<p>Coal-fired power <a title=\"Bamboo plants shows great potential to become the next big renewable energy source\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/bamboo-plants-shows-great-potential-to-become-the-next-big-renewable-energy-source\">plants are scheduled to be shut down over the next<\/a> three decades (Graph\u00a04). This could put upward pressure on <a title=\"Energy Globe Award for Sustainability \u2014 Awards 2023\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/uncategorized\/energy-globe-award-for-sustainability-awards-2023\">energy<\/a> prices if coal plant closures are not matched by renewables supply and storage. There is much uncertainty here. In recent years, some plants have brought forward their planned closure dates. Looking forward, coal plant closures may be delayed to ensure electricity generation is sufficient to meet demand. But this comes with other risks \u2013 for example, coal plants may be more prone to outages as the infrastructure ages. Furthermore, slower coal plant closures would require more rapid reductions in emissions in other sectors to meet national emissions targets.<\/p>\n<p>Shifting the mix of <a title=\"European Commission \u2014 Awareness Raising in Renewable Energy\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/european-commission-awareness-raising-in-renewable-energy\">energy generation towards a higher share of renewables<\/a> also has flow-on effects. <a title=\"Call for Project Proposal: Access to Renewable Energy\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/call-for-project-proposal-access-to-renewable-energy\">Renewable energy<\/a> generation in Australia is weather dependant and is often best located in more remote parts of the country. So, alongside the large amount of investment required to generate electricity from wind, solar and hydro energy, investment and innovation will also be needed in energy storage and other firming capacity, and to upgrade, extend and <a title=\"Expert: Climate change adaptation is vital for forest restoration.\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/expert-climate-change-adaptation-is-vital-for-forest-restoration\">adapt<\/a> the transmission network in Australia. This investment will require a large workforce and a range of specialist skills.<\/p>\n<div class=\"image-graph\">\n<figure><figcaption>\n<div class=\"title\">Graph 4<\/div>\n<\/figcaption><img decoding=\"async\" src=\"https:\/\/www.rba.gov.au\/speeches\/2023\/images\/sp-dg-2023-08-29-graph04.svg\" alt=\"Graph 4: Coal Power Plant Closures in Australia\" width=\"\" height=\"\" \/><\/figure>\n<\/div>\n<p>The extent of investment required is uncertain because it depends on the pace and ambition of Australia\u2019s transition path and because the costs for inputs could change considerably over time. New technologies will also likely emerge that could reduce costs and increase efficiencies. The public estimates for the investment needed in Australia over coming decades vary \u2013 but are all large. It is important to note that Australia\u2019s transition will occur in the context of the global transition \u2013 with all countries drawing on similar materials and labour skills \u2013 and at an increasing pace. To achieve net zero emissions globally, the International Energy Agency (IEA) estimates that by 2030 annual investment in <a title=\"Climate Technology Initiative \u2014 Funding for Climate or Clean Energy Projects\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/climate-technology-initiative-funding-for-climate-or-clean-energy-projects\">clean energy<\/a> will have to be running at around three times the current pace \u2013 which has already increased substantially in recent years (Graph\u00a05).<sup class=\"footnote-reference\"><a id=\"r10\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#fn10\" aria-label=\"Go to endnote 10\">[10]<\/a><\/sup>\u00a0If realised, this is expected to have some sizeable and possibly volatile effects on overall inflation.<\/p>\n<div class=\"image-graph\">\n<figure><figcaption>\n<div class=\"title\">Graph 5<\/div>\n<\/figcaption><img decoding=\"async\" src=\"https:\/\/www.rba.gov.au\/speeches\/2023\/images\/sp-dg-2023-08-29-graph05.svg\" alt=\"Graph 5: Global Annual Clean Energy Investment\" width=\"\" height=\"\" \/><\/figure>\n<\/div>\n<p>On the other hand, the argument can be made that rapid adoption of renewables or faster-than-expected improvements in <a title=\"Africa Enterprise Challenge Fund \u2014 Clean Energy Technologies\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/africa-enterprise-challenge-fund-clean-energy-technologies\">clean technologies could push energy<\/a> costs down even more quickly than anticipated.<sup class=\"footnote-reference\"><a id=\"r11\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#fn11\" aria-label=\"Go to endnote 11\">[11]<\/a><\/sup>\u00a0While renewable power plants have quite high fixed costs, their operating costs are very low owing to the zero cost of fuel (e.g. wind and sunlight). The costs of wind- and solar-generated electricity have decreased markedly over the past decade, driven by technological innovation as well as falling manufacturing and installation costs.<sup class=\"footnote-reference\"><a id=\"r12\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#fn12\" aria-label=\"Go to endnote 12\">[12]<\/a><\/sup><\/p>\n<p>Whatever the outcomes, trends in energy prices have significant effects on overall inflation. This is because energy prices have a sizeable direct impact on inflation, with retail electricity and gas prices accounting for around 3\u00a0per\u00a0cent of the CPI basket. There are also indirect effects, as <a title=\"Pollination service business\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/pollination-service-business\">businesses can be expected to gradually pass on higher energy costs to the prices consumers pay for goods and services<\/a>. So how the transition plays out for energy prices is going to be an important consideration for monetary policy over coming years.<\/p>\n<p><strong>The impact on Australia of global developments<br \/>\n<\/strong>When we think about the economic impacts of the transition to a lower emissions economy for Australia, we also need to consider the global dimension. Fossil fuels account for over one-third of the value of Australian exports \u2013 and most major Australian export markets have announced commitments to transition to net zero emissions. While the policies and technology required to achieve these <a title=\"Action Awards for Sustainable Development Goals\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/action-awards-for-sustainable-development-goals\">goals are in many cases still being developed<\/a>, in scenarios where net zero emissions is achieved by mid-century, there is a significant decline in demand for fossil fuels, including Australian coal exports (Graph\u00a06). The 2023 Intergenerational <a title=\"IDF Global Marketing Trends Report 2020 now available\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/idf-global-marketing-trends-report-2020-now-available\">Report shows that in a scenario where global<\/a> action limits temperature risks to 1.5\u00b0C, the associated reduction in global demand for thermal coal could reduce Australia\u2019s exports to less than 1\u00a0per\u00a0cent of current levels by 2063.<sup class=\"footnote-reference\"><a id=\"r13\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#fn13\" aria-label=\"Go to endnote 13\">[13]<\/a><\/sup><\/p>\n<p>As discussed earlier, there is significant uncertainty associated with these scenarios \u2013 including around the speed and the means by which countries make progress towards their net zero targets, and future technological developments. Indeed, across the key benchmark scenarios developed by the Intergovernmental Panel on Climate Change, the IEA, the Network for <a title=\"Republican attacks on ESG aren\u2019t stopping companies in red states from going green\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/republican-attacks-on-esg-arent-stopping-companies-in-red-states-from-going-green\">Greening<\/a> the Financial System and others, there is significant variation in the speed and extent of coal phase out.<\/p>\n<div class=\"image-graph\">\n<figure><figcaption>\n<div class=\"title\">Graph 6<\/div>\n<\/figcaption><img decoding=\"async\" src=\"https:\/\/www.rba.gov.au\/speeches\/2023\/images\/sp-dg-2023-08-29-graph06.svg\" alt=\"Graph 6: Global Primary Energy Consumption\" width=\"\" height=\"\" \/><\/figure>\n<\/div>\n<p>The impact of declining global demand for fossil fuels on Australia\u2019s exports could also be partly offset by opportunities in new low-emissions industries (Graph\u00a07). For example, Australia has significant endowments of several the minerals identified by the IEA as important inputs for the energy transition \u2013 including cobalt, lead, lithium, nickel, vanadium and zinc, which are used in products like batteries, <a title=\"What are solar trees, and Could they replace solar panels?\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/what-are-solar-trees-and-could-they-replace-solar-panels-what-are-solar-trees-and-could-they-replace-solar-panels\">solar panels<\/a> and wind turbines.<sup class=\"footnote-reference\"><a id=\"r14\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#fn14\" aria-label=\"Go to endnote 14\">[14]<\/a><\/sup>\u00a0Global demand for lithium is projected to increase significantly over the next 40\u00a0years, expanding Australia\u2019s potential export market.<sup class=\"footnote-reference\"><a id=\"r15\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#fn15\" aria-label=\"Go to endnote 15\">[15]<\/a><\/sup><\/p>\n<div class=\"image-graph\">\n<figure><figcaption>\n<div class=\"title\">Graph 7<\/div>\n<\/figcaption><img decoding=\"async\" src=\"https:\/\/www.rba.gov.au\/speeches\/2023\/images\/sp-dg-2023-08-29-graph07.svg\" alt=\"Graph 7: Selected Australian Resources Exports\" width=\"\" height=\"\" \/><\/figure>\n<\/div>\n<p><strong>Climate change and the setting of montary policy<br \/>\n<\/strong>Finally, the climate-related economic effects discussed may affect the Bank\u2019s ability to assess the stance of monetary policy. This is because climate change might have important effects on an economy\u2019s capacity to produce goods and services \u2013 that is, on potential output. It might also affect the neutral interest rate and, therefore, the stance of monetary policy. These concepts are difficult enough to assess in real time in the normal course, let alone when climate change is introducing additional variability and uncertainty.<\/p>\n<p>When demand and supply in the economy are in balance there is no pressure on inflation to rise or fall. As I have discussed, extreme weather and higher temperatures could reduce the level or growth in the capital stock and labour productivity, lowering supply. The impact of transition to net zero emissions is less clear. The relative price <a title=\"Climate change mitigation: reducing emissions\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/climate-change-mitigation-reducing-emissions\">changes due to mitigation<\/a> policies could make parts of the capital stock economically obsolete, reducing supply at least until it is replaced. On the other hand, these same relative price changes will support capital accumulation and technological innovation associated with low-emission activities, adding to potential output.<\/p>\n<p>The neutral interest rate is the interest rate at which monetary policy is neither expansionary nor contractionary \u2013 and so it provides a conceptual benchmark for assessing the stance of policy.<sup class=\"footnote-reference\"><a id=\"r16\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#fn16\" aria-label=\"Go to endnote 16\">[16]<\/a><\/sup>\u00a0The impact of climate change on the neutral interest rate is not clear cut.<sup class=\"footnote-reference\"><a id=\"r17\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#fn17\" aria-label=\"Go to endnote 17\">[17]<\/a><\/sup>\u00a0In a world where significant climate risks materialise, households may be more likely to accumulate savings and firms may be less willing to invest, putting downward pressure on the neutral rate, and limiting the effective monetary policy space available to policymakers where interest rates are still positive. On the other hand, the extra investment required to replace capital stocks destroyed by more frequent natural disasters or to transition to a lower emissions economy could put upward pressure on the neutral rate.<\/p>\n<p>On a broader scale, there is a question about whether climate-related trends could cause central banks to re-examine the relative merits of flexible inflation targeting. The RBA Review considered this question but found that flexible inflation targeting had served the Bank well and recommended its continued use. Nevertheless, I expect that debate will continue.<\/p>\n<p id=\"impact-on-the-financial-system-and-risks-to-financial-stability\"><strong>Impact on the financial system and risks to financial stability<br \/>\n<\/strong>The physical and transition risks of climate change introduce both risks and opportunities for financial institutions. More intense weather events and higher average temperatures are likely to reduce the value of some assets and income streams. This could result in unexpected credit losses for banks, increased claims on insurers and write-downs to the value of financial investments. If not adequately managed, there could be implications for the stability of the financial system.<\/p>\n<p>As part of the Bank\u2019s mandate to contribute to the stability of the financial system, we are monitoring the build-up of climate-related risks. We are also working with other members of the Council of Financial Regulators (CFR) to create a framework for financial <a title=\"Breaking systemic barriers to women\u2019s participation in science\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/breaking-systemic-barriers-to-women-s-participation-in-science\">system participants<\/a> to manage their climate-related risks and opportunities.<\/p>\n<p>Early analysis on climate-related risks to financial institutions by Australian financial regulators has focused on banks. Australian banks <a title=\"Blue foods face significant risks from climate change\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/blue-foods-face-significant-risks-from-climate-change\">face climate risks<\/a> primarily through their extensive exposure to residential mortgages. If climate change makes a home\u2019s location less desirable and significantly reduces its value, banks would then have less <a title=\"Protected and Conserved Area Fund\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/protected-and-conserved-area-fund\">protection<\/a> against default. Banks could also experience losses from transition risk associated with their exposure to carbon-intensive industries, through their lending to businesses in these sectors.<\/p>\n<p>In analysis conducted by Reserve Bank staff, a macrofinancial stress-testing model was used to estimate how climate change might affect the banking sector, using two scenarios \u2013 one with severe physical risks, another with significant transition risks.<sup class=\"footnote-reference\"><a id=\"r18\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#fn18\" aria-label=\"Go to endnote 18\">[18]<\/a><\/sup>\u00a0To capture the physical climate risks to residential housing, climate hazard data were used to measure the expected increase in insurance costs due to climate-related damage \u2013 such as more frequent flooding and more damaging cyclones \u2013 which were translated into housing price falls. As shown in Figure\u00a01, around 7.5\u00a0per\u00a0cent of properties are in postcodes that could see property prices decline by 5\u00a0per\u00a0cent or more due to climate change by 2050.<\/p>\n<div class=\"image-graph\">\n<figure><figcaption>\n<div class=\"title\">Figure 1: Housing Price Effects of Physical Risk<\/div>\n<\/figcaption><img decoding=\"async\" src=\"https:\/\/www.rba.gov.au\/speeches\/2023\/images\/sp-dg-2023-08-29-figure01.svg\" alt=\"Figure 1: Housing Price Effects of Physical Risk\" width=\"\" height=\"\" \/><\/figure>\n<\/div>\n<p>This analysis was done as a complement to a Climate Vulnerability Assessment (CVA) led by the Australian Prudential Regulation Authority (APRA), which was conducted for the five largest banks over 2021 and 2022.<sup class=\"footnote-reference\"><a id=\"r19\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#fn19\" aria-label=\"Go to endnote 19\">[19]<\/a><\/sup>\u00a0Participating banks were provided with a high physical risk and a high transition risk scenario and assessed the implications for themselves and their counterparties using internal models and processes. The CVA results showed that losses on bank lending would increase in the medium-to-long term in both scenarios, but this would not cause severe stress. This was largely because lending losses were concentrated in specific regions and industries that represent only a small proportion of banks\u2019 overall lending exposures.<\/p>\n<p>Do these results mean that we do not need to worry about the impact of climate change on financial stability? Unfortunately, no. These are early exploratory exercises that covered only some aspects of climate risk and were subject to a number of limitations. Firms and policymakers will need new and detailed data, capturing the varying effects of climate change across geographic locations and economic environments. Better reporting of climate risks will help. In addition, <a title=\"Understanding Risks Tanzania (URTZ) 2019\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/understanding-risks-tanzania-urtz-2019\">understanding climate risks<\/a> has a forward-looking element, requiring the use of scenarios. More can be done to understand the range of possible outcomes, including looking at the distribution of outcomes as well as the central tendency, using a wider range of models and finding ways to capture second-round or \u2018spillover\u2019 effects.<\/p>\n<p>While the early work has focused on banks, other participants in the financial system will also feel the impacts of climate change and require consideration. The insurance sector is of particular interest here. Insurers are most directly affected by climate change because they offer protection to customers against natural disasters. Australian insurance payouts have been rising in real terms over the past few decades (Graph\u00a08). This increase is less apparent when claims are adjusted for the cost of rebuilding and the geographic distribution of population across Australia. However, more frequent or more severe weather events are expected to increase claims on damaged property and other assets.<\/p>\n<p>In contrast to banks, insurance contracts are typically renewed annually, so insurers can <a title=\"Forest Farm Producers in Nepal discussed to up-scale the best climate change adaptation practices\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/forest-farm-producers-in-nepal-discussed-to-up-scale-the-best-climate-change-adaptation-practices\">adapt their business more quickly to climate<\/a> risks. They can pass on increased costs to their customers in the form of higher premiums. Or they may simply withdraw coverage from high-risk regions. While this manages the risk to the insurer, it passes it back to the household or business, or to the lenders in the case of loan defaults where affected assets are used as collateral. Indeed, the availability of insurance will influence the ability of businesses and households to recover from natural disasters, and hence could amplify the overall economic impact of these events.<\/p>\n<p>To better understand the risks to the financial system that could occur due to changes in the cost and coverage of insurance, starting this year, APRA, on behalf of the CFR, will conduct a climate scenario analysis with insurers.<\/p>\n<div class=\"image-graph\">\n<figure><figcaption>\n<div class=\"title\">Graph 8<\/div>\n<\/figcaption><img decoding=\"async\" src=\"https:\/\/www.rba.gov.au\/speeches\/2023\/images\/sp-dg-2023-08-29-graph08.svg\" alt=\"Graph 8: Insurance Catastrophe Payouts\" width=\"\" height=\"\" \/><\/figure>\n<\/div>\n<p>More broadly, members of the CFR are working together to create a framework to enable participants in the financial <a title=\"FBA 602: Agroforestry concepts, systems and management\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/study\/fba-602-agroforestry-concepts-systems-and-management\">system to manage<\/a> their climate-related risks and opportunities, which will support the transition to a lower emissions economy. Current priorities include:<\/p>\n<ul>\n<li>supporting the Australian <a title=\"Forest Governance Scholarship for PhD\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/forest-governance-scholarship-for-phd\">Government<\/a> in the implementation of standardised, internationally aligned climate-related financial disclosure requirements for large businesses and financial institutions<\/li>\n<li>overseeing the development of an Australian sustainable <a title=\"Biodiversity offsets under fire as EU updates green finance taxonomy\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/biodiversity-offsets-under-fire-as-eu-updates-green-finance-taxonomy\">finance taxonomy<\/a> and coordinated strategies to prevent greenwashing<\/li>\n<li>strengthening international engagement on sustainable finance.<sup class=\"footnote-reference\"><a id=\"r20\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#fn20\" aria-label=\"Go to endnote 20\">[20]<\/a><\/sup><\/li>\n<\/ul>\n<p id=\"conclusion\"><strong>Conclusion<br \/>\n<\/strong>Climate change has macroeconomic implications that are relevant for the setting of monetary policy and the Reserve Bank\u2019s financial stability remit. There are some familiar elements \u2013 monetary policy has always had to grapple with supply shocks, structural changes and uncertainty. But some are new \u2013 in particular, the heightened uncertainty around how the <a title=\"Trees and People: Resilience in a Changing Climate \u2013 John G. Bene Fellowship 2020\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/trees-and-people-resilience-in-a-changing-climate-john-g-bene-fellowship-2020\">climate will change<\/a> and how this will impact the economy and financial system. Furthermore, these changes are occurring over a prolonged timeframe, not just a normal business\/policy cycle. And there is uncertainty around the evolution of <a title=\"Enhancement of local farmers\u2019 adaptive capacity to climate stresses, livelihoods and biodiversity conservation through introduction of proven mushroom cultivation and preservation technologies in villages adjacent to Kilombero nature reserve in Kilomber\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/research\/enhancement-of-local-farmers-adaptive-capacity-to-climate-stresses-livelihoods-and-biodiversity-conservation-through-introduction-of-proven-mushroom-cultivation-and-preservation-technologies-in-villag\">technology and the speed with which climate<\/a>, economic and social systems can adapt.<\/p>\n<p>As a result, we have for some time been building the Bank\u2019s capacity to conduct analysis and research into how climate change will affect the structure and operation of the economy and the implications for monetary policy. This has included analysis to understand the likely direction of structural <a title=\"Call for Project Grant 2021: Sustainable development and climate change.\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/call-for-project-grant-2021-sustainable-development-and-climate-change\">change in the Australian economy and developments<\/a> in energy markets. The Bank\u2019s liaison program has complemented our data analysis, by <a title=\"Recent scientific briefs provide information about the Global Biodiversity Framework goals.\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/recent-scientific-briefs-provide-information-about-the-global-biodiversity-framework-goals\">providing information<\/a> on firms\u2019 views on the likely directions of structural change and how this will impact firms and households. We are also developing our <a title=\"Enhancement of local farmers\u2019 adaptive capacity to climate stresses, livelihoods and biodiversity conservation through introduction of proven mushroom cultivation and preservation technologies in villages adjacent to Kilombero nature reserve in Kilombero\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/research\/enhancement-of-local-farmers-adaptive-capacity-to-climate-stresses-livelihoods-and-biodiversity-conservation-through-introduction-of-proven-mushroom-cultivation-and-preservation-technologies-in-vill-2\">capacity to model the macroeconomic implications of different types of climate<\/a> risk for the economy and the setting of monetary policy.<\/p>\n<p>In addition, we are increasing our understanding of how climate risks might translate into financial stability risks. And, as part of the CFR, the Bank is seeking to improve the ability of companies and investors to understand and price climate-related risks. We are also monitoring and analysing climate-related investment trends and their implications for the cost and availability of <a title=\"Climate Change Impact on Beaches: Need for Green Thinking\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/news\/climate-change-impact-on-beaches-need-for-green-thinking\">green<\/a> and sustainable finance in Australia.<sup class=\"footnote-reference\"><a id=\"r21\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#fn21\" aria-label=\"Go to endnote 21\">[21]<\/a><\/sup><\/p>\n<p>Finally, we are examining and managing our own climate-related risks and opportunities. In line with APS Net Zero requirements, the Bank has set a target to reduce our scope 1\u00a0and scope 2\u00a0emissions to net zero by 2030. We are also considering what sustainability and climate-related financial disclosures we can make, starting with operational emissions reporting in the\u00a0<span class=\"no-wrap\">2022\/23<\/span>\u00a0Annual Report.<\/p>\n<p>Thank you for listening. I am happy to answer any questions.<\/p>\n<section>\n<div class=\"footnotes\">\n<p id=\"endnotes\" class=\"title\"><strong>Endnotes<br \/>\n<\/strong>I would like to thank members of the Reserve Bank\u2019s Climate Analysis and Policy Team for their work on this speech, particularly Julie Guo, Kate McLoughlin, Anna Park, Geordie Reid, Andrew Staib and Faye Wang.<a class=\"back-to-reference\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#r0\" aria-label=\"Back to content\">[*]<\/a><\/p>\n<p id=\"fn1\" class=\"footnote\" aria-label=\"Endnote 1\">See RBA Unreserved (2021), \u2018<a class=\"anchor-external\" title=\"Link, opening in a new window, to external website.\" href=\"https:\/\/unreserved.rba.gov.au\/nodes\/view\/84417?keywords=&amp;type=all&amp;lsk=e20745fa5739878efdd20f2d45406466\" target=\"_blank\" rel=\"noopener noreferrer\">Research Guide: Sir Leslie Melville KBE<\/a>\u2019.<a class=\"back-to-reference\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#r1\" aria-label=\"Back to content\">[1]<\/a><\/p>\n<p id=\"fn2\" class=\"footnote\" aria-label=\"Endnote 2\">Cornish S (2021), \u2018<a href=\"https:\/\/www.rba.gov.au\/publications\/bulletin\/2021\/dec\/the-central-banks-first-economist.html\">The Central Bank\u2019s First Economist<\/a>\u2019, RBA\u00a0<cite>Bulletin<\/cite>, December.<a class=\"back-to-reference\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#r2\" aria-label=\"Back to content\">[2]<\/a><\/p>\n<p id=\"fn3\" class=\"footnote\" aria-label=\"Endnote 3\">Bureau of Meteorology (2022), \u2018State of the Climate 2022\u2019, November.<a class=\"back-to-reference\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#r3\" aria-label=\"Back to content\">[3]<\/a><\/p>\n<p id=\"fn4\" class=\"footnote\" aria-label=\"Endnote 4\">Net Zero Tracker, \u2018Data Explorer\u2019. Available at &lt;https:\/\/zerotracker.net\/#data-explorer&gt;.<a class=\"back-to-reference\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#r4\" aria-label=\"Back to content\">[4]<\/a><\/p>\n<p id=\"fn5\" class=\"footnote\" aria-label=\"Endnote 5\">Australian Government (2023), \u2018Review of the Reserve Bank of Australia \u2013 An RBA Fit for the Future\u2019, March.<a class=\"back-to-reference\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#r5\" aria-label=\"Back to content\">[5]<\/a><\/p>\n<p id=\"fn6\" class=\"footnote\" aria-label=\"Endnote 6\">See Trust C, S Joshi, T Lenton and J Oliver (2023), \u2018The Emperor\u2019s New Climate Scenarios\u2019, Institute and Faculty of Actuaries and University of Exeter, July.<a class=\"back-to-reference\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#r6\" aria-label=\"Back to content\">[6]<\/a><\/p>\n<p id=\"fn7\" class=\"footnote\" aria-label=\"Endnote 7\">RBA (2022), \u2018<a href=\"https:\/\/www.rba.gov.au\/publications\/smp\/2022\/nov\/box-a-insights-from-liaison.html\">Box\u00a0A: Insights from Liaison<\/a>\u2019,\u00a0<cite>Statement on Monetary Policy,\u00a0<\/cite>November; RBA (2020), \u2018<a href=\"https:\/\/www.rba.gov.au\/publications\/smp\/2020\/feb\/box-b-macroeconomic-effects-of-the-drought-and-bushfires.html\">Box\u00a0B: Macroeconomic Effects of the Drought and Bushfires<\/a>\u2019,\u00a0<cite>Statement on Monetary Policy,<\/cite>\u00a0February; RBA (2011), \u2018<a href=\"https:\/\/www.rba.gov.au\/publications\/smp\/2011\/feb\/box-a.html\">Box\u00a0A: The Impact of the Recent Floods on the Australian Economy<\/a>\u2019,\u00a0<cite>Statement on Monetary Policy,<\/cite>\u00a0February; RBA (2011), \u2018<a href=\"https:\/\/www.rba.gov.au\/publications\/smp\/2011\/may\/box-b.html\">Box\u00a0B: An Update on the Impact of the Natural Disasters in Queensland<\/a>\u2019,<cite>\u00a0Statement on Monetary Policy,<\/cite>\u00a0May.<a class=\"back-to-reference\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#r7\" aria-label=\"Back to content\">[7]<\/a><\/p>\n<p id=\"fn8\" class=\"footnote\" aria-label=\"Endnote 8\"><a href=\"https:\/\/www.rba.gov.au\/publications\/smp\/2020\/feb\/box-b-macroeconomic-effects-of-the-drought-and-bushfires.html\">RBA<\/a>\u00a0(2020), n 7.<a class=\"back-to-reference\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#r8\" aria-label=\"Back to content\">[8]<\/a><\/p>\n<p id=\"fn9\" class=\"footnote\" aria-label=\"Endnote 9\">See Australian Treasury (2023), 2023 Intergenerational Report<cite>.<\/cite><a class=\"back-to-reference\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#r9\" aria-label=\"Back to content\">[9]<\/a><\/p>\n<p id=\"fn10\" class=\"footnote\" aria-label=\"Endnote 10\">International Energy Agency (2023), \u2018World Energy Investment 2023\u2019, May.<a class=\"back-to-reference\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#r10\" aria-label=\"Back to content\">[10]<\/a><\/p>\n<p id=\"fn11\" class=\"footnote\" aria-label=\"Endnote 11\">See Americo A, J Johal and C Upper (2023), \u2018The <a title=\"Award for Global Energy Transition\" href=\"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/uncategorized\/award-for-global-energy-transition\">Energy Transition<\/a> and its Macroeconomic Effects\u2019, BIS Paper No 135.<a class=\"back-to-reference\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#r11\" aria-label=\"Back to content\">[11]<\/a><\/p>\n<p id=\"fn12\" class=\"footnote\" aria-label=\"Endnote 12\">de Atholia T, G Flannigan, S Lai (2020),\u00a0<a href=\"https:\/\/www.rba.gov.au\/publications\/bulletin\/2020\/mar\/renewable-energy-investment-in-australia.html\">Renewable Energy Investment in Australia<\/a>, RBA\u00a0<cite>Bulletin<\/cite>, March.<a class=\"back-to-reference\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#r12\" aria-label=\"Back to content\">[12]<\/a><\/p>\n<p id=\"fn13\" class=\"footnote\" aria-label=\"Endnote 13\">See Australian Treasury (2023), n 9. Earlier work from the RBA also examined this issue, see Kemp J, M McCowage and F Wang (2021), \u2018<a href=\"https:\/\/www.rba.gov.au\/publications\/bulletin\/2021\/sep\/towards-net-zero-implications-for-australia-of-energy-policies-in-east-asia.html\">Towards Net Zero: Implications for Australia of Energy Policies in East Asia<\/a>\u2019, RBA\u00a0<cite>Bulletin,<\/cite>\u00a0September.<a class=\"back-to-reference\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#r13\" aria-label=\"Back to content\">[13]<\/a><\/p>\n<p id=\"fn14\" class=\"footnote\" aria-label=\"Endnote 14\">Geoscience Australia, \u2018World Rankings\u2019. Available at &lt;https:\/\/www.ga.gov.au\/digital-publication\/aimr2021\/world-rankings&gt;.<a class=\"back-to-reference\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#r14\" aria-label=\"Back to content\">[14]<\/a><\/p>\n<p id=\"fn15\" class=\"footnote\" aria-label=\"Endnote 15\">See Australian Treasury (2023), n 9.<a class=\"back-to-reference\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#r15\" aria-label=\"Back to content\">[15]<\/a><\/p>\n<p id=\"fn16\" class=\"footnote\" aria-label=\"Endnote 16\">Ellis L (2022), \u2018<a href=\"https:\/\/www.rba.gov.au\/speeches\/2022\/sp-ag-2022-10-12.html\">The Neutral Rate: The Pole-star Casts Faint Light<\/a>\u2019, Keynote address to Citi Australia and New Zealand Investment Conference, Sydney, 12\u00a0October.<a class=\"back-to-reference\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#r16\" aria-label=\"Back to content\">[16]<\/a><\/p>\n<p id=\"fn17\" class=\"footnote\" aria-label=\"Endnote 17\">See Breitenfellner A and W Pointner (2021), \u2018The Impact of Climate Change on Monetary Policy\u2019, Oesterreichische Nationalbank\u00a0<cite>Monetary Policy and the Economy<\/cite>, Issue Q3; Mongelli FP, W Pointner and JW van den End (2022), \u2018The Effects of Climate Change on the Natural Rate of Interest: A Critical Survey\u2019, ECB Working Paper Series No 2744.<a class=\"back-to-reference\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#r17\" aria-label=\"Back to content\">[17]<\/a><\/p>\n<p id=\"fn18\" class=\"footnote\" aria-label=\"Endnote 18\">Kurian S, G Reid and M Sutton (2023), \u2018<a href=\"https:\/\/www.rba.gov.au\/publications\/bulletin\/2023\/jun\/climate-change-and-financial-risk.html\">Climate Change and Financial Risk<\/a>\u2019, RBA\u00a0<cite>Bulletin<\/cite>, June.<a class=\"back-to-reference\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#r18\" aria-label=\"Back to content\">[18]<\/a><\/p>\n<p id=\"fn19\" class=\"footnote\" aria-label=\"Endnote 19\">Australian Prudential Regulation Authority (2022), \u2018Information Paper \u2013 Climate Vulnerability Assessment Results\u2019, November.<a class=\"back-to-reference\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#r19\" aria-label=\"Back to content\">[19]<\/a><\/p>\n<p id=\"fn20\" class=\"footnote\" aria-label=\"Endnote 20\">Council of Financial Regulators (2022), \u2018Quarterly Statement by the Council of Financial Regulators\u2019, Media Release No 2022-05, 15\u00a0December.<a class=\"back-to-reference\" href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-dg-2023-08-29.html#r20\" aria-label=\"Back to content\">[20]<\/a><\/p>\n<p id=\"fn21\" class=\"footnote\" aria-label=\"Endnote 21\">Schwartz C (2023), \u2018<a href=\"https:\/\/www.rba.gov.au\/speeches\/2023\/sp-so-2023-08-08.html\">Australian Financial Markets and Climate Change<\/a>\u2019, Speech at the Risk Australia Conference, Sydney, 8\u00a0August.<\/p>\n<\/div>\n<\/section>\n","protected":false},"excerpt":{"rendered":"<p>Michele Bullock[*] Deputy Governor Sir Leslie Melville Lecture Canberra\u00a0\u2013\u00a029 August 2023 Audio Melville is of course renowned for his contribution to the establishment of central banking in Australia. On that front it is a challenging time as we seek to return inflation to target in a reasonable timeframe and to preserve gains in the labour [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":6847,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-8135","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/wp-json\/wp\/v2\/posts\/8135","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/wp-json\/wp\/v2\/comments?post=8135"}],"version-history":[{"count":5,"href":"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/wp-json\/wp\/v2\/posts\/8135\/revisions"}],"predecessor-version":[{"id":8140,"href":"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/wp-json\/wp\/v2\/posts\/8135\/revisions\/8140"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/wp-json\/wp\/v2\/media\/6847"}],"wp:attachment":[{"href":"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/wp-json\/wp\/v2\/media?parent=8135"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/wp-json\/wp\/v2\/categories?post=8135"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.cfwt.sua.ac.tz\/ecosystems\/wp-json\/wp\/v2\/tags?post=8135"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}