New research published by GHD has revealed that natural phenomena exacerbated by climate change, such as droughts, floods and storms could result in a total loss of $452 billion to Australia’s GDP between 2022 and 2050.
The Aquanomics: The economics of water risk and future resilience report, published by global professional services company GHD, reveals that Australia will suffer an average annual GDP loss of 0.6% due to water risks such as droughts, floods, and storms.
The research places Australia in the third most vulnerable position when projecting the future economic impact of these events in seven countries*.
The report highlights that Australia’s agricultural and retail sectors could be significantly affected and that these rising threats need to be managed effectively now to lessen the impact of these environmental factors.
The report proposes a greater focus on solutions like water recycling, desalination, and smarter irrigation, as Australian water market leader at GHD, Lindsey Brown, explains.
“To create resilience to the increasing risks from extreme weather events we need to adapt how we build water infrastructure, optimise the performance of existing infrastructure and prioritise nature-based solutions to water management across industries,” Brown said.
“With a growing population and increasing demand for water, embracing the circular economy is a key part of creating climate resilience in Australia.”
Storms are expected to have the greatest direct impact on the Australian economy ($102 billion), followed by floods ($64 billion) and droughts ($41 billion).
The report represents the first time that the economic impact of these three types of events have been calculated at a GDP and sector level and the report additionally builds on concerns highlighted recently by the Intergovernmental Panel on Climate Change (IPCC) that revealed over half of all natural disasters worldwide since the 1970s have involved water.
The research highlights the potential impact of extreme weather events on five critical economic sectors in Australia: agriculture; banking and insurance; energy and utilities; fast-moving consumer goods (FMCG) and retail; and manufacturing and distribution.
The circular economy involves eliminating waste and pollution, circulating products and materials to extend their lives as long as possible through recycling and reuse, and the regeneration of nature.
“A circular economy approach to water management includes options like supporting water authorities to design out waste and pollution and regenerate natural systems,” Brown said.
“Increasing supplies of manufactured water through water reuse and recycling also offers a reliable source of water that is not climate-dependent and can contribute to economy-wide decarbonisation efforts through energy production of green hydrogen.”
“Desalination will be crucial in easing water stress and inland, wastewater treatment and recycling will become more important. These processes make purified recycled water available for drinking and for use by power stations, industry and agriculture.”
“The government has a key role to play in managing the transition to new methods of water management. Investment programs, such as the National Water Grid Fund, are the first step but infrastructure can only be part of the solution.”
Re-emphasising the importance of tackling the future potential threats posed by droughts, floods and storms across the country, Brown says that Australia needs to reorient its relationship with water and move away from the voew that water is a commodity to be controlled.
“By focusing on economic impacts of extreme weather events in our Aquanomics report, we aim to help identify and unlock the social and environmental benefits of tackling water risk head-on,” Brown said.
“We also have a responsibility to collaborate with traditional owners and explore water’s deep connection to country. And it’s important to remember that many Indigenous communities are vulnerable to water risk, especially drought.”