As your HSC approaches, it’s important to remember the relationships between economic theory and what’s going on in the real world. This becomes evident in the increasing need for structural change to maintain sustainable economic growth and consumption to ensure our long term recovery from COVID is as high as sustainably possible.
1. Alternatives to Net Zero by 2050
The Australian economy is heavily reliant on natural resource exports such as coal and iron to support economic growth. Though this strategy has been successful in maintaining Australia’s economic prosperity and high growth figures over the past thirty years, there are arguably better strategies to lead the economy into the future. For over a decade now, experts and research organisations have been calling for Australia to shift the core of our economy from relying heavily on exporting minerals towards a more diverse mix of industries, such as manufacturing and engineering, in particular, green technologies involving renewable energy.
A structural shift across the industries in Australia towards green technology research and manufacturing as well as renewable production have the potential to revive the local manufacturing sector with a focus on high-skilled, high-tech, high-income manufacturing of products such as electric cars, solar panels and hydrogen technology. The revival of the manufacturing industry would be a viable way to ensure the competitive advantage of Australian firms and economy for decades into the future, meaning higher sustainable economic growth that is supported by a wide and resilient export base and improved local income and aggregate demand.
This is an especially forward-looking economic strategy, and will save the Australian economy from serious recessions when the rest of the world inevitably transitions away from coal usage as part of the global push for carbon neutrality over the years to 2050 and 2060.
As SBS notes, this shift is likely to look like “Sectors such as manufacturing would lean on domestic hydrogen and biofuels, while carbon sequestration in the land would help offset hard-to-abate emissions.” And the Australian economy, its people’s fortunes would be less impacted by declines in the mining industry by being able to sustain demand and investment elsewhere in the economy.
2. Consumer confidence
Consumer confidence is a strange term used across essays and by economists to explain the fact that most consumers, beyond the purchasing of their basic needs, will likely reduce total consumption and increase savings if they feel as though their income is under threat. This natural piece of behavioural economics has become especially pertinent during the covid pandemic which saw critical cuts to our consumption and threatened the income of many Australians. Luckily the Guardian was recently able to provide us with some specifics around this impact, they allude to the fact that “On average, people who find themselves unemployed cut their spending by 9%, while total consumption decreases for up to three years after a job loss”. For our economy, this 3 year long hangover of covid unemployment and underemployment is quite likely to reduce our long term consumption and delay our economic growth and recovery.