Swathes of WA towns and suburbs face property values taking a hit of up to 10 per cent amid heightened risk from climate change, new research from the Reserve Bank shows.
Deputy governor Michele Bullock, in warning on Tuesday of the potential for widespread economic disruption from rising temperatures and less predictable weather, detailed new analysis of the potential for property prices from ongoing climate-related damage.
The research shows that across the country, about 7.5 per cent of all properties are in postcodes that could see property price declines of 5 per cent or more by 2050.
The bulk of WA’s west coast from Ningaloo to Augusta is highlighted on the RBA’s maps as being affected, as is a large part of suburbia around Perth spanning south towards Nannup.
Ms Bullock — who takes over as head of the RBA from next month — said the data and a similar set compiled by the banking regulator, the Australian Prudential Regulation Authority, last year were early exercises and much more attention would need to be be paid.
The speech is being seen as significant as it is the first Ms Bullock has made since her appointment was made last month, and suggests how she will set some priorities. Her tenure is for seven years, replacing Philip Lowe, who also discussed potential impacts from the energy transition on the broader economy.
“Firms and policymakers will need new and detailed data capturing the varying effects of climate change across geographic locations and economic environments,” Ms Bullock told an audience in Canberra. “Better reporting of climate risks will help.”
Ms Bullock said the energy transition posed risks to the economy and inflation through potential power price rises and higher insurance policy costs, saying climate change would have implications for employment, price stability and broader stability of the financial system.
“Navigating uncertainty is an inherent part of the work of a central bank,” she said. “But the uncertainty around climate change is particularly acute.
“There is not only uncertainty around exactly how the climate will change, but also around how this will affect the economy and financial system.”
Disruptions to product supply becoming more frequent, severe or protracted thanks to climate change could create more price volatility, Ms Bullock said, potentially creating risks for central banks in determining how to set interest rates.
“More extreme weather events could lower employment if physical assets are destroyed and the capital stock is reduced,” she said. “Higher temperatures could adversely affect the health of workers … and weigh on productivity.”
Ms Bullock also said uncertainty in power generation — with the bulk of Australia’s power created via coal — could push down demand for exports of the material, but suggested lithium and other critical minerals could fill the void.
“Trends in energy prices have significant effects on overall inflation,” she said. “This is because energy prices have a sizeable direct impact on inflation … (and) there are also indirect effects.
“Businesses can be expected to gradually pass on higher energy costs to the prices consumers pay for goos and services.
“How the transition plays out for energy prices is going to be an important consideration for monetary policy (the setting of interest rates) over coming years.”