SYDNEY – Australia’s carbon emissions are not dropping fast enough to reach its 2030 climate target, Oxford Economics said, as the roll-out of renewable energy takes longer than initially anticipated.

Australia is set to miss the goal by a couple of years, Oxford said on March 18 in an analysis contained in its biannual economic outlook. Australia is aiming to reach emissions levels of 43 per cent below 2005 levels by 2030.

“The roll-out of renewable energy is taking longer than expected,” said Mr Kristian Kolding, head of consulting for Oxford Economics Australia. “But more worrying is the fact that we don’t currently see a path to meaningfully decarbonising hard-to-abate industrial sectors and electrifying the vehicle fleet will take decades.”

The world experienced its hottest year on record in 2023, reinforcing the urgency for countries to meet their emissions targets and slow climate change. Australia, one of the world’s highest emitters per capita, has legislated its commitment to reach net-zero emissions by 2050. 

“Credible paths to net zero do exist,” Mr Kolding said. “Technological advancements and policy initiatives are steering the forecast in that direction, but the cost of transition will be high, and we’re yet to see who is willing to pay.”

On the economic front, Oxford predicted Australia will avoid a technical recession aided by strong population growth. Both fiscal and monetary policies are at or close to the peak drag they will impose on the economy in this cycle, said Mr Sean Langcake, head of macroeconomic forecasting for Oxford Economics Australia. 

He does not expect the Reserve Bank of Australia (RBA) to begin lowering interest rates until the final three months of 2024 because services inflation remains sticky. “The next part of the disinflation cycle will be tougher. The ‘easy wins’ from supply chain improvements have already been realised.” 

The RBA is expected to leave rates unchanged at a 12-year high of 4.35 per cent when it announces its decision on March 19. BLOOMBERG