Climate change is the top perceived risk to Australia, with inadequate R&D investment, flooding, storms and cyclones, demographic challenges and infrastructure fragility also figuring in a list of top 10 risks based on their likelihood of happening in the next decade and the severity of their impact, according to a broad-based report.
Environmental concerns dominated the Australia Report 2012, in terms of the perception of likelihood and severity. This rating is influenced by the impact of two years of flooding in the east of Australia and fires in the west of the country, and is also influenced by the political debate surrounding the introduction of the carbon pricing regime in July. The Australia Report 2012 is a broad-based report produced by the ADC Forum in collaboration with KPMG.
The risk of climate change is also tightly interwoven with other perceived risks, both environmental and social – the report notes that environmental risks are connected to water security and food security.
“The rain appears to have doused the sense of urgency around securing fresh water supplies, at least temporarily, with the risk rating for water security having dropped substantially in terms of severity and to a lesser extent in terms of likelihood,” the report said. “It is, however worth noting predictions that by 2030, global demand for fresh water may exceed supply by as much as 40%, potentially leading to shortages, poor water quality, price volatility and conflict.
“By contrast, the rating for food security has edged slightly upwards in terms of both severity and likelihood. Water security and food security now sit together on the risk landscape on pathways that connect them directly with climate change, and, indirectly, with demographic challenges, chronic disease, pricing essential services and fiscal crisis.”
The report noted increased concerns about political and economic risks as well, and while Australia’s economic growth is sound, particularly in comparison to other countries, Australia has not remained isolated from protests such as the Occupy Wall Street Movement. The report notes police eviction of protestors from venues including Melbourne’s City Square as “a vivid reminder that, despite the country’s physical isolation, relative political stability and economic good fortune, Australia is more exposed and connected to events and trends everywhere than ever before.”
General concerns about Australia’s ability to respond to environmental risks and economic threats including the impact of the “two-speed” economy has led to the higher ratings for the risk of infrastructure fragility and inadequate R&D investment, the report notes.
“Inadequate R&D investment, highly rated for likelihood and severity over previous two surveys, has risen once more to become the surveys’ second most costly risk and its fifth most likely, perhaps because of concern about Australia’s manufacturing future,” the report notes. “Although ‘innovation’ is repeatedly invoked as a panacea, the term is used so often and so broadly that its meaning is being diluted. Despite Australia’s strong research outcomes, rate of commercialisation remain very low.”
The issue of inadequate R&D investment was intertwined with other issues. KPMG cites OECD statistics that show that Australia’s researchers work in higher education, rather than in business, and that university-industry collaboration is important, as is access to venture capital. The KPMG report notes that since 2007-2008, investment in venture capital has fallen by 72% and new venture capital investments have decreased by 90%.
“Overcoming this problem does not necessarily mean that Australia governments should be trying to ‘pick winners’ as a strategy; this has historically penalised competitive companies and sectors and propped up weaker ones,” the report said “The shortcomings of Australia’s present models suggest that it is worth looking further afield, possibly to countries such as China – where commercialisation rates are high – and to try to isolate those elements of the innovation process that might be adaptable to the Australian context.”
The report also noted that while research is the “bedrock of innovation” and there is a need for a highly educated, skilled workforce. The report cited the Gonski Report into education.
The report also cited demographic challenge as the “standout” societal risk of 2012 – a combination over the approaching retirement of Australia’s 5.5m baby boomers moving into retirement, and the challenges that stem from the “sometimes vast distances between the places where jobs are growing and the places where people prefer to live.”
The Australia Report 2012 is an examination of risk perception in the country, and a discussion of risks, opportunity and the interplay between the factors. It is the third consecutive report.