1. Home
  2. Home Loans
  3. News
  4. Climate change: it’s not just the planet that’s worse off, we’re financially worse off too

Climate change: it’s not just the planet that’s worse off, we’re financially worse off too

Alex Ritchie avatar
Alex Ritchie
- 9 min read
Climate change: it’s not just the planet that’s worse off, we’re financially worse off too

A new court ruling determined that the Federal Environment Minister does not have a “duty of care” to protect children from climate harm when considering fossil fuel projects. When we think of ‘climate harm’, it’s worth exploring just how far reaching this concept is. Climate harm actually includes a number of financial impacts that will ultimately see future generations worse off than their parents.

The decision on Tuesday to overturn the original decision in favour of a class action against Federal Environment Minister, Sussan Ley, by eight school students, may see an extension to the Vickery coal mine.

The original decision hoped to grant an injunction preventing Ms Ley from approving said extension due to the “duty of care” the Minister had to protect the future children of Australia from the impacts of climate change from prolonged reliance on fossil fuels.

Unfortunately, if the environmental and generational impacts aren’t enough to warrant responsibility, it may be worth reiterating some of the economic impacts of climate change that politicians care about to help get the message across.

The economic implications of climate change

Some of the most destructive results of climate change in the Australian environment may include rising sea levels and coastal erosion, more extreme heat waves and events, more damaging storms, including flooding and cyclones.

All of these events can have catastrophic consequences to the Australian economy, in particular how it may impact housing supply and raise insurance premiums, as well as increase the cost of living and healthcare costs.

Housing supply, property destruction and increased premiums

It was heartbreaking to watch as Simon Kofe, Tuvalu’s Foreign Minister, stood in thigh deep water as he addressed COP26. Equally heartbreaking to know that Tonga's Prime Minister Samuela 'Akilisi' Pohiva was reduced to tears as climate change activists delivered a presentation at the Pacific Islands Forum.

But the reality for many low-lying nations is stark. More and more land is gradually being submerged by rising sea levels meaning that there are fewer and fewer areas for safe housing. And those that are left are only becoming more and more devalued.

A recent Forbes article on the impacts of climate change on housing supply and affordability states that rising seas levels could cause two problems for homeowners. Firstly, there are “larger chances of temporary flooding events”. Secondly is the more “fundamental risk of location ultimately being underwater (inundation). Neither is positive for prices”.

The website Coastal Risk Australia is one tool Australians can use to view how future sea level rises may impact different households and suburbs. ​​If high-end sea level scenarios come true and increase by around 1m, every state and territory except the ACT will see houses and landmarks submerged underwater by 2100.

In Australia, climate change may become a $5.7 trillion dollar building damage and replacement issue, according to a report into Australia's changing climate and its implications for the built environment by the Environment and Communications References Committee.

The report also notes that rising sea levels alone are expected to directly impact individual cities and communities, such as Darwin, Collaroy-Narrabeen Beach and the City of Lake Macquarie.

And in November last year, the Insurance Council of Australia reported that we will need to spend over $30 billion in the next 50 years to bolster coastal defences from the threat of rising sea levels.

But before property prices may be destroyed, they will be devalued, with coastal housing values plummeting due to the increased risk of destructive events. And this has significant ramifications to banks, with mortgages accounting for about two-thirds of their portfolios. As banks underpin loans with housing as collateral, if values begin to plummet, they will have less protection against borrower default.

The Reserve Bank of Australia (RBA) published a bulletin on the risk of climate change to banks. According to the RBA, unchecked climate change will lead to skyrocketing insurance premiums.

Some 254 Australian suburbs are likely to face a Value at Risk (VaR) increase of 0.4% by 2050, equating to a 10% decline in housing prices due to climate risk. These increases in premium costs would occur every year and lead to further decline in property values – particularly those close to coastlines.

Residents currently living in these at-risk areas may be left in the lurch when increased climate events push down the value of properties, rendering them unable to sell to repay their mortgage. And if these homes are destroyed, the impact this loss may have on housing supply across the country will be insurmountable.

More pandemics are likely

The economic impacts of the COVID-19 pandemic cannot be understated. ABS data shows that in the June 2020 quarter, GDP fell by a record 7%, its second quarter fall in a row. The unemployment rate recorded in the following month peaked at 7.5% - its highest in over 20 years. Between 2020-2021, the lockdowns alone were estimated to cost the economy around $28 billion in lost output, according to AMP Capital.

But this may not be the last we experience, according to experts. This is because the root causes of climate change may also increase the risk of further pandemics.

A 2020 Vox article outlining the spread of Covid-19 reported that our environmental and social policies — “like cutting down forests or failing to address a housing crisis” – increase the likelihood that “previously harmless microbes will cause a devastating outbreak”.

A Harvard School of Public Health report on ‘Coronavirus, Climate Change, and the Environment A Conversation on COVID-19 with Dr. Aaron Bernstein’ goes further to state that while we don’t have direct evidence that climate change influenced the spread of COVID-19, we do know that “climate change alters how we relate to other species on Earth and that matters to our health and our risk for infections”.

“As the planet heats up, animals big and small, on land and in the sea, are headed to the poles to get out of the heat. That means animals are coming into contact with other animals they normally wouldn’t, and that creates an opportunity for pathogens to get into new hosts,” notes Dr Aaron Bernstein.

Deforestation, which occurs mostly for agricultural purposes, is the largest cause of habitat loss worldwide. Loss of habitat forces animals to migrate and potentially contact other animals or people and share germs. Large livestock farms can also serve as a source for spillover of infections from animals to people,” says Dr Bernstein.

While Australia has been able to recover mostly since March 2020, this is likely to happen again unless more action is taken to prevent climate change and future pandemics.

Increased cost of living

Changes to the Australian environment due to climate change are already being experienced in low-lying pacific island nations, and this is directly affecting the cost of living, among other things.

In Tuvalu, the fourth smallest nation in the world, two of its nine islands are at risk of going underwater due to sea level rise and coastal erosion, according to its government. A 2019 report by The Guardian outlined how “porous, salty soil” has rendered the earth unsuitable for planting or growing crops. This has destroyed staple pukaka crops and decreased further fruit or vegetable production, forcing Tuvalu’s government to import most of its food at a high cost.

And the recent flooding in Queensland and New South Wales has been devastating for crops and supermarket supplies. Coles and Woolworths have had to close hundreds of stores in these locations and those that are still open are reporting empty shelves.

The total cost of these floods could exceed $2.5 billion, with insurance claims on private infrastructure, like housing and businesses, expected to reach $936 million, according to ABC News.

In one example in farmland near Texas, 300kms south-west of Brisbane, up to 100% of barley crops have been lost, with 30% of cotton damaged, according to farmers in the area. One farmer suggested to ABC News that the recent floods may have caused “up to $100,000 in damage” to his property.

Climate change has, and will continue to, impact Australia’s food production if left unchecked. This could result in a dramatic hike in the cost of living, as staple foods are unable to grow, crops are destroyed, and supplies are expensive to import, increasing the cost of basket of goods.

And it’s not just food supplies that are being impacted by climate change. A report by Australian Housing and Urban Research Institute into the impacts of climate change on low-income housing found that housing within hot/mild climate zones (typical Australian hinterland area) will see the greatest increase in future energy consumption due to the need to “manage heat”.

Low-income Australians may be disproportionately disadvantaged by the impacts of climate change and be unable to service the growing cost of living, putting further pressure on the government to financially support this group.

Increased healthcare costs

Any New South Wales resident who lived through the 2019 summer bushfires knows how aggravating exposure to smoke and pollutant particles can be. However, research into the health cost of these devastating fires has uncovered that even short-term exposure to PM2.5 particles is doing more than irritating our lungs.

The bushfire smoke from the NSW fires has been directly linked to illnesses such as sepsis and urinary tract infections. And in terms of the economic impact, this research discovered that every 0.001 part per-million of PM2.5 in the air was linked to $46 million in healthcare costs and 2,050 extra admissions for conditions like lung disease, Parkinson’s disease and diabetes.

If increased heat events are to be expected as a result of climate change, it’s safe to expect that this multi-million dollar value of potential healthcare costs will continue to grow.


Without the appropriate policy measures and government interventions in place, Australian citizens will suffer as a direct result of climate change. It is unsustainable for the government to not take into consideration how future generations will be affected by these devastating environmental events, including their ability to buy and live in a home, afford staple foods or avoid adverse impacts to their health due to climate change.


This article is over two years old, last updated on March 16, 2022. While RateCity makes best efforts to update every important article regularly, the information in this piece may not be as relevant as it once was. Alternatively, please consider checking recent home loans articles.

Compare home loans in Australia

Product database updated 14 Jul, 2024

This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.

Share this page

Get updates on the latest financial news and products

By continuing, you agree to the RateCity Privacy Policy, Terms of Use and Disclaimer.

Latest home loans news