{"id":441791,"date":"2026-04-28T11:01:43","date_gmt":"2026-04-28T18:01:43","guid":{"rendered":"https:\/\/climatescience.press\/?p=441791"},"modified":"2026-04-28T11:01:46","modified_gmt":"2026-04-28T18:01:46","slug":"hsbc-net-zero-australia-one-of-the-least-well-placed-to-weather-the-iran-oil-shock","status":"publish","type":"post","link":"https:\/\/climatescience.press\/?p=441791","title":{"rendered":"HSBC: Net Zero Australia \u201cone of the least well placed\u201d to Weather the Iran Oil Shock"},"content":{"rendered":"
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From Watts Up With That?<\/a><\/p>\n\n\n\n

Essay by<\/strong> Eric Worrall<\/a><\/p>\n\n\n\n

\u201c\u2026 the Australian economy has also been operating beyond its sustainable capacity \u2026\u201d<\/p>\n\n\n\n

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Australian economy among world\u2019s worst placed to weather Middle East shock: HSBC<\/strong><\/p>\n\n\n\n

The news:<\/strong> HSBC chief economist Paul Bloxham has warned that Australia is in one of the worst spots globally to deal with the economic fall out of the US-Iran conflict.<\/p>\n<\/blockquote>\n\n\n\n

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\u2026<\/p>\n\n\n\n

He said this week\u2019s first quarter inflation figures are expected to confirm that headline and trimmed mean CPI were \u201cwell above\u201d the 2.5% target even before the full impact on the fuel price shock appeared.<\/p>\n\n\n\n

\u201cAt the same time, the Australian economy has also been operating beyond its sustainable capacity<\/strong> and the jobs market has been tight,\u201d he said.<\/p>\n\n\n\n

\u201cIn our view, this combination makes Australia is one of the least well-placed developed economies to deal with the inflation shock that is arriving.<\/strong>\u201d<\/p>\n\n\n\n

\u2026<\/p>\n\n\n\n

He said the \u201cslow road\u201d taken by the RBA to get inflation back to target, compared to the higher and quicker rate rises overseas, means the economy is \u201cnow not very well placed to deal with the next shock\u201d.

\u2026Read more: https:\/\/www.capitalbrief.com\/briefing\/australian-economy-among-worlds-worst-placed-to-weather-middle-east-shock-hsbc-dcfceedb-12bc-4804-900e-8af282b0eac5\/<\/a><\/p>\n<\/blockquote>\n\n\n\n

Why is the Australian economy in such a precarious situation?<\/p>\n\n\n\n

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Lowe\u2019s stark warning to Labor on spending, growth<\/strong><\/p>\n\n\n\n

Former Reserve Bank of Australia governor Philip Lowe has blasted the federal government\u2019s cost-of-living handouts and inaction on boosting the overall size of the economy, warning it has condemned the nation to high interest rates, low wage growth and a stagnation in living standards.<\/p>\n\n\n\n

Speaking in his new role as chair of the ASX\u2019s corporate governance advisory body, Lowe said government spending was making the economic challenge worse but said the bigger issue was federal Labor\u2019s failure to act on productivity and increase growth.<\/p>\n\n\n\n

\u2026<\/p>\n\n\n\n

\u201cThere\u2019s been endless reports, we know \u2026 we tax income and wealth generation too highly and consumption too lightly. The way we tax land is all screwed up, on education we\u2019re going backwards, our energy system is high-cost and unreliable<\/strong>, we haven\u2019t planned the growth in the housing stock for the growth in the population, and skills are going backwards in some areas.\u201d

\u2026Read more: https:\/\/www.afr.com\/policy\/economy\/lowe-s-stark-warning-to-labor-on-spending-growth-20260217-p5o2zx<\/a><\/p>\n<\/blockquote>\n\n\n\n

Federal treasurer Jim Chalmers suggested Philip Lowe\u2019s criticism was payback for Chalmers not re-appointing him as Reserve Bank governor<\/a>. But it\u2019s not just Philip Lowe saying something is very wrong with the Australian economy.<\/p>\n\n\n\n

The HSBC critique (first quoted article) suggests the Aussie economy was already overheated before the Iran War oil shock. So what was overheating the economy? From the Aussie government website;<\/p>\n\n\n\n

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\u2026<\/p>\n\n\n\n

In its most general sense, inflation is the rate at which prices change over a given time period. According to the RBA, the main causes of inflation fall into three broad categories<\/a>: demand-pull, cost-push, and inflation expectations. Government spending that provides additional money to people and organisations can in turn mean the money is used to purchase more goods and services\u2014that is, adding to demand and increasing prices\u2014the \u2018demand-pull\u2019 mechanism. Economist Chris Richardson has estimated<\/a> that for every $7 billion in additional government spending, the RBA would need to lift the cash rate 0.25 of a percentage point higher than otherwise.

\u2026Read more: https:\/\/www.aph.gov.au\/About_Parliament\/Parliamentary_departments\/Parliamentary_Library\/Research\/Budget_Review\/2024-25\/GovernmentSpendingInflation<\/a><\/p>\n<\/blockquote>\n\n\n\n

I\u2019m not suggesting government expenditure is the only factor \u2013 our lack of preparedness for the Iran War crisis and a consequent surge in fuel prices is a significant factor. But the impact of government expenditure is not negligible.<\/p>\n\n\n\n

According to economist Chris Richardson, cited on the Australian Government website page above, every $7 billion increase in government expenditure in Australia generates a 0.25% increase in interest rates. That\u2019s quite an impact. Unfortunately the original document written by Chris Richardson has disappeared, but going by what wasn\u2019t accidentally deleted from the Aussie federal government website, that\u2019s quite a boost. [note this article by AFR<\/a> puts the number at $7.5 billion \/ 0.25%]<\/em>.<\/p>\n\n\n\n

I haven\u2019t found the original paper by Chris Richardson, but his website is available here<\/a>.<\/p>\n\n\n\n

So what is the government spending our money on? The answer is plenty \u2013 but there is one set of expenditures in particular which caught my eye. From the government\u2019s 2025-2026 budget document;<\/p>\n\n\n\n

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Budget 2025-2026<\/strong><\/p>\n\n\n\n

Economy
Building a stronger economy<\/p>\n\n\n\n

\u2026<\/p>\n\n\n\n

Cleaner, cheaper energy<\/strong><\/p>\n\n\n\n

The Government is unlocking $8 billion of additional investment in renewable energy<\/strong> and low emissions technologies through a $2 billion expansion of the Clean Energy Finance Corporation. This is in addition to $36.9 million to enhance the use of existing grid infrastructure and a $10 million Accelerated Connections Fund to reduce grid bottlenecks.<\/p>\n\n\n\n

Unlocking private investment in priority areas<\/strong><\/p>\n\n\n\n

The Government has legislated $13.7 billion in hydrogen<\/strong> and critical minerals production tax incentives and has allocated $1.5 billion in support for priority areas through the Future Made in Australia Innovation Fund, including:<\/p>\n\n\n\n