While Mr Lowe said that central banks should “stick to their knitting” and admitted that climate change is not a core responsibility of the RBA, he also noted that the economic implications of climate change are “profound”.
“We’re seeing already in Australia, perhaps more than anywhere else in the world, the effects of that right now,” Mr Lowe told the 7th Australia-Canada Economic Leadership Forum in Melbourne.
“We’ve got a drought that’s detracting, this year, a quarter per cent of GDP as it has for the last couple of years. The fires, probably across the December-March quarters, detract 0.2 from GDP. Climate change is affecting the nature of production in Australia, the nature of investment, ultimately the nature of exports.”
A report from the Bank of International Settlements has said that central banks may ultimately have to take action to rescue carbon-producing assets in the event that “green swan” climate events make them worthless – something that Mr Lowe seemed to hint at, despite Treasurer Josh Frydenberg knocking back the possibility.
“We’re also trying to understand the financial implications … it’s going to affect asset values, the possibility of stranded assets and if the assets are stranded that some are going to be worthless – but more importantly, other assets are going to be worth more,” Mr Lowe said.
“We have to understand that we’re not responsible for designing climate change policy, but we are responsible for understanding the implications of it.”
