Economists: Australia’s Net Zero Aim Shouldn’t Mirror US Inflation Act

Australia’s leading economists are advising Prime Minister Anthony Albanese against emulating US President Joe Biden’s “think big” approach to clean energy. A survey revealed that two-thirds of participating economists advocated for supporting innovation across the economy rather than specifically supporting projects that drive the energy transition. They emphasized the importance of investing in research and development across all sectors, avoiding ‘picking winners’, and ensuring that the benefits of public investments stay with the public rather than private companies.

Leading Australian economists urge PM Anthony Albanese to avoid mirroring President Biden’s ambitious clean energy strategy. Biden’s Inflation Reduction Act—the largest climate investment in US history—aims to halve US emissions by 2035 through $400 billion in funding.

While Albanese wanted Australia’s government to partner in the energy transformation, economists suggest supporting innovation across the economy rather than replicating Biden’s initiative.

Support Innovation, Not Replication

In a survey commissioned by the Economic Society of Australia and The Conversation, the majority of economists backed grants to innovative firms across all sectors. The participating economists, respected leaders in their fields, highlighted the importance of supporting economy-wide innovation.

Only a few preferred Australia to mimic the US approach. Warwick McKibbin, an economic modeller, proposed labour market and tax reforms. Meanwhile, energy specialist Frank Jotzo insisted on government support that benefits the nation, not just business profits.

Focus on Supplying, Not Competing

Former chief economist Mark Cully advocated for Australia to supply resources for other countries’ green industries rather than competing head-on. However, Australia’s falling investment in research is endangering productivity. Cully suggested focusing investments on research and development across the economy and avoiding “picking winners.”

Before the announcement of A$840 million government loans for Gina Rinehart-backed rare earths mine, economic modeller Janine Dixon stressed that public investments should mainly benefit the public.

Economist Saul Eslake warned against corporate rent-seeking, while John Quiggin supported loans for firms supplying US projects. Consultant Rana Roy highlighted the importance of preventing further collapse in Australian living standards.

Advocate for Conditions and a Carbon tax

Many economists reiterated their support for a carbon tax as the most efficient way of reducing emissions. They warned against “picking winners” and suggested temporary support with conditions, similarly to the US’s approach.