Economists warn souring trade relations with China and watered-down climate policy could be the perfect storm to fracture an already fragile Australian economy.
Modelling from Deloitte Access Economics shows no commitment of net zero by 2050 would damage the economy in excess of $3.4 trillion over the next three decades and cost upwards of 600,000 jobs.
The report, which deems Australia's economic diversification as unsophisticated compared to other major economies, also highlights the reliance on China is a major red flag if the superpower threatens to further tighten the export tap.
Deloitte partner Pradeep Philip also warned the United States considering a carbon tariff would put further pressure on Australian coal and resource exporters, a sector the Reserve Bank has flagged would be in decline due to demand from key trading partners shifting to renewable and low emission energy sources.
"If the rest of the world imposed a carbon tariffs on us than the cost of transitioning for Australian business would rise by about 45 per cent over the next decade," Dr Philip said in relation to Deloitte's analysis.
"That would cost about $15 billion, or 70,000 fewer jobs created over the next 10 years."
Insights from one of the major global consulting firms coincide with comments made by the European Union ambassador to Australia in The Canberra Times, warning the trading bloc would slap tariff sanctions on countries which did not factor in emissions within export products.
Prime Minister Scott Morrison during question time on Tuesday acknowledged changing global responses are presenting risks to the current structure of the economy.
"The global economy is changing while the world responds to climate change," Mr Morrison said.
"Those changes ... will have an impact on the Australian economy. They do present risks and threats to rural and regional areas."
Nationals leader Barnaby Joyce also noted economic demand modelling for Australian coal and fossil fuel exports would be in decline over the next few decades.
Dr Pradeep said the grim outlook could be overturned if the policy response and business can pivot, particularly for energy exporters who rely on countries such as Japan and South Korea.
"If they are going to want more renewable source energy, then we are going to have to provide that, if we want to maintain growth and jobs in our economy," he said.
The Deloitte Sophistication Index ranks Australia as 37th out of 63 countries, with nations such as Bulgaria, Estonia and Thailand all having more complex and diversified economies.
According to the report, further deterioration of trade relations with China would dent gross domestic product growth.
A separate export report from Wine Australia shows the value of total exports to mainland China over the year to September, plummeted 77 per cent as a result of the tariff sanctions imposed on imports.
Deloitte modelling which has also been provided to the Business Council of Australia, showed commitment to a net zero target by 2050 and more ambitious interim goals, would generate more than $890 billion in net benefit to the economy and inject more than 200,000 jobs.
Dr Philip said the economic arguments against net zero targets have not been right, as those arguments are not factoring climate change into the scenario.
"The economics has not been right, because currently when people have debate, they assume that the current economy will grow at trend and unaffected by climate change forever," he said. "If you assume that, then anything you do on climate change is a cost."
It is understood the Morrison government would publicly reveal climate modelling and its economic impact once cabinet had formally made a decision.
Greens leader Adam Bandt said the federal government needed to commit to stronger 2030 targets ahead of the Glasgow climate talks.
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