Australia’s real gross domestic product (GDP) grew by an average of 3.3% per year between 1970 and 2010, and GDP per capita grew by 1.9% between 1970 and 2010. Our national standard of living, at least in economic terms, continues to grow faster than our population; we are an increasingly affluent society. The structure of Australia’s economy has also changed over this period, with an increased share of the economy driven by the services and resources industries (Figure 2.8). Since different industries exert different pressures on the environment, future structural changes in the economy can be expected to have an impact—either positively or negatively—on the environment.
Economic growth is supported by population, productivity and participation in the economy. The 2010 IGR projections of economic growth are based in part on the population projections discussed in Section 3 (see Table 2.1). Economic growth will, to some extent, offset the economic implications of an ageing population. It is also assumed that labour productivity will continue to increase at the 30-year historical average of 1.6% per year for the next 40 years.
Under these assumptions, the base scenario for Australia’s economic outlook is an average annual growth in real GDP of 2.7% to 2050, with per capita increases of 1.5%. This scenario indicates a somewhat slower economic growth than currently, largely due to the consequences of an ageing population on participation rates. A more optimistic scenario in the 2005 IGR of Australia’s future economy is based on maintaining productivity gains of 2% per year; under these assumptions, real annual GDP growth would average 3% to 2050.
Just as an increasing population does not necessarily translate proportionately to increased environment impact, neither does a growing economy. However, there is strong historical evidence that this has been the case and thus will likely continue into the future. As the economy of Australia expands, it is likely that our consumption of resources and production of waste will also increase. In its 2008 report on Australia’s environmental performance, the OECD recommended that Australia:22
… make concerted efforts to decouple environmental pressures from economic growth, especially those pressures from the energy, transport and household sectors, including urban growth.
Historical trends can give insights into future trends in resource consumption and waste production, but do not consider significant changes in policy and the rate of technological innovation. Of course, in the real world, neither policies nor technology tend to be static, as demonstrated clearly in Box 2.1, which examines changes in the management of solid waste. From 1996 to 2009, government policy (strongly influenced by a growing community desire to recycle), together with improved technology, successfully diverted tens of millions of tonnes of solid waste from landfill into productive uses. This saved large quantities of valuable materials, and significant amounts of embodied energy and water.