The Australia Report 2011: Risks and Opportunities, the second annual report published by The ADC Forum in collaboration with KPMG, outlines the risks facing Australia over the next decade by likelihood, and economic impact. The forward-looking publication is built on surveys and discussions undertaken with key leaders in their fields in May this year to capture risks and opportunities across the economic, political, environmental, societal and technological boundaries.
"Environmental issues were the standout risk, in terms of both likelihood and severity. These were strongly interconnected with societal risks such as water and food security, as well as to economic risks such as infrastructure fragility and energy price volatility," said Anton Roux, Director of Programs, ADC Forum. "This highlights the need for Australia to be proactive in planning for risks. Extreme events need to regarded as more 'normal' and must be included in scenario planning."
The report showed major trading partner weakness was perceived as the most likely economic risk as Japan recovers from the earthquake and tsunami, China’s growth slows and the US struggles with an uncertain outlook. Asset price collapse was rated the most severe economic risk reflecting concern about overseas asset pricing and uncertainty about the outlook for Australian property, especially residential.
"Fiscal crisis rated as one of the most costly risks. While Australia’s own risk was considered low, fallout from a European sovereign debt default would make it more difficult and expensive for Australian banks to access wholesale funds. Demographic risks around Australia’s ability to support our ageing population were rated in the top five for both likelihood and severity," added Mr Roux.
The report explicitly acknowledges the interconnectedness of risks and opportunities, with each other and with global forces.
"The majority of these risks are without borders. Australia has become more connected and exposed to events internationally than ever before,” said Head of Risk and Compliance for KPMG, James Allt-Graham.
The single most interconnected risk was found to be 'economic disparity', with respondents conscious of how income disparities threaten stability and productivity. The second most interconnected risk was 'infrastructure fragility'. With much of Australia’s infrastructure ageing and under increasing stress, respondents were concerned that future demand would not be met, with worrying implications for Australia’s standard of living and ability to service and compete in the global economy.
"Recognising the linkages allows organisations to focus on points at which we can most effectively mitigate risk and seek opportunities," added Mr Allt-Graham. "Business leaders, who comprise the majority of respondents to this survey, clearly recognise that economic risks are intertwined with a range of political, environmental, societal and technological issues."
Recurring themes from this report and the previous one are:
- climate change and its consequences;
- concerns about adverse global economic events and trends;
- underinvestment in infrastructure; and
- inadequate research and development.