The latest Intergenerational Report is an opportunity missed to highlight real risks and uncertainties we face as Earth keeps getting warmer. David McEwen with the story.
All we really know about the future is that we don’t know it. Or as SMH economics editor Shane Wright wrote, “There is one certainty about Jim Chalmers’ upcoming Intergenerational Report – it will be wrong”; he captured the unavoidable truth of long‑run projections. They are always wrong.
But the real issue is not that the latest Intergenerational Report (IGR) will miss the mark. It is that it will miss in a predictable way, by
assuming continuity in a world defined by discontinuity.
Treasury frames the IGR as a “structural” model built on the 3Ps – Population, Participation and Productivity. In practice, however, it is a continuity exercise. Population projections extrapolate fertility, mortality and migration trends. Participation projections extrapolate cohort behaviour. Productivity projections assume growth will revert to its 30‑year average.
This architecture produces smooth trajectories, not systemic shocks, even when discontinuity is the defining feature of the decades ahead.
Two examples illustrate the problem: agricultural yields and disaster spending.
Implausible agricultural yields
The IGR claims that by 2066, heat stress could reduce crop yields in Australia by just 3.6% under a scenario where global warming exceeds three degrees. Under a Paris‑aligned two‑degree scenario, the decline is only 1.2%. Treasury adds that impacts are uncertain and could be offset by adaptation or higher export demand.
These numbers are not just conservative; they feel implausible.
ABARES’ Farm Performance and Climate study found that climate conditions between 2000–01 and 2014–15 – with roughly one degree of global warming – lowered national wheat yields by about 11.9% relative to the long‑run baseline. While farmers are adapting to climate change, including changing the mix of crops grown in particular regions, there are limits to adaptation.
Further ABARE’S modelling to 2050 finds substantial declines in profitability and increased “adaptation pressure” across many regions. These studies consistently show strong sensitivity of yields and profits to temperature and rainfall changes, with impacts growing non‑linearly as warming increases.
The IPCC’s global crop modelling reinforces this picture: negative impacts on major crops at warming above two degrees, often in the five to twenty per cent range or worse, without strong adaptation.
Against this evidence, the IGR’s 3.6% figure looks decidedly optimistic.
It reflects a narrow focus on heat stress as a damage function, excluding rainfall shifts, soil moisture decline, pest and disease dynamics, and the risk of multi‑year compound extremes. It assumes smooth adaptation and treats impacts as small percentage deviations from a baseline, rather than allowing for multi-year shocks.
The result is a projection that underestimates risks already observed in the real world.
Disaster spending shortfall
The IGR also projects that natural disaster spending will almost triple by 2066 due to climate change. On the surface, this sounds serious. But the methodology is again incremental: extrapolating historical disaster outlays and scaling them with simple assumptions about more frequent and severe events.
What it does not seem to capture are compounding and cascading impacts. A bushfire can be followed by storms that wash debris into water systems, creating health crises. Frequent crippling droughts reduce crop yields while forcing more farmers off the land, compounding future yield declines.
Multiple disasters can strike in close succession, overwhelming emergency services and fiscal capacity. Insurance retreat can amplify the fiscal burden, as households and businesses fall back on government support. These are not linear cost increases,
they are systemic shocks.
Australia’s National Climate Risk Assessment, released in 2025, explicitly emphasises compounding and cascading risks. It warns that climate hazards will interact with other stress factors such as ageing populations, health system strain, and geopolitical shocks to produce outcomes far beyond the sum of individual events. It notes that concurrent events and reduced time between severe events will become more common, and that historical observations are no longer a reliable guide to future risk.
Yet the IGR’s disaster spending path is largely linear and incremental. It does not model cascading failures or integrate systemic fragility.
It assumes that the future will behave like the past, only with bigger numbers.
A baseline, not a map
Treasury would counter that the IGR is a baseline, not a map. It is designed to show the long‑term implications of current policy settings under a stable scenario, effectively acting as a control variable. And it is true that modelling discontinuities is difficult, perhaps impossible.
Treasury is also acutely aware that publishing a mathematically explicit collapse scenario – the kind of world implied by more than three degrees of warming – could be politically explosive.
A realistic model of systemic insurance retreat, regional abandonment and collapsing agricultural yields might
spook markets, alarm the public and destabilise investment.
Bureaucratic conservatism is, in that sense, understandable.
But neither defence rescues the IGR’s usefulness. A baseline is only valuable if the world it assumes still exists, and institutional caution does not make the risks disappear.
By sanitising the very forces that will shape the next 40 years (climate being one of several), the IGR becomes a continuity narrative in a discontinuity world, a document that cannot describe the future Australia is actually entering.
David McEwen is a Director at Adaptive Capability, providing climate risk and emissions reduction strategy, program and project management. He works with businesses, community leaders, policy makers, designers and engineers to deliver impactful change. His book, Navigating the Adaptive Economy, was released in 2016. He holds an MBA from the Australian Graduate School of Management and a certificate in Sustainability and Climate Risk from the Global Association of Risk Professionals.