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Australia is entering a decisive decade in which climate change will test its disaster response systems, home safety, and water supply security.
From Lismore’s flooded streets to the blackened fringes of Perth and Melbourne, climate‑fuelled disasters are colliding with a housing crisis, pushing more people into exposed suburbs on floodplains, fire‑prone hillsides and eroding coasts.5
At the same time, the world’s driest inhabited continent is preparing for a new wave of desalination plants, as a growing population and a booming data centre and resources sector drive up demand for water while rainfall becomes less reliable.3
Policy advisers warn that without faster investment in prevention and adaptation, climate damage will drag on productivity, deepen inequality and force governments into ever more expensive rebuilding efforts after each disaster.1
The Productivity Commission has called for a public database of climate hazards and a national climate resilience star rating for homes, making risks more visible to buyers, builders and insurers, and guiding upgrades to older housing in danger zones.2
Research on housing recovery shows that, in high‑risk regions, reinforcing homes and updating planning rules before the next flood or fire generally costs less than rebuilding suburbs again and again after disasters.4
On the water front, analysts estimate that Australia is on track to build or expand 11 desalination plants worth more than A$23 billion over the next ten years, reshaping coastal landscapes and energy demand in the name of water security.3
These choices are not purely technical: they go to the heart of the Australian dream of a detached house on the fringe, a backyard and a reliable tap, challenging governments to balance economic growth, housing security and environmental resilience under a rapidly changing climate.
How Canberra, states and local councils respond over the next five years will influence not only insurance bills and water prices, but where millions of Australians can safely live, and how cities adapt to a hotter, drier future.1
Prevention versus the cost of doing nothing
For decades, Australia has spent far more on cleaning up after disasters than on preventing damage in the first place, a pattern that economists increasingly argue is unsustainable in a warming climate.4
State and federal budgets support emergency services, recovery grants and rebuilding of public infrastructure, yet relatively modest sums have gone into relocating the most exposed homes, strengthening building standards or restoring natural buffers such as wetlands.4
The Productivity Commission’s work on climate and productivity highlights that climate damage, including from more intense heat, floods and storms, poses “substantial risks” to future economic growth, and argues that well‑designed adaptation can reduce these losses while unlocking new opportunities.1
Parallel research on housing recovery notes that post‑disaster rebuilding is slow, complex and often more expensive than anticipated, citing the 2022 Lismore floods where reconstruction costs were estimated at around A$1 billion for a single regional city.5
Analysts at AHURI and other institutions argue that, in high‑risk areas, stronger planning controls, buy‑backs and resilient construction are more cost‑effective over time than repeatedly repairing damaged homes, especially as insurance premiums rise or cover is withdrawn.5
Insurance and actuarial assessments suggest that, without large‑scale adaptation, hundreds of thousands of Australian properties could face sharply higher premiums by 2030, or become effectively uninsurable, with obvious implications for household finances and mortgage markets.5
These findings strengthen the case for shifting more public and private finance upstream, from disaster recovery to prevention, by funding buy‑backs, retrofits, early‑warning systems and nature‑based solutions that reduce the impact of extreme events before they strike.4
Population growth, housing demand and risky land
Australia’s housing pressures are colliding with climate risk in ways that make planning decisions more consequential than ever.
Population growth and years of undersupply have pushed up prices and rents, encouraging development on cheaper land at the edges of cities, which is often more exposed to bushfire, flood or extreme heat.5
Research on climate risk to housing warns that millions of homes are already exposed to riverine flooding, coastal inundation or bushfire, with concentrations of vulnerable properties in New South Wales, Queensland and Victoria where rapid growth has pushed suburbs into hazard zones.5
In this context, planning rules that still allow new estates on floodplains or in heavily forested, hard‑to‑defend landscapes lock in future disaster costs, and can leave first‑home buyers and low‑income renters shouldering the highest risks.
The Productivity Commission has recommended that governments agree on clear goals for improving the resilience of housing, backed by a national climate hazard database so that councils, developers and households can see the risks before new suburbs are zoned or approved.2
This approach would support more stringent planning controls in high‑risk areas, including steering new housing towards safer sites, lifting the minimum height of floor levels in flood‑prone districts and requiring evacuation routes that remain passable in disasters.2
It also raises challenging equity questions, because restricting development in dangerous locations can reduce land supply and push up prices unless governments are prepared to invest in well‑planned, safer infill and medium‑density housing near jobs, services and transport.
Can a climate resilience star rating change the market?
One of the Commission’s most striking proposals is a nationally consistent, outcome‑based climate resilience star rating for housing, similar in concept to the energy star labels on appliances or the NatHERS energy ratings used for homes.2
The idea is that star ratings would reflect a home’s ability to withstand climate hazards in its location, taking into account factors such as elevation above flood levels, construction materials, roof design, shutters and the presence of ember‑proofing and other protections.2
ACOSS and other social and environmental groups have backed the concept, and have called for a major program of federal investment to retrofit public, community and First Nations housing for climate resilience and energy efficiency, arguing that safer homes can reduce poverty, improve health and cut disaster costs.7
If such a rating became visible in listings, conveyancing documents and insurance assessments, it could start to shift the “Australian dream” away from size and location alone, towards a more nuanced picture of safety, liveability and long‑term cost.
In practice, a climate resilience star rating could affect valuations, as high‑rated homes attract better insurance terms or higher buyer demand, while low‑rated properties in exposed areas face pressure to upgrade or accept lower prices.
Banks and regulators would likely take an interest, because climate resilience affects the security of mortgage collateral, and a transparent rating system could help them manage portfolio‑wide risks.2
For households, especially in older suburbs, the key will be coupling ratings with clear guidance and finance options for improvements, so owners know which changes, from raising floor levels to installing shutters, deliver the greatest risk reduction for the money.
The politics and economics of desalination
On the other side of the climate ledger, Australia is preparing for a “big build” in urban water infrastructure, centred on desalination and, in some states, large‑scale recycling.
Bloomberg reporting, drawing on Oxford Economics analysis, indicates that Australia is projected to build or expand 11 desalination plants worth more than A$23 billion over the next decade, as demand from households, industry and data centres rises and rainfall in major catchments becomes less reliable.3
Perth, which already relies heavily on desalination, is constructing the Alkimos Seawater Desalination Plant, a multibillion‑dollar project expected to supply around 50 billion litres of drinking water annually from 2028, highlighting how coastal cities are turning to the ocean to secure supplies.8
Desalination offers a rainfall‑independent source of water, but it is energy‑intensive, which means its climate benefits depend heavily on how quickly the electricity grid decarbonises and whether plants are paired with renewables or contracts for clean power.
Economically, large‑scale plants create construction and supply‑chain jobs and can underpin regional industrial growth, yet they involve long‑term contracts that commit governments and water users to paying for capacity even in wet years.8
The politics of desalination has often been turbulent, with criticism over “white elephant” projects built at the end of droughts, but recent dry periods and climate projections have shifted the debate towards seeing diversified water portfolios, including desalination, as a form of insurance against system failure.9
To keep public trust, governments will need to demonstrate that these investments are integrated with demand management, leakage reduction and recycling, and that long‑term costs are fairly shared between households, businesses and heavy water users.
Urban farming and lessons from global cities
As Australian cities grapple with heat, water stress and food security concerns, some of the most interesting examples of integrated solutions come from global experiments in urban agriculture and green infrastructure.
Singapore’s “Cooling Singapore” initiative, along with building rules that mandate greenery on roofs and upper levels, has helped create layered green spaces that moderate temperatures, support biodiversity and host community urban farms.10
New York, Paris and Singapore have seen the spread of rooftop farms and community gardens that not only produce food close to consumers, but also insulate buildings, reduce stormwater runoff and contribute to reducing urban heat island effects.6
Scenario work on urban agriculture suggests that, when cities mainstream green roofs, vertical farms and community gardens, they can cut peak temperatures, ease pressure on drainage systems and improve resilience to supply chain disruptions, while using recycled water and organic waste to close resource loops.6
For Australian planners, these examples point to a broader vision of climate adaptation in which housing, water and food systems are considered together, rather than as separate silos.
Embedding urban farming and green corridors into densifying suburbs can complement hard infrastructure like desalination, reduce localised flood and heat risks, and strengthen social cohesion, which is critical during and after disasters.10
What global cities can learn from urban farming pioneers
Cities that have embraced urban farming show that resilience is not only about engineering, but about using every available surface and space to cool streets, manage water and grow food closer to where people live.
By integrating rooftop farms, community gardens and vertical agriculture into planning rules and incentives, global cities can reduce heat stress, cut stormwater runoff and improve local food security, while giving residents a direct stake in climate adaptation.6
What planners must do in the next five years
The next five years will be critical for regional planners and policymakers seeking to reduce long‑term climate risk for Australian communities.
First, governments need to deliver a national, public climate hazard database, embed it in planning schemes and introduce a climate resilience star rating for housing, so that risk information is visible and drives safer land‑use and construction decisions.1
Second, planning systems must restrict new development in high‑risk locations while enabling well‑designed, climate‑resilient infill and medium‑density housing in safer areas, backed by funding to retrofit and, where necessary, relocate the most exposed homes.2
Third, water authorities and governments should lock in staged investment in diversified, low‑carbon water sources, including desalination, recycling and demand‑side measures, to meet rising demand without over‑reliance on rainfall or last‑minute, high‑cost projects.3
Finally, planners can integrate green infrastructure and urban agriculture into growth strategies, using vegetation, permeable surfaces and local food systems to cool neighbourhoods, manage stormwater and strengthen community resilience as the climate continues to warm.6
References
- Productivity Commission report highlights climate action as crucial for Australia’s productivity
- Interim report: Investing in cheaper, cleaner energy and climate‑resilient housing
- Australia poised for desalination boom as water shortages loom
- An indicative assessment of four key areas of climate risk for NSW
- Enhancing housing recovery policy and practice for improving community resilience to future disaster
- The role of urban agriculture in mitigating heat islands
- Submission to the Productivity Commission on climate resilience and social housing (ACOSS and partners)
- Quenching growth: How new desalination plants could boost ASX stocks
- What Australia can learn from Singapore about designing our cities to reduce urban heat
- Why we need to invest in water security, even when the dams are full