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For weeks, hazardous air blanketed the national capital, schools closed and construction sites fell silent.
The images were dramatic, yet the economic story unfolding beneath them was quieter and more enduring.
Big picture and macroeconomic impacts
Climate modelling for south eastern Australia projects more frequent extreme heat, reduced cool season rainfall and longer fire seasons over coming decades.[1]
Heat reduces labour productivity, particularly in outdoor and non air conditioned settings, and the Productivity Commission has warned that climate impacts will weigh on national output if adaptation lags.[2]
For the ACT, whose economy is dominated by public administration, professional services, education and health, the effect is less about lost mines or farms and more about disrupted services and rising costs.
The ACT Treasury assumes steady population growth, stable public sector employment and moderate productivity gains in its forward estimates.
Those projections embed historical weather patterns that no longer reflect a warming climate.
Physical risks such as fires, hailstorms and flash floods sit alongside chronic stresses like extreme heat and transition risks from decarbonisation policies.
The public service is exposed through continuity of operations and asset management.
Construction faces downtime during heatwaves and storms.
Tourism and events depend on clear skies and predictable summers.
Health services absorb the costs when heat and smoke drive hospital admissions.
Each shock compounds cost of living pressures already amplified by insurance and energy price volatility.
Sector specific and local business impacts
The 2019 to 2020 Black Summer bushfires exposed Canberra to some of the worst air quality in the world.[4]
Retail turnover fell during peak smoke periods as residents stayed indoors and tourism bookings collapsed.
In February 2020, a severe hailstorm damaged more than 20,000 vehicles and thousands of buildings, generating insurance claims exceeding $1 billion nationally.[6]
Local trades experienced a surge in repair work, yet small businesses without adequate insurance faced crippling losses.
Universities have since incorporated climate risk into campus planning, upgrading cooling systems and reviewing emergency protocols.
Hospitals have expanded heatwave response plans as evidence links extreme heat to increased admissions and mortality.[7]
Large federal agencies now assess climate resilience in procurement and building design.
Small and medium enterprises often lack similar analytical capacity.
Industry groups report demand for clearer guidance on climate risk disclosure and insurance options.
Infrastructure, housing, insurance and finance
Critical infrastructure across the ACT, from roads to digital networks, was built for a cooler climate.
Extreme heat softens road surfaces and strains electricity networks during peak demand.
Water security remains a central concern in the Murray Darling Basin, where inflows are projected to decline under high emissions scenarios.[3]
Reduced inflows can translate into higher water prices for households and businesses.
Insurance premiums in disaster prone regions of Australia have risen sharply in recent years as insurers reprice climate risk.[8]
While Canberra is not coastal, bushfire and hail exposure affect premiums and mortgage affordability.
If parts of the ACT were deemed high risk, reduced insurance availability could depress property values and deter investment.
The ACT Government has begun integrating climate considerations into asset management and green bond issuance.
Labour market, productivity, and inequality
Higher average temperatures increase the number of days above 35 degrees in Canberra, affecting outdoor workers in construction, landscaping and emergency services.[1]
Heat stress reduces cognitive performance and raises workplace injury risk.
Casual hospitality staff lose shifts when smoke deters visitors.
Low income renters in poorly insulated housing face higher cooling costs and health risks.
Climate shocks therefore deepen inequality, as those with fewer resources struggle to adapt.
There is limited evidence so far of net migration driven by climate risk into or out of Canberra.
However, relative climate stability compared with coastal flood zones could influence future population flows.
Preparing the workforce for electrification, renewable energy maintenance and climate risk analysis will require targeted training and vocational programs.
Public finances, health, and social services
Disaster recovery and infrastructure repair have placed pressure on ACT and federal budgets.
Heatwaves increase demand for ambulance callouts and hospital care, generating direct fiscal costs and lost work days.[7]
The ACT Budget acknowledges climate risk but long term fiscal projections remain sensitive to assumptions about disaster frequency.
Community organisations report spikes in demand after extreme events, particularly for housing assistance and mental health support.
Smoke exposure has been associated with respiratory and cardiovascular impacts, with measurable economic costs through absenteeism and treatment.[7]
Water, land, and regional interdependence
Canberra relies on water catchments and transport corridors that extend into New South Wales.
Climate impacts on regional agriculture affect food prices in the ACT.
Disruptions to highways or energy infrastructure reverberate through Canberra’s service economy.
Urban tree canopy mitigates heat island effects, yet prolonged drought and heat stress threaten tree health and liveability.
Investment in urban greening and environmental restoration can reduce cooling costs and support local employment.
Transition risks, policy, and investment
The ACT has committed to net zero emissions by 2045 and sources 100 per cent of its electricity from renewable contracts.[5]
This positions Canberra favourably in a decarbonising economy, yet transition risks remain.
Federal policy shifts, carbon pricing mechanisms or border adjustments could affect defence contractors and service exporters based in the ACT.
Investors increasingly apply climate disclosure standards aligned with national reporting frameworks.[9]
Projects that fail to demonstrate resilience may struggle to secure finance.
Community resilience and long term planning
Early adaptation investments, such as cooling infrastructure and fire resilient urban design, can reduce long term costs.
Land use planning now incorporates bushfire risk mapping and building standards designed for higher temperatures.
Some outer suburbs near grassland and forest interfaces face disproportionate fire exposure.
Designing adaptation projects to create apprenticeships and local supply chains can diversify the ACT economy.
A climate resilient ACT economy in 2050 would combine low emissions energy, heat adapted infrastructure and a workforce skilled in environmental management.
Conclusion
Canberra’s economy has long appeared insulated from the commodity cycles that buffet other Australian regions.
Yet climate change reveals a different vulnerability, one tied to heat, smoke, water and fiscal exposure.
The costs are already visible in insurance premiums, hospital admissions and disrupted business activity.
Over the next three decades, the ACT’s prosperity will depend less on avoiding climate impacts than on managing them intelligently.
Transparent budgeting, resilient infrastructure and investment in skills for electrification and environmental restoration can cushion economic shocks.
Delay, by contrast, will compound losses and widen inequality.
For a city built on planning and policy, the challenge is to align economic forecasts with a warming reality and act before the next smoke filled summer writes its own balance sheet.
- Climate Change in Australia Projections
- Productivity Commission, Climate Change Adaptation Inquiry
- Murray Darling Basin Authority, Climate Change and Water Availability
- Australian Government, Health Impacts of 2019–20 Bushfire Smoke
- ACT Climate Change Strategy
- Insurance Council of Australia, Canberra Hailstorm Report
- Australian Institute of Health and Welfare, Heatwaves and Health
- APRA Climate Vulnerability Assessment
- Australian Treasury, Climate-related Financial Disclosure