Economic Outlook: 31 March 2022

Innovative science and technology drive economic growth in Australia

The economy-wide returns to innovation are high.  CSIRO Futures has estimated that $1 of R&D investment creates an average of $3.50 in economy-wide benefits in today’s dollars, and a 10% average annual return for Australia.

Science and technology continue to play a critical role in supporting the global response to COVID-19 and will continue to support Australia's economic recovery and long-term resilience.

The opportunity for Australian protein industries to unlock greater commercial opportunities from science and technology is explored in CSIRO's new Protein roadmap.

What is the current macroeconomic environment?

Global economic environment

• Global economy: Projected to grow 4.4% in 2022 and 3.8% in 2023, with a downward revision for 2022 by 0.5 percentage points (pts). This revision largely reflects Omicron-induced disruptions and continued supply shortages (IMF, 25 January). 
• However, moves in commodity prices and financial markets seen since the outbreak of the war in Ukraine could, if sustained, reduce global GDP growth by over 1 pt in the first year, with a deep recession in Russia, and push up global consumer price inflation by approximately 2.5 pts (OECD, 17 March).
• Global labour market recovery forecasts have been downgraded for 2022, with working hours estimated to remain 1.8% below pre-pandemic levels this year. Working hours in high-income countries are estimated to recover and exceed pre-pandemic levels by 2023, while recovery will be slower and remain below pre-pandemic levels for middle and low-income countries over 2023 (ILO, 17 January).
• The US: GDP increased 1.7% in the fourth quarter of 2021 (BEA, 24 February).
• The EU: GDP increased 0.4% in the fourth quarter of 2021 (Eurostat, 15 February [pdf · 251kb]).
• China: GDP increased 1.1% in the fourth quarter of 2021 (Reuters, 16 January).
• Interest rates: Eurozone remains at 0%, China at 3.7%, Japan at -0.1%, the US at 0.5%, and the UK at 0.5%.

Global macroeconomic policy measures

• 64.4% of the global population has received at least one dose of a COVID-19 vaccine, although the rollout has fallen considerably short of achieving equitable global distribution (Our World in Data, 30 March).
• Monetary policy has tightened globally, with the US Federal Reserve reducing its asset purchases and the European Central Bank ending its Pandemic Emergency Purchase Programme (IMF, 25 January).
• Numerous Western countries, including Australia, have imposed economic sanctions on Russia over the conflict in Ukraine (CNN, 28 February).

Australian economic environment and macroeconomic policy measures

• GDP rose 3.4% in the fourth quarter of 2021, after falling 1.9% in the third quarter of 2021, with private demand driving this as NSW, VIC and ACT came out of extended lockdowns. (ABS, 2 March). The RBA forecasts GDP to grow by 4.25% over 2022 and 2% over 2023 (RBA, 2 February).
• The annual CPI headline inflation rate increased from 3.0% to 3.5% from the third to fourth quarter, while the underlying inflation rate increased from 2.1% to 2.6% (ABS, 25 January). The RBA forecasts the underlying rate will increase to 3.25% in the coming quarters, before easing to around 2.75% (RBA, 11 February).
• The unemployment rate fell 0.2 pts to 4.0% from January to February, its lowest point since August 2008, and the participation rate increased 0.2 pts to 66.4% (ABS, 17 March).
• Hours worked increased by 8.9% over the same period, rebounding from a prior month of a higher than usual number of people taking annual leave or sick leave (ABS, 17 March). The youth unemployment rate increased by 0.3 pts to 9.3% and the underemployment rate decreased by 0.1 pts to 6.6% from January to February (ABS, 17 March).
• 67.6% of eligible Australians have received a booster COVID-19 vaccine (Department of Health, 29 March).
• Flooding in NSW and QLD from record rainfall has seen over 100,000 insurance claims filed (New York Times, 9 March). Global ratings agency S&P expects the costs of the flooding to exceed $2 billion (New York Times, 9 March). Disaster payments for affected households will provide $1,000 per adult and $400 per child (ABC, 10 March).

• The RBA interest rate remains at a historic low of 0.1%.

2022-23 Federal Budget

The 2022-23 Federal Budget was released on 29 March. Key measures related to science and technology include:

• Incentives to small businesses to invest in skills and new technologies through a $120 tax deduction for every $100 spent on training, as well as similar deductions for investments in digital technologies.
• A $9.9 billion investment over ten years in Australia’s offensive and defensive cyber capabilities.
• A further $135.6 million over 5 years from 2021-22 to support the agricultural sector’s ambition of a $100 billion industry by 2030.
• $1.3 billion from 2021-22, and $38.8 million per year ongoing, to grow the Australian space sector and space manufacturing industry.
• $839.9 million to strengthen Australia’s capabilities and presence in Antarctica.
• An additional $1.0 billion over 9 years from 2021-22 to strengthen protection of the Great Barrier Reef.
• $83.1 million over 5 years from 2022-23 to support the waste and recycling sector and Australia’s transition to a more circular waste economy.
• $988.2 million over 5 years from 2021-22, and around $325.1 million per year ongoing, to drive university industry collaboration, workforce mobility and research translation and commercialisation.
• $423.7 million over 5 years from 2021-22 to support specialist facilities and research to fight and prevent cancer.
• A further $1.3 billion under the Medical Research Future Fund Ten Year Investment Plan to invest in medical research.
• An additional $63.6 million over 5 years from 2021 22, and $1.5 million per year ongoing, to support the Australian Institute of Marine Science.
• An additional $328.3 million over 5 years from 2021-22 to further support the Modern Manufacturing Strategy and National Manufacturing Priorities and address critical supply chain vulnerabilities.
• $250.5 million over 5 years from 2022-23 to help early-stage Australian critical minerals projects reach market readiness.
• A further $446.1 million over 5 years from 2021-22 to increase energy security, maintain affordable and reliable power, and reduce the cost of deploying low emissions technologies.

How might innovation matter for Australia’s future protein industries?

The recently released Protein roadmap highlights how Australia can unlock technology-led growth opportunities to become a global leader in high quality, value-added proteins. This includes animal products plant sources, and non-traditional sources.

Plant-based burger patties from v2food – a partnership between CSIRO, Main Sequence Ventures and Competitive Foods Australia.

According to AgriFutures [pdf · 6.7mb], by 2030 Australia could be supplying protein to an additional 10.47 million consumers compared to 2018.

Further, total domestic and export demand for Australian protein products could reach 65 million tonnes in 2030, and there could be an additional 8.65 million tonnes of demand for protein products by 2030 compared to 2018.

Expected economic impacts of technology-led growth in Australian proteins

The roadmap identifies an additional $13 billion and nearly 10,000 jobs in science and technology driven protein opportunities for Australia by 2030 including.

• Integrity systems in the red meat sector across the supply chain to deliver farm to plate traceability and trusted credentialling.
• Australian red meat exports into new and emerging Southeast Asian markets.
• Locally made protein concentrates and isolates to meet domestic consumption and expand into a range of products for local and export markets.
• Domestic production of higher protein crops with favourable downstream characteristics.
• Red meat co-products for health markets.
• Insect production to provide pathways for food waste and new protein sources for food and feed.
• Local, sustainable white flesh fish production to meet domestic demand and export to Asian markets.
• Local production of plant-based products, enabling an end-to-end onshore supply chain.
• Commercial production of proteins via precision fermentation for both domestic and export markets.
• R&D on cultivated meat products, with clear regulatory pathways for domestically produced cultivated protein products.

Ecosystem priorities for Australia’s protein industries:

In addition to the strategic science and technology areas, the roadmap sets out five priorities to guide activities for whole of ecosystem benefit and to monitor progress:

1. Producers, communities, and regions recognise the role that the protein industry plays in food production and economic prosperity.
2. Customers and consumers are engaged and seek high value, high quality, and trustworthy Australian products.
3. Protein production increases while also protecting ecosystem health and biodiversity, and meeting consumer and market expectations for sustainability and biosecurity.
4. The protein industry sees the significant global opportunity for all types of protein and be coordinated and collaborative in pursuing this.
5. The protein industry is well supported by policy and regulations that enable the industry to compete globally and deliver high quality products to local and export markets.

Australia’s future innovation and resilience

• Short to medium term: focus is on how science and innovation can contribute to economic, social and environmental prosperity, such as through the adoption of deployment-ready technologies.
• Longer term: focus should be on building a resilient economy and reducing Australia’s exposure to future shocks and disruptions. This involves technologies that are in development and demand further investment, technical and commercial testing, and scale-up before their economic potential is realisable.