Australia needs to make significant investments in electricity infrastructure and export industries. Some economic commentators and analysts view a renewable transition as inflationary, in large part because of the high levels of investment required. This ignores the fact that there will be high levels of investment over the coming decades regardless of whether it is 'green' or not. To the extent that green investment may cost more, it is unlikely to have significant impacts on inflation.

A significant portion of Australia’s electricity infrastructure will reach the end of its life over the coming years. This turnover of coal and gas assets provides a natural impetus to decarbonise the electricity system. Around 12 GW of coal and gas power will be retired by 2030, and 38 GW by 2050. In addition, AEMO modelling predicts maximum demand will increase by 20 GW by 2050. Put together, there is a gap of almost 60 GW that needs to be filled by 2050.

Investing in renewable energy to fill this gap is likely to cost more than replacing coal and gas assets like-for-like. The best estimates available suggest a coordinated green transition will cost $625 billion, whereas it will cost around $400 billion to reinvest in existing fossil fuel generation classes. However this difference – roughly $225 billion – is small from a macroeconomic perspective. Spread over several decades, the inflationary effects of this investment will be small in any given year.