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Keywords:

  • climate change;
  • G-ECON;
  • Gross Cell Product;
  • Oceania

This paper examines the newly constructed geographically scaled economic output measure, Gross Cell Product (GCP), of Australia and New Zealand to quantify the impacts of climate change in the region. The paper discusses advantages of using the GCP instead of the Gross Domestic Product. The paper reveals that the GCP falls sharply as temperature increases in the region. A 1°C increase in temperature would decrease the productivity with an elasticity of −2.4. A 1 per cent decrease in precipitation would decrease productivity with an elasticity of −2.3. However, forest vegetation on the coasts will benefit from initial warming. We find that the changes in climate means are potentially more harmful than changes in climate variability. In the long term, a 3.4° warming coupled with 6.6 mm decrease in rainfall would decrease the GCP by 34 per cent by 2060. The damage is largely accounted for by population effects. The paper confirms that Australia is highly constrained by climate and geographic factors.