Feature
Public Policy
Transformations Too Big to Ignore
Industry topics
Upcoming events
Lifelong learning
Claim your CPD points
When was the last time you questioned the fundamental assumptions and scenarios underlying your actuarial models? Recent insights from three leading experts at the All Actuaries Summit 2025 suggest it might be time to do exactly that.
Economist Saul Eslake, former Reserve Bank Deputy Governor Guy Debelle, and Australian Academy of Science CEO Anna-Maria Arabia presented sobering evidence that three critical systems — economic stability, energy infrastructure, and scientific capability — are all transforming simultaneously. Their message to actuaries was clear: the comfortable assumptions of the past may no longer hold. As the Chair of the session, Vanessa Beenders said: "It's time to think big, really big."
Saul Eslake opened with a stark assessment: the world faces "an almost unprecedented degree of uncertainty about the future directions of economic policy in the United States." The cause? The current administration’s economic policies, which have created a situation where "nobody today knows what tariffs will apply to which goods coming from which country, for how long, at what rate."
But there's a deeper issue at play. "American consumers know something that President Trump appears not to, and that is that the policies he's pursuing represent substantial risks to the US economic outlook," said Saul. "Americans know that it's them who are going to be paying the higher prices for imported goods, bearing the cost of the tariffs that Trump wants to impose, not the Canadians, not the Chinese, not the Mexicans."
The implications extend beyond trade wars. For the first time in recent memory, "US bond yields have gone up in the face of the uncertainty that the Trump administration is causing and the US dollar has gone down." The traditional safe haven for uncertain times — US Treasury bonds — is no longer behaving as expected. "The only safe assets that there now appear to be in the face of pervasive uncertainty are gold and the Swiss franc."
Meanwhile, China's economic model is fundamentally shifting. "China stopped growing at double digit rates just after the Global Financial Crisis," Saul noted, and its current growth "is now disproportionately dependent on net exports rather than domestic demand."
Australia isn't insulated from these global forces. Despite outperforming peers in managing inflation, the country faces "an abysmal performance in terms of labour productivity" and sits in a precarious position: "We are one of only two AAA rated countries that runs an external current account deficit." Saul’s warning was direct: "We need to have an adult conversation in this country about how we pay for the additional government spending that the population clearly wants."
The actuarial implications are significant. Australia risks losing its AAA credit rating, which "means higher interest rates and higher discount rates that you will be applying in the kind of calculations that you do for your clients."
Guy Debelle brought both realism and humour to the energy discussion. He reframed the energy transition to be less about cost and more about inevitability: "Most of our power generation assets are at end of life. They have to be replaced anyway." The question isn't whether to invest in energy infrastructure, but what kind.
Australia's opportunity lies in becoming a "green superpower" by exporting what Guy termed "green electrons” – renewable energy embedded in products like green iron. "We have some of the best sun and the best wind, and importantly, and often overlooked, a whole bunch of land to put that sun and wind on."
However, transformation requires more than wishful thinking. "We aren't in Kansas and just tapping our shoes together… We actually have to get on and do the investment to get to that place."
The scale of the opportunity is substantial. Guy shared that steel production counts for 5-7% of global emissions each year, and Australia's potential contribution to global decarbonisation through green iron exports could be "five or six times larger" than what we could contribute by domestic emissions reductions.
Provocatively, Guy challenged conventional thinking about costs: "I think it's important not to describe things as having a green premium. It's much more important to think about it as being a black discount, because the products which are produced using fossil fuels do not internalise the externalities that they're imposing."
He also highlighted that governments routinely spend billions on disaster relief after catastrophes strike yet fail to include these predictable costs in their forward budgets. This disconnect between disaster costs and adaptation spending represents a significant challenge for government finances. He pointed the audience to a recent paper on this topic that he authored for the Centre for Policy Development and for which Ramona Meyricke, Chair of the Institute’s Climate & Sustainability Practice Committee, had provided helpful feedback.
Anna-Maria Arabia's presentation focused on a fundamental question: does Australia's science capability match what the country needs to meet its national ambitions? Referring to the Academy, she said, "We don't get up in the morning unless we're trying to advance science," but the data shows Australia is falling behind in exactly that mission.
Australia's investment in research and development (R&D) has been in decline for 10 years while other countries have increased theirs. "Following the COVID-19 pandemic, most countries increased their investment in R&D,” said Anna-Maria. “Australia didn't. We've continued to decline."
The investment imbalance is particularly concerning in the business sector. "More than 50% of business investment is coming from SMEs – one might argue those least able to do so. Larger companies have a declining investment in R&D, and one might argue that they are most equipped to do so."
The numbers are stark: Australia produces "3 to 4% of knowledge" globally but needs to gain "96 to 97% from somewhere else." Yet the country's science capability is shrinking just as national ambitions across many sectors and knowledge domains demand greater innovation.
Anna-Maria highlighted critical workforce gaps, particularly in mathematical sciences—the foundation underlying most actuarial work. All of the top 10 science capability needs depend on mathematical expertise, she explained.
Infrastructure gaps are equally concerning. "Our supercomputers in Australia, our largest supercomputer at the ANU in Canberra, is about to reach end of life. There's no plan for its upgrade." By contrast, other countries integrate supercomputing into their economic strategy: "In Germany, their supercomputer is handed over to car manufacturers for two months a year so that they can advance their industries."
The international collaboration challenge is equally complex. In artificial intelligence, Australia’s largest collaborator is China, yet security concerns limit cooperation. To help us reflect, she noted, "There are more Chinese AI PhD students than there are all AI researchers across the United States."
The convergence of these three transformations creates compounding effects that traditional models struggle to capture. Economic uncertainty affects energy transition financing. Energy transitions require massive scientific capability. Science capability depends on international collaboration amid geopolitical tensions.
For actuaries, the session's implicit message was clear: the assumptions and scenarios underlying long-term modelling — stable economic growth, predictable energy costs, linear technological progress — are all being challenged simultaneously.
The path forward requires what Saul called "adult conversations" — honest assessments of new realities and their implications for professional practice. These transformations are indeed too big to ignore.
