ASHBY, Ms Lis, Lead, Policy and Innovation, Biodiversity Council [by video link] BEKESSY, Professor Sarah, Chair and Lead Councillor, Biodiversity Council [by video link] CORNISH, Mr Michael, Policy Lead, Australian Land Conservation Alliance [by video link] GUNN, Dr Jody, Chief Executive Officer, Australian Land Conservation Alliance [by video link] HENRY, Dr Ken, Chair, Australian Climate and Biodiversity Foundation [by video link] LASSEN, Ms Marnie, Chief Executive Officer, Natural Resource Management Regions Australia [by video link] Committee met at 0 8 : 30 CHAIR ( Senator Bragg ): I declare open this hearing of the Senate Select Committee on Productivity in Australia. I begin by acknowledging the traditional custodians. These are public proceedings being streamed live via the parliamentary website, and a Hansard transcript is being made. I remind all witnesses that in giving evidence to the committee they are protected by parliamentary privilege. It is unlawful for anyone to threaten or disadvantage a witness on account of evidence given to a committee, and such action may be treated by the Senate as a contempt. It is also a contempt to give false or misleading evidence. Witnesses also have a right to request to be heard in camera. If a witness objects to answering a question they should state the ground upon which the objection is being made, and the committee will determine whether it will insist on an answer having regard to the ground which is claimed. If the committee determines to insist on an answer, a witness may request that the answer be given in camera. I remind senators of their obligations under the Behaviour Code for Australian Parliamentarians to treat witnesses with courtesy, dignity, fairness and respect. I now welcome representatives of the Australian Land Conservation Alliance, the Australian Climate and Biodiversity Foundation, the Biodiversity Council and NRM Regions Australia. I understand that information on parliamentary privilege and the protection of witnesses giving evidence to Senate committees has been provided to you. As this is the second time we've had most of you to this committee, I was wondering if you had a very brief opening statement, then we'll go to questions from senators? Dr Gunn : I have an opening statement. Thanks again for the opportunity to appear today. The Australian Land Conservation Alliance, ALCA, is Australia's peak body for land conservation, with a focus on private and non-government managed lands. We have 23 member organisations, and they're united in seeking to protect, steward and restore land for biodiversity. Safeguarding Australia's biodiversity, our natural capital, safeguards Australia's productivity, our prosperity, our cultural identity and our quality of life. Despite nature being essential economic infrastructure, its role of underpinning Australia's productivity is too often overlooked. Indeed, national discussions about productivity rarely consider the impacts of the accelerating decline on Australia's natural capital stocks. We need to look no further than the key findings of the most recent Commonwealth state of the environment report from 2021, which reports that our declining nature is reducing the environmental capital on which current and future economies depend. It goes further to say that social, environmental and economic impacts are already apparent. Australian governments have failed to systematically forecast the impacts of our declining biodiversity upon productivity and economic growth. Unfortunately, what Treasury does not measure does not get addressed, and it helps to explain why less than one-tenth of one per cent of the federal budget is directly spent on biodiversity. Underinvestment in nature has led to a narrowing of the natural capital base that underpins every dollar of economic output. However, nature and the economy do not have a linear relationship. Ecosystems often do not just slowly decline; instead, they manage to hang on until they hit a tipping point and then rapidly collapse, and our economy is relying on increasingly unstable foundations. At a national level, for too long we've been asking the wrong questions. We've been asking, 'How much does conservation cost?' when instead we should be asking, 'How much productivity wealth does conservation and our environmental management create?' Dasgupta, through his review, frames that debate neatly. Fundamentally, Australia's decline in natural capital stocks can only be overcome by reversing the chronic underinvestment by business and government. I wish, particularly, to highlight four recommendations from our submission. First, the impacts upon our economy and its productivity from declining natural capital needs to be urgently investigated by Treasury and then integrated into their forecasting. Treasury can draw heavily upon the UK government's 2021 report The economics of biodiversity: the Dasgupta review. Secondly, we can dramatically increase direct government investment in natural capital by redirecting the estimated $26.3 billion in nature-negative federal government subsidies into investments with positive impacts on nature. Third, we can help businesses understand and manage the risks they face from declining biodiversity by directing ASIC to provide guidance for entities wishing to voluntarily make nature related risk disclosures. Finally, we can undertake a review of the tax settings for conservation activities, including environmental restoration, as per recommendation 28(d) of the Samuel review of the EPBC Act—and we note that this recommendation has not yet been acted upon. I look forward to the discussion. We also seek the committee's leave to table the Dasgupta review report as indicated to the secretariat. CHAIR: Thank you. Climate and Biodiversity Foundation, do you have a couple of quick comments? Dr Henry : Yes I do. Thank you very much. By the way, I support the comments just made by Dr Gunn. I want to talk about the importance of bioregional planning and the important role that that can play in lifting Australia's stalled productivity growth. I'll put it this way: according to the economics that I used to teach, university students in the first half of the 1980s—I know that's a long time ago—in competitive markets, provided there was no fraud or deception or any other instances of market failure, could generally be relied upon to deliver efficient outcomes. Back then, economic rationalists like me considered that the principal sources of economic inefficiency were not a consequence of market failure but rather of government failure. There was a lot to point to, because, through the 1960s and the 1970s especially, governments had seized the opportunity to interfere in just about every market for goods and services, labour, capital and, of course, finance. Their tools included a set of draconian regulatory instruments, taxes, subsidies and so on. The economic reform efforts in the second half of the 1980s were largely about dismantling all of those taxes, subsidies and so on. I think we now know, though, that securing private property rights in land and otherwise allowing the market to rip leads to very poor outcomes. It's not an approach that's served us well. It's been a substantial driver of the twin crises now challenging productivity growth in every continent, including this one. I'm talking about climate change and the loss of biodiversity across vast landscapes. It's introduced an environmental risk premium to be factored into every major investment decision, and, given the political salience of these twin crises, it's also introduced a sovereign risk premium as well, because one day governments will respond, but nobody knows in which way. Investors are crying out for clarity and certainty if they can get it, but governments have underinvested massively in the set of institutional arrangements required to deliver that certainty. The recent reforms to the EPBC Act are a big step forward. Given the limited time we have, I would particularly point to the capacity to develop bioregional plans, identifying upfront where the no-go zones are and where the go zones are and involving and engaging local communities in decision-making, with a full assessment of cumulative impacts. I'll conclude by saying that community based planning of that sort is certainly a long way from the market economics that I was teaching 45 years ago, but, without it, we've got no chance of lifting Australia's productivity growth. CHAIR: Biodiversity Council, do you have some brief comments? Prof. Bekessy : I do. Unfortunately, we have we both have comments. Is that okay? We'll try and be really brief. I'm a professor at the University of Melbourne and a lead councillor with the Biodiversity Council, which is an independent expert group that was founded by 11 Australian universities to promote evidence based solutions to Australia's biodiversity crisis. As you've heard from others, countries around the world are now recognising the deep dependence of their national prosperity and wellbeing on nature, and Australia is no different. Our economy depends on nature, and this dependency is growing. Approximately 50 per cent of our GDP is moderately or highly dependent on nature and the services it provides. On the flip side, there are substantial risks of neglecting nature. The World Economic Forum consistently ranks nature loss and ecosystem collapse in the top risks to the global economy over the next decade. I want to give you a couple of examples to highlight why neglecting nature in Australia is a risk to our economy, and to point out the substantial opportunities to our economy of adequately investing in nature, and then I'll hand over to Lis to talk through our key recommendations. In 2025 the massive algal bloom that formed in South Australia's coastline was triggered by a combination of nutrient runoff, particularly from the Murray-Darling Basin system and from a marine heatwave. I'm sure we all know just how catastrophic that algal bloom was. The economic losses have been really substantial—at least a $250 million loss to the economy in South Australia. That's about $100 million losses in fisheries, a $46.8 million blow to tourism, and $100 million in government relief grants. That's just one example of the kinds of risks to our economy of biodiversity neglect. On the flip side, studies have consistently shown that there are substantial returns when we invest in nature. Investing in nature in cities—my pet topic—increases real estate values, reduces energy costs and lowers public spending on stormwater. Retail strips with more biodiversity—not just green—have more foot traffic and more people buying stuff. The rate and consistency of occupancy of commercial buildings is much higher if you have green walls, green roofs and access to nature. The health benefits of nature in cities are highly compelling: one example of many is a research project led by the University of New South Wales, which estimated increasing local canopy cover to 30 per cent in urban areas would reduce cardiovascular disease related hospital costs by approximately $19.3 million per year for every 100,000 residents. Links between nature and productivity extend to agriculture. There's a recent study by our colleagues at La Trobe University that found that livestock farms with higher levels of natural capital were up to three per cent more productive than farms with the lowest levels of natural capital. This is really significant when you consider that our agricultural productivity in Australia has grown by just 0.2 per cent per year on average in the last decade. I'll hand over to Lis now, who is going to run through our key recommendations super quickly. CHAIR: It'll have to be pretty quick, because we've got questions. Senator McKENZIE: You've got the opportunity to put in submissions. The whole point is questions. CHAIR: Just take one minute. Ms Ashby : We're consistently underinvesting in nature protection—we're investing about 15 per cent of what is needed. We're calling for a lot more to be spent—that would be one per cent of the budget—to achieve protection of nature, restoration and addressing species crises, including by doing actions such as invasive species management and restoration of degraded land that can provide employment opportunities for people. I want to highlight that, in contrast to that nature spend, where we're spending less than $1 billion per year on nature protection, we're spending $26 billion a year on biodiversity-harmful subsidies, or about four per cent of the federal budget. Although the government has made international commitments to address environmentally harmful subsidies by 2025, and to identify them and reform them by 2030, that's not progressing. We're calling for an independent assessment by an organisation like the Productivity Commission to look at what harmful subsidies should be phased out, what should be reformed and what might be retained. That provides a double dividend both for an opportunity to invest in that underinvestment in environmental protection and to remove those that are encouraging overinvestment in harmful activities. We'd like to table our report on that as well. CHAIR: Thanks. I have three areas of inquiry. I'm just going to put the questions, and if people want to make a contribution then we'll take their contributions. They're about three quite separate issues. The first is the invasive species issue, which I think will be known to all of you in different ways. What do you think would be the key elements of an invasive species policy? I'm sure you all have a view. We'll go to the Land Conservation Alliance first. Dr Gunn : We'll defer to some other key stakeholders, obviously—the Invasive Species Council and others who are not on the call—who have very clear and strong policies around invasive species management at a national level. As you've flagged, invasive species are an absolutely critical threat to our productivity and our biodiversity, and there are essential strategic pillars around which to manage invasive species. It's really important to have extensive and strategic coordinated responses to invasive species management and to have really targeted investment for the long term around key invasive species issues. There are a couple of high-level elements of that, but absolutely it's long-term investment and significant investment and really thinking about both eradication and reducing risk of invasive species management in a coordinated and strategic way. There are specific issues regarding different particular invasive species, as you'd know. Michael might have some other considerations. Mr Cornish : I would simply add that sustained investment for managing invasive species is quite critical. That's often the problem with securing government funding: it's done in bite sized pieces for a period of activity, but then that doesn't lead necessarily to a long-term decline in the invasive species pressure. The earlier you can work on that eradication curve that the Invasive Species Council refers to—we can provide you some links, if it's helpful, out of session— CHAIR: We have all that. I just wanted to know your perspective. We'll go to the Climate and Biodiversity Foundation. Dr Henry : Like Dr Gunn, I would defer to the Invasive Species Council on what should be targeted. The key question, I suggest, is how it's going to be funded. We're talking about a lot of money. It's either going to be funded by governments—what I mean by that is taxpayers, probably future taxpayers, given that just about every government in Australia is running a budget deficit; that's one option—or the second option is to have it funded by the private sector. But if it's going to be funded by the private sector, we're going to need new instruments, instruments that we presently do not have. I'd suggest that your committee have a look at what we can do to help develop those instruments that can apply private funding to dealing with invasive species. Senator McKENZIE: To follow up on that, yes, we've got invasive species already present on our continent, but would that include strengthening our biosecurity arrangements to halt new invasive species? I know there was a plan under former governments to actually have the private sector—the importers, shall we say, that are bringing the risk in—fund stricter border controls. Dr Henry : Absolutely, 100 per cent. Dr Gunn : It's absolutely critical—those border security controls. The evidence shows us that the costs of eradicating invasive species once they're here are far more than the costs of holding them back from arriving. CHAIR: Are there obvious options for funding instruments that could be applied here? Dr Henry : There's one that I would suggest we have a good look at. As you know, under Australia's climate policy, land based Australian carbon credit units are being developed, and at scale. They face substantial headwinds, of course, for a variety of reasons, but nevertheless they're about the only instrument we currently have for providing a flow of private finance into the Australian landscape. At the moment, that private finance is directed by the willingness of purchasers of ACCUs to offset their carbon abatement obligations. It seems to me that it is possible to develop a scheme which provides premium value for ACCUs that not only sequester carbon but also achieve biodiversity enhancement, and dealing with invasive species looks like a pretty good target area for carbon plus ACCU. CHAIR: That's very helpful. Thank you. Ms Lassen : As the senators likely know, we have a network of 54 natural resource management organisations right across the country created in response to inefficiencies in the late 1990s in the delivery of the federal environment and biosecurity and sustainable agriculture spend. We would endorse the idea of leaning on existing institutional infrastructure that has been set up and invested in for many years and using that infrastructure, which is right across the country—it does not overlap but covers every part of the continent—with all the partners to send the money for invasive species and biosecurity control to the areas where the local communities and regional areas know it's needed most. I'd also mention the centre for invasive species control. They also partner with industry, and I think there are opportunities, particularly for looking at innovations, for them to have further partnerships with industry to address incursions. NRM Regions Australia has been funded by the federal government for the last three years for a biosecurity community of practice and knowledge hub. Unfortunately, that funding has just run out. We've been unable to find further funding for that. But we need investment in that knowledge brokering and in the prevention, which we all know is much cheaper than cure. CHAIR: Does anyone else want to jump in on this invasive species issue? Ms Ashby. Ms Ashby : I agree with what everyone said, but I think that it's important to talk about the process by which invasive species come into the country and to deal with issues such as biosecurity but also to recognise that things are changing fast and that there are new avenues for introduction to do with trade through packages and things that aren't the same shipments that we used to have before. The way that things are moving through the country has changed through time as we use a lot more ecommerce. I don't know if we're keeping abreast of all of that. I also think that, once it's established in the country, we really have to be thinking about prioritising through things like bioregional planning, integrated pest control and opportunities that arise through particular events such as fires that allow us to do much more effective eradication events in key areas. That's what Victoria has been doing a little bit of. Post their fires, they have a bit of money to go in and do aerial control of deer, which they can't normally do if there's significant forest cover. But that needs to be available, ready to go. The other element is that there are these threat-abatement plans that are species by species. They can't be used in isolation, because the NRMs that Marnie talked about would be more successful if they looked at species together in a landscape—not just picking off foxes and then benefiting the cats, for instance. But, at the same time, those threat-abatement plans have very useful information about specific species interventions. For instance, it's only recently been announced that we're exploring new biocontrol for rabbits because we're seeing that the past investments in myxomatosis and calicivirus are no longer effective, so you can't ignore those elements either. We could just be investing in landscape and avoiding those species-specific interventions that are also required. If we don't invest early enough, then that research takes a considerable amount of time. At the moment, we've really backslid in terms of our rabbit numbers. Also keep in mind that what we see in one period of time might change. In drought conditions, numbers drop. And what we're seeing with the mouse plagues and things like that is that suddenly we say, 'Oh my gosh. It's out of control. We weren't really staying on top of this.' CHAIR: What do you think about the idea of expanding the ACCUs to deal with invasives? Ms Ashby : I think that it's really beneficial to have private flows of money. But I guess my concern with some of these mechanisms is that when we're talking about where people invest through private markets, a lot of people might volunteer to say, 'I'm willing to take cattle off my land to allow natural regeneration' and things like that, but it has to be embedded in a broader landscape. It's just like when private farmers do pest control and you have one farmer who's really on top of it, but his neighbours aren't. The challenge with any of this is that integration and coordination because the pest species generally don't follow these firm borders, and that's both between properties and between different states. Senator McKENZIE: Can I just ask—sorry, Senator Bragg— CHAIR: Go. Senator McKENZIE: But it's often said in regional communities the worst neighbour is your state government managing the forest or the bush that's butting up onto your property, whether it's wild dogs, every manner of pest, pigs et cetera. Is there something more rigorous so that we can get the managers of our Commonwealth forest holdings to be more serious about feral pest management to assist the private sector on farm issues? Dr Henry : Can I say something here? This feels to me like a Dorothy Dixer! Senator McKENZIE: I can assure you, Chair, it's not. We haven't colluded! Dr Henry : Here's the thing. It's kind of ironic. As you would know, there is, currently sitting before the Australian parliament, a new carbon method called the improved native forest management carbon method. My understanding is that your party is set to propose a disallowance motion for that improved native forest management carbon method. That improved native forest management carbon method is available for those who manage the native forest public estate. Any state government that uses that improved native forest management carbon method to generate carbon credits will be legally obliged to manage those forests under contract law, and Australian government law, to deal with invasive species for 100 years. Yes, there is a way of doing it. Do not disallow the INFM. Senator McKENZIE: I'm sure that's not the only reason we're going to be looking at disallowing that particular mechanism, Dr Henry. If you really want to go to the Labor and the Greens policy positions around native forestry, harvesting et cetera, I'm very happy to have a conversation offline about that. Dr Henry : Yes, that'd be good. Dr Gunn : If I can also just respond back to the question. CHAIR: Yes. Dr Gunn : When we talk about landholders, 60 per cent of Australia is privately managed. There's a huge opportunity, and a need, to incentivise support and enable landholders all around the country. They can look like all sorts of different things. They can look like a farmer, a First Nations landholder or a conservation landholder, but they all have a critical role to play in, firstly, tackling this invasive species challenge, as you've identified, but also managing our land for reducing the impacts of climate change, for building resilient landscapes, for producing our food and for managing our unique biodiversity in all its different ways. Incentives for landholders to be able to deliver on all of these critical issues are really important. I agree wholeheartedly with using existing infrastructure, and that might look like investing through NRM regions. It might look like investing through the state based covenanting organisations that protect biodiversity and provide stewardship payments to landholders. It might look like investing in different agricultural stewardship programs, Landcare Australia, among many others. There are a number of incentive programs already designed to support landholders right around the country to be able to manage our land. I'd also just like to point to the fact that, when we talk about our national parks, which are also critically important for productivity, and for tourism income that comes into the country, invasive species are a real challenge for those areas as well. What we know is that more than 50 per cent of our protected areas of our national parks are managed by First Nations communities and are largely also across desert country. Investing in Indigenous protected areas is also really critical for invasive species management. CHAIR: Thanks for that. I might get you, all three organisations, to provide on notice any further ideas you have about different funding instruments that could be deployed here. The ACCU idea is an interesting one, but there may be other ways, as you've just outlined. I'll get you to take that on notice. There is another thing I want to ask you about, which is quite separate. You may not know about this, but there was a Senate community affairs report into microplastics recently, and there's been a lot of debate generally about the recycling of EV batteries and other things. But there also appears to be a lot of concern about recycling policy in general in Australia at the moment. I note that I'm always reluctant to entertain the idea of more regulation. I want to get people's views about one of the recommendations that the community affairs committee made. I'll read the recommendation out; it's not very complicated. It is recommendation 10, and it says: The committee recommends that the Australian Government work with state and territory governments to consider how to expand extended producer responsibility schemes to expand and harmonise product stewardship legislations and accelerate the transition to the manufacturing of products that are more durable, easier to recycle— blah, blah, blah. But the main point is really around this extended producer responsibility idea. I might get all your views on that, please. Feel free to jump in. Dr Henry : Stunned silence! The ACBF hasn't done any work in this area other than in conversation with you. I'm aware of your interest in it, and it's obviously a huge area, but we don't have any expert advice at this stage. CHAIR: Thank you. Prof. Bekessy : Likewise, the Biodiversity Council hasn't really focused on this issue. But, clearly, microplastics and other kinds of plastic pollution are a big problem for Australia's biodiversity, so I think any mechanism that can minimise the amount of those materials entering the environment will be beneficial not just to biodiversity but to industries like fisheries, aquaculture and the like. Dr Gunn : We don't have further comments on that. CHAIR: Okay. Senator Darmanin. Senator DARMANIN: Thank you all for coming. Unfortunately, I missed the earlier discussion with this group of people, so I hope that I'm not repeating—I haven't had a chance to look at the transcript closely. You would probably agree—Dr Henry, this one's probably for you—that, in terms of how we measure productivity when it comes to climate, there's a lot of literature that talks about fossil fuels appearing highly productive because they provide cheap and dense energy, but many of the environmental costs are not reflected in the statistics. If you subscribe to this view, it clearly creates a risk around what our productivity measures are, overstates the contribution of fossil fuels and understates valuing the transition to cleaner energy sources. I wonder if you could talk a bit about how we could look at measuring these things differently and what we might be able to learn from other countries on the question of how we measure productivity when it comes to climate. It's just a small question! If this was covered earlier, feel free to add in— Dr Henry : Yes. I'll provide a short and obviously very partial response to the question. It is certainly the case that the way that we measure productivity is highly distorting, if one wants to use productivity as an index of some sort of improvement in human welfare. To give you an example, every tonne of thermal coal that is dug out of Australia, exported and burned overseas and contributing to climate change—every tonne of that is added to Australia's gross domestic product in the quarter in which it's dug out of the ground and exported. Clearly, the contribution that that makes to the welfare of Australians is not measured accurately, or maybe not even at all, by the value of the exports of thermal coal. For a start, most of the revenue doesn't ever go to Australians, because a lot of the coal exporters are big multinational corporations and most of the shareholders are foreigners. Of course, the same is true of LNG. Australians are, of course, bearing the costs of a changed climate, just like everybody else is around the world. But Australians are not getting most of the income attributable to those exports. So there's certainly an issue there. It's not impossible to take account of these costs and benefits in a more rigorous way in an assessment of the benefit to Australians that comes from the exploitation of our fossil fuel resources and other things that contribute to climate change. On the other hand, it is quite difficult, I would suggest, to factor into our current measures of productivity the implications for future economic growth of carbon pollution that's already occurred. It is quite conceivable that, if we do not act globally to reduce emissions very substantially in the first half of this century, we will experience decades and decades of negative productivity growth for reasons that we've already discussed this morning. But trying to figure out how big those negatives are right now would be extremely challenging and contentious. Senator DARMANIN: Is the answer, then, to instead think about how investment in cleaner energy contributes to the Australian economy and to productivity? Is that an easier—I mean [inaudible]— Dr Henry : That's part of the answer, but, look, the United Nations working group on the System of National Accounts has been exploring these questions for a couple of decades now. One proposal that probably makes as much sense is to subtract revenue from or attributable to fossil fuels from gross domestic product completely. The reason is that, whilst it is true that income or at least cash is generated by digging stuff up out of the ground and selling it, you've got a negative impact on the nation's balance sheet at the same time. If we were a private corporation, we would not regard this as earnings at all; we'd say it's an asset sale. And, if it's an asset sale, perhaps it shouldn't contribute to gross domestic product at all. There's a lot of support among statisticians and economists generally for that proposition. That would be a quicker way of dealing with it. Senator DARMANIN: Thank you. Ms Ashby? Ms Ashby : I want to highlight one of the challenges for us when we're talking about these complex systems between what we measure versus what's important. One of the challenges for us is often that, for instance, natural environment values aren't well measured. I think that's been touched on with the environmental accounts. But I also think there's a problem also with the timeframe in which we measure these things. One of the things that we see over time, of course, are these long-running declines in biodiversity. We have these long-term impacts from climate change, and we're not really looking over those time horizons. For instance, if you look at a short time horizon, there's significant research that talks about disaster events. If you measure it improperly, you can actually claim that there's a lot of economic activity post a disaster event, because a lot of people are rebuilding things. So you can say there's a big spike, for instance, of labour productivity, but no-one who's thinking about it sensibly goes, 'Well, that was beneficial to the economy—having these big disaster events.' So I think we need to think about that more holistically and understand those interacting factors, and that goes to something I think we need to touch on with something like invasive species management, which is that governments seem very poor at maintaining our assets, because it's not very announceable. It's not a ribbon-cutting activity to be able to say, 'Yes, we've been doing a great job regularly maintaining our assets.' That's where a lot of our things fall down: we're not treating the natural environment as an asset that we have to maintain, and we're not measuring the impact of things like climate change as degrading the value of that asset over time. So I think sometimes we've got to be really careful about trying to shoehorn, say, issues to do with the natural environment or even wellbeing into simple productivity measures that aren't fit for purpose and might be measuring the wrong thing. Senator DARMANIN: Thank you. There are a couple of people— Prof. Bekessy : I've got a really quick comment if that's possible. Thank you very much, Senator, for your question. I will just add to this that I think the private sector has a key role to play as well, in reporting and actually disclosing impacts, particularly on the natural environment. We've imposed mandatory disclosures for climate, but there's a real opportunity in Australia for us to follow the international lead and have a goal by, say, 2030 that we should be demanding mandatory disclosures for all nature related impacts and dependencies from the business sector as well. Senator DARMANIN: Ms Lassen. Ms Lassen : I would certainly support the point around mandatory nature related financial disclosures. I'd also respectfully remind the committee of the federal government's Measuring What Matters framework, which came out in 2023. Specifically, it has a number of wellbeing themes, including 'Sustainable: a society that sustainably uses natural and financial resources, protects and repairs the environment and builds resilience to combat challenges'. I'd suggest that returning to that framework and continuing to measure those aspects of wellbeing would be valuable in this discussion. Senator DARMANIN: Thank you. I have one final question, about natural capital. I think a number of you referenced this in your opening statements. Could you just talk in a bit more detail about what you think the opportunities are here in Australia around natural capital and how that can contribute, because my sense is that we're not very developed in this area in our thinking. I am interested in your expertise and what you see of how this has evolved, perhaps, elsewhere around the world that we could learn from. Dr Gunn : I'm happy to just jump in quickly there. I'm back from a Churchill Fellowship back in 2022-23, and one of the things that I observed from that fellowship was actually how advanced Australia is, compared to a number of other countries around the world, in thinking about natural capital. There are some things that we should absolutely commend Australia's leadership on over time. I was travelling particularly around the US, and the conversations that I was having with landholders and with community over there didn't reflect the sophistication of the kinds of conversations that I was having here in Australia regarding natural capital. Australia has been leading in developing, I would say, some of the really important natural capital frameworks. We've had federal and state government coordination around natural capital infrastructure over many years. We've got leading organisations who have been advancing monitoring and evaluation frameworks. We've got the food and farming industry, which is really leaning into understanding, measuring and monitoring natural capital in a very meaningful and scalable way, and we have measurement frameworks that are framing up to be really useful at those different scales. I would say that we need to continue to lean into the leadership around understanding, monitoring and measuring natural capital. There are some fantastic reports that are being produced that are showing and demonstrating that, by understanding our natural capital and investing in that understanding and then in the management, monitoring and improvement of that natural capital, we're seeing improvements not just in biodiversity and natural capital but also in productivity and profitability for landholders. There are some really important reports that we can point you to regarding that. Senator DARMANIN: If you could, on notice, provide some of those key reports, that would be very helpful. Dr Henry : I was going to say much the same thing, although Dr Gunn has done it much more eloquently than I could have. I don't think it is true that Australia is a laggard in understanding the importance of natural capital, not in respect of academic literature nor in respect of on-ground practice. We've got a rich history of farmers and other landholders being actively engaged in the management of natural capital and understanding that that's exactly what they're doing. By the way, I have to say that NRMs have had quite a lot to do with this over many years. Senator DARMANIN: Very good to hear. Prof. Bekessy: I think there's an opportunity for Treasury in this country to start capturing that information more effectively and to report back to the Australian public on what the return is on investment in natural capital, and on what the risks are to our economy of nature loss and ecosystem collapse. They're things that are a little bit hidden at the moment. Hopefully, if you take one message from this session today, the message is clear that return on investment is high and that the risks to the Australian economy of not investing are significant. Senator DARMANIN: Thank you. CHAIR: Senator Ananda-Rajah. Senator ANANDA-RAJAH: I want to turn to the nature repair market. As you know, we introduced this early last year. It's, in theory, designed to protect and restore nature, crowding in private investment, because government doesn't have all the money to do this on a vast continent of ours. How do we get this framework working better? What do we need to consider? Mr Cornish : Apart from the fact we are essentially still in design phase for a lot of the methods under the nature repair market—we're still building it, as it were—the biggest question is where the demand will ultimately come from. This is where ideas like Dr Henry's—whether it may be that all ACCUs ought to be nature positive or whether nature repair certificates could be attached to ACCU projects. Ultimately, there will need to be some sort of regulatory driver to drive demand unless we simply rely on government procurement in this space. That may change over time, as natural capital markets become more sophisticated, but in the short to medium term we're not going to get significant demand unless we have some sort of regulatory driver. Senator ANANDA-RAJAH: What would that look like? Mr Cornish : We have a safeguard mechanism for carbon. It could well be that there's a safeguard mechanism that relates to nature. That's just at a conceptual level, but there are lots of different ways it could be done such as the example I gave of Dr Henry's, around nature-positive ACCUs; that's another approach. There is some hope that when we have nature related financial disclosures—at the moment they're not mandated in Australia. There's scope under the legislation that was passed a couple of years ago for climate to regulate in that space. Ultimately, we expect there will be mandatory nature related financial disclosures; that could well drive some demand, but it's not clear yet exactly to what extent. The other source of potential demand is the regulation that's happening in overseas markets such as with the EU's deforestation regulations, which will very soon be having impacts upon cattle in Australia and other key commodities that they're targeting. We can expect that those sorts of jurisdictions will bring in more rigorous metrics or requirements around nature over time, and the nature repair market could be a way of being able to deliver or evidence that we meet the standards required in order to export to those markets. Senator ANANDA-RAJAH: Can you elaborate briefly on what the EU are doing and how that impacts our beef industry, on deforestation? You just mentioned that. I've not heard this. Mr Cornish : I might defer to others on the call. In brief, the EU has a regulation that requires that you demonstrate that there hasn't been deforestation related to certain key agricultural commodities like cattle and soy—there are others; I don't recall them all off the top of my head—and there will be certain penalties, as I understand it, if you can't demonstrate it I can provide more details on notice. It's not top of— Senator ANANDA-RAJAH: That's fine, thank you. Do others have a comment on this? Ms Lassen? Ms Lassen : I would certainly reiterate what Michael said in terms of demand being the single biggest issue around the Nature Repair Market. But then, even if there is demand, there needs to be a really careful consideration of extension and outreach to support landholders to make decisions around all the different markets that are available to them and how that affects their own productivity on their land, because just having the market doesn't mean that they will actually come and engage in it. It's very complex, as is the carbon market, as is the biodiversity offsets market, even leaving aside the markets they're actually working in, in terms of where they're farming. We're currently doing a project funded by the federal government to look at best practice outreach and extension. We know, at a really high level, already that you need to be delivering property and regionally specific advice. So that whole ecosystem needs to be part of the delivery of these markets to make sure they're delivered efficiently, strategically and in line with government priorities, from the federal right down to the regional. Senator ANANDA-RAJAH: Dr Henry, do you have a comment there? Dr Henry : Yes. I could spend all day on this topic, honestly. Senator ANANDA-RAJAH: Please don't! I've got one more question. Dr Henry : No, just a couple of minutes. I agree, obviously, with Michael's analysis of the issue here. It is largely finding sources of demand to finance nature improvement on ground. There are a couple of ways that have already been mentioned that have to do with the utilisation of ACCUs—that is, by bringing together climate policy and biodiversity policies. One would be simply to mandate that all land based ACCUs have to be nature positive and then have some system for measuring the nature-positive increment. You could do that. That's one possibility. Another would be to levy some sort of royalty on all ACCUs created from the Australian landscape and to use the revenue from that royalty to fund nature repair and nature restoration. We've done a lot of work on that topic, using the LUTO model that was developed initially by the CSIRO some years ago now and enjoyed worldwide acclaim. The modelling that we have had done suggests that it would be possible for Australia to meet its commitment to net zero by 2050 in a way which also has about $7 billion a year spent on nature repair for 30 years. There would be enough revenue generated. It would impact, of course, land tenure—that is, some of what is presently farming land would be converted to nature restoration. We think about 10 per cent of prime agricultural land probably would be, but Australia's agricultural production would nevertheless continue to increase. And, by the way, Australian farmers would have their profitability increased, on average—this is across all 85,000 farms in Australia—by a 12 per cent uplift in productivity, in profits, through income diversification. So, yes, there are certainly models here that are well worth investigating. But, as others have said, there is a need to do a lot of on-ground work involving communities; a lot of decision-makers have to be involved. And I would emphasise the important contribution that could be made by bioregional planning in this process. Those new tools that have become available through the reforms of the EPBC Act at the end of last year are in their infancy. There's an opportunity now to develop some bioregional plans that are really smart and do both—well, do more than both: assist with the rollout of renewable energy projects that are presently stalled in many parts of the country via social licence for that or secure social licence for that rollout and, at the same time, find places for the restoration of critical biodiversity, critical habitat and ecosystems under threat and find good places to sequester carbon that enjoy community support. I would make those points. Prof. Bekessy: I would like to add a brief comment, which is that if the goal of the Nature Repair Market is genuinely to repair nature then I think what we must realise is that it cannot be funded through the destruction of nature. I think including biodiversity offsets in this market is a really dangerous pathway to follow. I can say this because government funded reports around the country, including those funded by the federal government, have consistently shown that biodiversity offsetting is not a successful way to protect nature. In fact, it fails nature consistently. That's one danger to avoid. If we want to have a successful Nature Repair Market, it can't rely on the destruction of nature elsewhere. Senator ANANDA-RAJAH: I've travelled around regional Victoria, and I must say I've seen a lot of farmland that's gone fallow. Farmers are ageing out of their work in some places, and it's returned to nature. It's in the Mallee as well—a lot of land—and other parts are very productive and doing well, so I feel there is an opportunity here. Prof. Bekessy: Yes, there's an opportunity, but the point I'm making is that if the money to repair that land is coming from the destruction of land on the fringes of our cities to build houses, for example, it's not going to succeed at repairing and protecting Australia's biodiversity. It's not an instrument that works in that regard. That's because we know that we consistently lose certain types of biodiversity when development happens and then we gain other types of vegetation, so we're not having a net gain in biodiversity at all. I can go into it further if you like, or I could provide you with some— Senator ANANDA-RAJAH: No, it's fine. Go ahead on notice, if you want to provide some materials. Ms Ashby? Ms Ashby : I think it's really important, as well, for us not to start with an instrument and look for what opportunities arise from that. If we're looking at issues to do with communities declining because of loss of economic opportunity, then that's something we need to consider and not try to make this instrument or methodology—the approach of the Nature Repair Market—a success by looking at all these avenues. If it's not well thought through, it won't be the most effective and efficient way of achieving our goals. The Nature Repair Market, in delivering for biodiversity, is still a bit untested. We have to have an open mind as to whether it will achieve that goal rather than try and weight it with all these other things that might distort how it goes. One of the things is that when we're bringing carbon in, as well, it complicates things, because approaches that deliver a lot more carbon may not be the things that are the highest value in degraded landscapes or where we need to invest in biodiversity. That's the same when we're considering rural communities. That's where things that are more holistic, like bioregional planning, are more interesting spaces to explore what those opportunities are. I'd be wary of trying to make the instrument or method a success rather than looking at the best way of solving these problems and potentially considering them together in an integrated way, like bioregional planning. Senator ANANDA-RAJAH: I'll leave it there. CHAIR: Thanks very much to all our witnesses this morning for being with us and providing your time. I remind you that answers to questions on notice are due by 12 August. You go with our best wishes..