New mobility could add up to $92 billion to economy by 2050

26 August 2019 3 min. read
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New analysis by L.E.K Consulting and Cadence Economics reveals that new mobility options have the potential to boost Australia’s real gross domestic product (GDP) by more than $90 billion in the best case scenario by 2050.

‘New mobility’ is an umbrella term that incorporates a wide variety of changes that the global automated sector is going through, ranging from the transition to electric vehicles (EVs) to the advent of autonomous vehicles (AVs). Evolutions in transportation also include mobile applications that enable planning and arranging travel, and other facilitators.

In essence, much like most other domains of daily life, advancement in technology is shaping the day-to-day mobility of individuals. This increasing digital influence is having a disruptive impact on all modes within the transportation sector, from cars and taxi's to public transport.

Cost to user by transport mode

For the individual, new mobility options have the potential to make travel more cost-effective, environmentally friendly, efficient and safe. At a macro level, L.E.K Consulting reports that investing in new mobility could bring substantial economic benefits to the Australian economy.

Experts in Australia – particularly those from the professional services industry – have been examining the impact that new mobility is likely to have on the overall transportation landscape. L.E.K’s analysis – compiled in collaboration with Cadence Economics (now part of EY) – has provided fodder for these discussions.

The analysis highlights that new mobility could offer a boost of anywhere between $62 billion and $92 billion by 2050, which is between 2% and 3% more than the economy would grow without the value added injected by new mobility. The calculation is based on an assessment model developed by Cadence Economics.

Economic impact of new mobility

The computable general equilibrium (CGE) model takes into account four central economic benefits that new mobility is expected to offer, provided that adoption rates are high. These include higher labour force participation, insurance cost savings, greater labour force productivity, and savings to health care costs.

The model is built on the assumption of greater adoption, particularly in the domain of EVs and AVs, although these assumptions appear to be grounded in promising indications. For example, AVs are expected to be particularly prevalent among taxi companies, to the extent that somewhere between 25% and 45% of all AVs will be comprised by robo-taxis.

Meanwhile, the global move away from the internal combustion engine (ICE) is likely to have a strong impact on the Australian scenario. EV penetration is expected to skyrocket in Australia over the next few decades, taking the share of the ICE in overall sales down to 17% by 2050.

Using these expectations and indicators, the report predicts promising scenarios for the GDP and employment landscapes in Australia. For instance, employment is likely to increase by between 1% and 2%, taking the number of full-time equivalent additions beyond the 200,000 mark. As a result, labour force participation is likely to contribute the GDP growth, adding between $32 billion and $44 billion.

Reduced accidents will add between $30 billion and $46 billion, while improved labour productivity and lower insurance costs will combine to contribute 87% to 89% of the GDP growth.