Economic growth is considered important compared to environmental protection by firms, consumers and governments for the following reasons:

Economic growth gives firms an opportunity to earn more profits due to high level of economic activity.

Economic growth gives the consumers high income and there fore increase substantially their standard of living measured by per capita income.

Economic growth gives the government more tax revenue as well overall development and capacity of the economy. It also increases the efficiency in producing goods and services. In addition, economic growth produces lower unemployment and governments prefer lower unemployment.

Because of these above reasons, in Australia Environmental issues takes a low priority compared to other macroeconomic objectives such as high economic growth, inflation and unemployment compared to environmental protection.

In addition, the firms do not normally take in to their cost of production the environmental costs. That is, there is a difference of private and social cost which is shared by the society as a whole. If  the government regulates pollution by banning or by any market instruments to control environmental externalises, the firms will pass on these cost to consumers. As well,  they will reduce their production levels and there fore in the short term produce more unemployment. In other words, if environmental cost is incorporated in the firm’s costs it will lead to low economic growth and lower standard of living in Australia.  

In a market economy, demand and supply allocates resources and they don’t take in to account environmental cost because they are social cost and only private costs are taken in to account. That is, the negative environmental externally is a market failure in a market economy like Australia.

As discussed above, at least in the short-term there is a trade off between economic growth and environmental protection. That is, in Australia as discussed above high economic growth is preferred and due to the nature of  environmental costs and difficulty to incorporate these costs in to the production costs of  firms and  profitability of companies and there fore, economic growth and environmental protection is in conflict but not supplementary.

High economic growth also leads to the degradation of land and unsustainable depletion of renewable and non renewable resources.  Mostly, all manufacturing and modern processes produces pollution in one form or another. For example, the use of fertilizers to boost food production leads to poor water quality and other problems of biodiversity.

That is, high economic growth due to more use of resources produces green house gases and other pollutants and increase the level of environmental negative environmental effects compared to positive environmental effects. In other words, high economic growth as explained above is not compatible with the principles of sustainable development to protect the environment with regard to inter-generational equity. Sustainable development is a way to reduce waste and to reduce the depletion of resources so that the next generation does not suffer more than the present.

The provision of public goods such as health and other services by government also increase the use of resources because the consumers are not priced. As a result,  they may use the resources excessively and there fore they also can lead to resource depletion and waste and  contribute to negative environmental effects.

In addition, environmental externalises show their effects on a longer term and policies to protect the environment also takes a longer term compared to the political cycle in Australia,  governments take a short-term view and there fore ignore the longer term issues of environmental protection.

However, due to global nature of environmental issues such as green hose effect international community is taking action by international means to have agreeable targets via Kyoto conference and internal carbon trading schemes. For example, the current Rudd government is proposing to introduce by legislation a carbon emission scheme as well as the US government also taking steps in this direction.

However, the industry and some consumer groups are not supporting these proposals because of the current state of the economy and its impact on employment and living standards and viability of firms at least in the short term.

As opposed to industry and consumer groups, environmental conservation groups argue the targets are very inadequate and there fore it will be disastrous to the environment and they point to the fact the economic growth cannot be sustainable in the longer term due to environmental cost affecting economic activity. This is due to energy costs, decrease in food production, health cost and other social costs. That is, in their view the cost of action is less than the cost of inaction and there fore environmental protection must be taken in to account with economic growth.

As explained above, at least in the short-term in Australia high economic growth is not compatible with environmental protection. That is, if economic growth is considered important by the government, consumers firms, and environmental protection takes a secondary role, then high economic growth certainly will negatively affect environmental protection as explained above.