The $50 Note We Keep Walking Past on the Cost of Living

As the year winds down, I’ve been reflecting on what we’ve actually learned about electrification, housing, and retrofit, and why progress still feels harder than it should.

Australia has more than 11 million homes and over one million commercial buildings that will need to be upgraded if we are serious about meeting our climate and energy targets. The technology exists. The capital exists. And on paper, many of these upgrades make economic sense.

And yet, progress is uneven at best.

There’s an old economics joke that feels uncomfortably relevant. An economist walks past a $50 note lying on the footpath. When someone asks why he doesn’t pick it up, he replies, “That can’t be real. If it were, someone would have picked it up already.”

Energy efficiency has been treated like that $50 note for decades. The benefits outweigh the costs. The paybacks stack up. And yet, at scale, the market keeps walking past.

So the more useful question isn’t whether the $50 note exists. It’s why no one can reach it.

From a standard economic perspective, this behaviour isn’t puzzling. For a large share of households, retrofit decisions sit behind binding liquidity and borrowing constraints. Even asset-rich households face limits on how easily and cheaply they can mobilise capital for discretionary upgrades. At the same time, households are rationally risk averse when costs are immediate and certain, while benefits are uncertain, delayed, and dependent on prices, performance, and tenure. Under those conditions, choosing not to invest is often the economically rational response. Expecting widespread retrofit uptake without changing the financing structure isn’t optimism. It’s a category error.

Behavioural economics reinforces this. Loss aversion is real. Status quo bias is powerful. Even when upgrades make sense over time, the certainty of paying today looms much larger than potential savings tomorrow. Split incentives in rental and strata settings only make that inertia harder to shift.

Recent policy experience reinforces this point.

Programs like the federal Cheaper Home Batteries initiative show very clearly that when upfront costs are reduced, households respond. Uptake has been strong enough for government to expand the program to around $7.2 billion, targeting roughly two million households.

That’s a success story. But it’s also revealing.

Even at that scale, the program will reach less than 20% of Australia’s 11 million households, and it’s being paid for by all taxpayers. Batteries are a relatively simple, single-technology decision. Whole-of-home retrofit is not. It involves multiple upgrades, longer timeframes, coordination, and much higher upfront costs.

Subsidies can kick-start uptake, but they don’t easily scale to the full housing stock, especially when the task is to upgrade millions of homes over decades rather than hundreds of thousands over a budget cycle.

That’s where finance design becomes unavoidable.

Traditional bank finance is essential to the housing system and always will be. But even with rebates, concessional loans, and blended finance, traditional products simply aren’t flowing capital into retrofit at anything like the scale required. That’s not a criticism of banks. It’s how credit models work. Small transactions, mixed asset quality, uncertain savings, and lower-income households don’t fit easily.

The UTS Institute for Sustainable Futures report, Property Linked Finance for Housing Transformation, puts this plainly. Existing policy and finance tools are necessary, but they’re not enough. Households are still left dealing with upfront cost, complexity, and fragmented decisions. Interest rate discounts help at the margins, but they don’t change behaviour at scale.

So how does the system break out of this loop?

This is where new housing enters the conversation, sometimes uncomfortably. Not as a substitute for retrofit, but as a way to learn. New homes offer clean transactions, standardisation, and speed. They let you test whether households will accept outcome-based approaches that remove upfront cost and replace energy bills with predictable, long-term payments linked to the property.

Seen this way, new housing isn’t a distraction. It’s capital formation.

If people are willing to buy a better-quality home with lower bills at the same price, that tells us something important. It suggests the barrier isn’t the outcome, but the way we currently ask people to pay for it. It also gives lenders and investors evidence based on real behaviour, not assumptions, and points to a scalable market where private capital can deliver more affordable, higher-quality homes that already exceed where building codes are heading.

The UTS report points in this direction too, recommending the use of new zero-net-carbon homes to help crowd in private capital and create the conditions retrofit markets need to scale.

This isn’t just an Australian problem, and it isn’t abstract for me.

This year I’ve spent a lot of time working on these questions both locally and internationally. In September, we launched the Global Property Linked Finance Initiative (GPLFI) at Climate Week in New York. The premise was simple. Across different countries, Property Linked Finance has emerged in isolation as a response to the same problem: traditional finance has struggled to support retrofit and resilience at scale. GPLFI aims to connect those efforts and accelerate capital deployment.

The numbers involved are enormous. Around $USD34 trillion needs to be mobilised between now and 2050, requiring roughly a fivefold increase in annual investment into a segment that, on paper, is already a rational investment.

That framing resonated. At COP30, GPLFI was formally recognised within the UNFCCC’s built-environment processes. For me, that recognition wasn’t about validation for its own sake. It was confirmation that many countries are running into the same wall. Capital exists. Targets exist. But the way finance reaches households and buildings isn’t working at the scale required.

At the same time, we launched the PLF Accelerator in Australia to focus on scaling what is already one of the few functioning Property Linked Finance markets globally. The intent isn’t to invent something new, but to take what exists, test what actually works for households, and reduce the cost and friction of upgrading buildings over time.

Seen from a global perspective, Australia’s experience isn’t unique. It’s just earlier.

If retrofit finance struggles to work for households in a mature, well-regulated market like Australia, it’s unrealistic to assume it will work by default in places with weaker banking access and tighter public balance sheets. That’s why questions of sequencing, capital formation, and consumer acceptance matter so much, both here and across the Indo-Pacific.

This has implications for how we think about sustainable finance more broadly. If the frameworks we promote assume traditional banking solutions will scale everywhere, there’s a real risk of disconnect in markets where those solutions have never worked. That’s not just a development issue. It’s a credibility issue.

As we head into summer, my takeaway is simple. The retrofit challenge won’t be solved by more capital, tighter regulation, or bigger subsidies alone. And it won’t be solved by pretending the system is already working.

It will be solved when finance is designed and structured around outcomes households actually value.

The next phase is quieter. It’s about evidence. Consumer acceptance. Willingness to pay. Real behaviour, not theory.

If we remove upfront cost and focus on outcomes, will households move?

That’s the question I’m carrying into the new year.