He would not specifically buy into the debate about the government's carbon tax proposals, saying it was a decision for the Australian people and government.
"Around the world right now people are moving towards a low carbon economy as the future,” he said.
"The essential decision that you have to make is are you going over time to move to an economy that is less dependent on carbon.
"The only way you do that in the end is you put some sort of a price on carbon."
Blair is in Australia as part of a speaking tour. After Melbourne on Wednesday, Mr Blair hits Auckland and Brisbane on Thursday and Sydney and Perth on Friday.
THE US DEBT CRISIS
Blair said it was a "troubling and anxious moment" for the world economy with the US days away from a possible debt default.
Speaking after President Barack Obama appealed to Americans to press Republicans to compromise, warning that a default would risk "a deep economic crisis", Blair said he was hopeful a deal would be reached.
"Everyone hopes and believes that shortly before midnight the deal will be done that allows the situation to stabilise - because obviously it is dramatically important for everyone that it does.
"What President Obama is trying to do though is correct in saying he wants a big deal that actually sorts the problem out, not one that kicks the can down the road, actually not very far down the road either, because that's not going to help anyone,” he said.
EUROPE AND THE GLOBAL FINANCIAL CRISIS
Blair, who was the British leader from 1997 to 2007, said Europe was also dealing with change as a result of problems thrown up by the global financial crisis.
"The financial crisis may have accelerated the need for change, made it more urgent, but the need for change is there and has happened really as a result of things that have been building up over a long period of time," he added.
THE PHONE HACKING SCANDAL
Blair, who had close ties with media tycoon Rupert Murdoch while in office, said it was important to get to the bottom of the phone hacking scandal but doesn't know if his own calls were intercepted.
Blair told reporters he didn't have a mobile phone while he was in government but the UK media has reported Mr Blair raised concerns messages he left on other people's phones may have been intercepted.
He would not comment on how damaging the scandal was for Prime Minister David Cameron. He added the government needed to work out a right way of trying to get media relationships on a “sound footing” for the future.
The former Labour Party leader enjoyed the support of Mr Murdoch's British newspapers in the three elections he won.
He took power from the Conservatives in 1997 on the day the country's biggest selling daily paper ran the headline “The Sun Backs Blair” after 20 years of supporting the Tories.
UK media have reported that former Prime Minister Gordon Brown contacted police over concerns that his mobile phone may have been hacked while he was in government.
