There does not appear to be a commonly held vision for Australia’s future for all to pull towards. Only recently has there been public debate on immigration and population, major components of the future. Federal Government policy sets the direction and scale of population and immigration, which implies a vision for the future that does not yet have public support. If asked, people would probably agree at base with continuing and expanding Australia’s world leading prosperity and liveability, contributing to wellbeing.
Unfortunately, government policy and plans are for very high, unavoidable cost which do not guarantee maintenance of prosperity and liveability. The embryonic debate on population and liveability indicates early alarm at the personal cost of the policy. People on lower incomes are unsettled by the low growth they experience. Everyday people want more everyday jobs and more growth of wages and salaries.
Governments’ policy and plans are for high immigration that turn Sydney and Melbourne into two large mega-cities of 8m each in coming decades. They will be ineffective. There is no apparent consideration by the authorities of a viable alternative that would add to prosperity and liveability, rather than debase them, and accommodate immigration and population increase: a mega-region. This would encompass all the cities along the east coast, connecting people by High Speed Rail (HSR) and high-speed communications.
One of the factors abetting the authorities’ plans seems to be anticipation of greater innovation by compressing people in mega-cities. Unfortunately, the cost is likely to be prohibitive for an uncertain, small extra benefit, if any. A mega-region would be much lower cost, direct and indirect or ‘external’, and achieve far more benefit than two mega-cities. It would build on Australia’s business strengths.
Prosperity and liveability
Australia is a very prosperous country. It is one of the highest per capita wealth in the world. Table 1 (at end of paper) shows Australia is third in the world after Iceland and a near second to Switzerland. It is twice as wealthy as other highly innovative countries and four times that of USA.
Australia is also one of the most liveable countries in the world. Melbourne is ranked number one of the top 10 most liveable cities in the world in Table 2; for 7 years in a row. Adelaide and Perth are included. Sydney was ranked number 7 in the 2015 edition. Brisbane has been included in the top 10 previously. Melbourne is already much the largest city of the 10 most liveable cities. Australian cities are the least dense of the 10 most liveable cities. World leading prosperity and liveability are serious achievements.
World cities are ranked by their innovation in Table 3. London and New York are the leaders of the top 10. Both are densely populated. Singapore, ranked 7, is the highest density and Boston ranked 5 is the lowest. Population size of the 10 most innovation cities varies from Tokyo 13.6m to Paris 2.2m. Neither population size nor population density are closely related to innovation performance.
The authorities hold out London, New York and Hong Kong as models (evidence) for the future of Sydney and Melbourne at 8m people, assuming growth stops. Table 4 shows Sydney and Melbourne ranked today with the three model cities. It is striking that Sydney and Melbourne are by far the most liveable cities. They are in the top 25 in the world for innovation. They have low population density compared to the others, especially to Hong Kong. The evidence is that a densified population of 8m is likely to reduce liveability dramatically, while not necessarily raising innovation, like Hong Kong with 7.3m people and ranked 35 for innovation and number 7 in the world for density: extreme densification.
Raising Sydney and Melbourne populations to 8m to gain higher, if not world leading innovation is likely to be illusory and greater density to be high cost in loss of liveability. The main Australian cities cover large areas, which adds to their spatial liveability and lifestyle appeal at present size, as shown in Table 5. Melbourne and Sydney are in the top 10% of world cities for population size today, before rising to 8m. Their city areas are in the top 4% largest in the world and their densities are in the lowest 10%.
Melbourne and Sydney are special. Their known benefits and lifestyle should not be lightly destroyed at great cost for highly uncertain benefit.
To densify Melbourne and Sydney for populations of 8m, governments have published plans for demolition of homes to house 8m more people without expanding their area significantly. This means 1½m out of some 2m of the total sound, single family, single- story homes with large back yards and garages on ¼ acre blocks in inner and middle suburbs are to be replaced by smaller, inner-city high-rise flats, and downsized 4 dwellings of 2 stories with regulated small yards and without garages on each cleared ¼ acre block. UK houses are half the size of average Australian houses at present. More single-story homes will be demolished to make way for nearby shops and services. Medium-rise flats will be built along tram/bus routes on demolished sites. More homes will be removed to create green spaces.
The cost of growing Sydney and Melbourne to 8m is huge. The cost is high for demolishing 1½m homes which adds to the cost of buying them and building 4m new dwellings for the 8m population increase in the two cities. Extra housing will have to be demolished and rebuilt for the 1½m displaced families of two on average, or 3m people. It is unnecessary and undue. The government cost of new freeways for circulating driverless electric vehicles (DEVs) to pick-up and set-down quickly is high (see below). The cost of refurbishing and expanding existing old water and sewage pipes for double the population is high. The cost of new high-rise schools, hospitals and other facilities is high in existing cities. The cost will increase exponentially, if the two mega-cities grow bigger than 8m in the longer term. Most of the ¼ acre blocks will disappear, and medium and high-rise flats take over. The suburban street networks will remain, and the area of cities will be much the same.
The largest cost is virtual, though very real to people affected. It is the loss of world leading spatial liveability in the cities to below that of London and New York with their good public transport systems. In London there is higher density, fewer cars per family, in a smaller area with smaller houses and back yards than in Australia. ‘20-minute neighbourhoods’, so desired by city planners here, are forced on it by its very high density. Few people walk for 20 minutes to the shops in London’s weather. They take the many frequent local buses, and often stay on board to the large, cheaper supermarket further away.
A rough, round-arm estimate to indicate scale of the real cost is attempted/hazarded below:
In the major cities-
If Sydney, Melbourne and Brisbane populations are increased by 4m+4m+2m=10m more people, and occupancy averages 2 per dwelling*, then 5m new units are needed:
At 4 units per ¼ acre block, 1.25m blocks with existing houses that must be demolished, plus say 0.25 more for green spaces, shops and services=1.5m blocks:
Land cost=1.5m blocks @ $667,000 each on average, total cost = $1trillion
Building cost=5m units @ $400,000 each on average, total cost = $2trillion
Total cost of providing dwellings for the extra 10m people = $3trillion
*Singles make up 30% of families and over 50% of families are single and couples in Australia.
NB. This excludes the extra cost of demolition of 1.5m houses, maybe some $billions. It excludes the high cost of more government infrastructure in existing cities: freeways, schools, hospitals, power, water and sewage pipes, sewage farms and extending the sewage pipe at Bondi Beach by 2 km for the extra 4m people. It excludes the disruption of building new public infrastructure for 4m more in the two existing large cities. It excludes inflation.
In the country-
Land cost=1.5m blocks @ $100,000 each on average, total cost =$150billion
Building cost=5m units @ $200,000 each on average, total cost =$1trillion
Total cost of providing dwellings for the extra 10m people =$1.15trillion
Plus, High Speed Rail cost, Melbourne, Sydney, Brisbane =$200billion*
Total cost in the country for 10m extra people =$1.35trillion, say $1.5trillion
The cost of settling an extra 10m in the country in large new cities on HSR is about half the cost in the major cities, including the means for rapid connection of people in city and country. It excludes the cost of disruption caused in the 3 cities by demolition and rebuilding, and the cost of lost liveability.
Worse, it excludes more demolition on ¼ acre blocks needed to accommodate the 3m displaced by the 10m new settlers. Those displaced by this extra demolition for the 3m need housing by further demolition and so on: an ongoing ripple of destruction, rebuilding, loss and cost. Some of the displaced would move to the city fringes and extend them further out. Some small high-rise residential buildings would be demolished for bigger high-rise buildings; another ripple effect. Government policy and plans are impractical, wasteful and ineffective in encouraging innovation.
There would be no ripple effect in the country. The lower land and construction costs in the country, the new facilities, the less than an hour commuting time and low-cost fares to the CBDs, the CBD and local jobs, and the life-style would attract settlers to new regional cities on the HSR line. Today, families are already moving to low cost country areas from high cost major cities, despite longer commuting time and higher commuting cost. The cost of roads and public transport in all the new cities is excluded, but may be less than $200b, a small part of the $1.5trillion and the additional +50% of government funds saved. If population grew towards 60-100m in the next 100 years, more new cities of up to 3m would be built at less cost on the HSR line in the regions to take up the increase, instead of clogging major cities.
Population and prudence
Governments have adopted population projections where increases cease after 30 or so years. Population growth is unlikely to stop. Australia’s population of 25m may double to 50m by 2050-60. It may reach 100m by 2100, while Sydney and Melbourne may grow to 10m, 12m, 14m or even 16m in that time, nobody knows: a potential time bomb. It is not prudent to build city infrastructure now that prevents this expansion or creates undue disruption and extra cost to replace or enlarge. Australian settlers built railways in the 19th and 20th century over 100 years ago for a population of 3-4m, which are still the core of rail services for the present 25m, with foresight. The same foresight should be employed today for cities and infrastructure construction. A mega-region for expansion would be prudent.
Public transport in Melbourne and Sydney is not going to be as good as London’s or New York’s in the future. It is insufficient for their 4-5m now. In past decades, funds for infrastructure were spent instead on welfare. To catch up on missing infrastructure for the bigger populations, welfare must be pared -back, or government debt increased substantially rather than cut back, or growth much accelerated, or a combination of these. More growth is preferred. Governments are building and plan more suburban railways, but not to double them for double the population, or more. They rely on future private DEVs to transport double the people to work in basically the same area of CBDs. This assumes that high-rise apartment buildings do not crowd out new office buildings. The intention is to press more people together in the CBD offices to stimulate more innovation. DEVs are unlikely to be effective in this.
Often, DEVs would be used instead of walking 20 minutes. They will not be parked or garaged. They will circulate 24/7 ready to pick up passengers. A couple of million ‘public transport’ DEVs incrementally replacing cars will cause greater congestion, on the road empty or occupied all the time. Company owners would pressure governments for more spending on freeways for quicker pick-up by DEVs.
At drop-off concentrated in the limited streets of CBDs, congestion will be like station platforms. The number of core CBD streets cannot change. They are a geometric limitation. Streets that were narrowed to deter cars will have to be widened again for better DEV access. CBD street parking will not be permitted. At pick-up in the evening, congestion will be even worse as more people leave together. Increased congestion will deter greater connection and innovation in the major cities.
Smart city technology
Smart technology and big data seem to be relied on by the authorities to lift digital liveability to compensate for the loss of spatial liveability. Most of the smart tech appears to be directed at sustainability, which is important, but has little effect on economic innovation and productivity. Smart tech is easier, more effective and lower cost to apply in new cities than retro-fitted to existing mega-cities. Reliance on a digital economy raises risk and danger of hacking, and the need for better security.
Behaviour and densification
The authorities seem to regard mega-cities as highly desirable, like London, New York and Hong Kong. It was announced in The Sunday Times in April this year that highly densified London is experiencing a new level of violence. The London murder rate has grown 40% over three years to exceed that of New York. These dense cities evidently are more violent.
Well regarded research more than 60 years ago showed that herds of deer and flocks of geese, normally free range, when forced to live close together, densified, become unsettled and violent. It was concluded that human behaviour would be similar. Japan, then one of the densest populations in the world, remarkably had little violence. It had developed over a long period strong cultural control not applied elsewhere.
Sydney and Melbourne are experiencing high density and high crime rates in some local areas already.
This is evidence for unrest that might be the future of densified Sydney and Melbourne mega-cities.
In essence, innovation starts with research and understanding of conventional wisdom. It continues with careful questioning the conventional wisdom of business and thinking of creative ways to improve it. It takes an enquiring mind, intelligence and courage. Innovation puts creative ideas into practice. Innovation produces new or better processes, goods and services. It may disrupt existing conventional wisdom or build on it. If successful, it improves productivity, expands businesses, creates new businesses, increases competition, stimulates more innovation, raises economic growth and generates more everyday and skilled jobs. It has always been so since the caves. Australia should foster, nurture and recognise entrepreneurs who make innovation happen. It should promote creativity and public acceptance and support of innovation. It should ensure there are the best incentives for innovation.
Everyone can contribute to innovation. Toyota, in its Japanese car plants in the 1980s, received 70,000 suggestions a year. It assessed each and put good ideas into practice and gave recognition and reward to the creators. It became a high productivity, low cost producer with job security. Today, there is strong international competition driving innovation, which makes for greater prosperity for all.
Australian leaders must produce conditions that encourage people in work to put up ideas for innovation in their employment and create their own job security; and conditions economy wide of more and better jobs for those who must move on and for those who aspire to improve.
Conventional wisdom about encouraging more innovation is that populations should be clustered and closely connected at work in the CBDs of cities, which is correct. The authorities believe that expanding cities into mega-cities will stimulate more innovation, for example, Melbourne and Sydney at 8m. This has worked in the past, but not today. Conventional wisdom has shifted to poly-centric mega-cities for more innovation. This does not work either, as demonstrated by recent experience in China (see later).
Melbourne and Sydney are already developing suburban poly-centric hubs where businesses cluster, but the clusters are not connected directly to each other for ease of meeting. The Federal Government has guaranteed that Melbourne and Sydney will become mega-cities by starting to build Badgerys Creek Airport in western Sydney before the next election and announcing that it has deferred HSR indefinitely (to protect the airport and airlines from competition). The authorities plan densification of Sydney and Melbourne to 8m and connecting them by incrementally expanding, private, high cost airlines, high cost interstate road freight and DEVs. This may be simple and easy, but it is the recipe for vitiating Australia’s relatively high innovation rating and slowing its innovation rate. It slows productivity improvement.
It is reported that Melbourne and Sydney are amongst world leaders in business start-ups. This is admirable for 5m populations. There are no mega-cities of 8m in the group, not London or New York.
Australia has some 50% (estimates of 40-60%) of its families paying no net income tax, which is high by world standards. What does it do for incentives? Welfare is straining the budget. Governments rely on high immigration to grow GDP and repair the budget to surplus and keep it in surplus long term. Treasury has estimated that high immigration of 1% of the population each year, or about 240,000 on average since the GFC, adds around 1% to annual real GDP growth. This is about half the average low growth of GDP achieved in the past 10 years post GFC. It may decline to 33% of a higher 3% average GDP growth in future, if achieved temporarily. It is still substantial. Hence, the authorities’ imperative for easily planned growth of Melbourne and Sydney to 8m to take more immigrants each year in the era of slow GDP growth. Australia needs the GDP growth and greater innovation to keep up paying for high welfare long-term, especially in economic crises and the coming 4th Industrial Revolution.
Australia needs innovation. It cannot let innovation fade in mega-cities and at the same time lose its world leading prosperity and liveability, a great loss. This would reduce its attraction to immigrants.
Australia is a “United Nations in one country”. At present, Australia has an international competitive advantage of high prosperity and liveability that attracts aspiring skilled, technical and entrepreneurial immigrants. It cannot afford to lose this advantage. Talented immigration and innovation are interrelated. They are crucial to growth in GDP and to Australia’s future. Greater innovation is the means of releasing Australia from the grip of dependence on high long-term immigration. Australia should innovate more strongly for greater growth and create choice for itself.
The foundation of scientific and technical innovation is research and good government funding. The foundation of business innovation is shop-floor and office experience and good management. Scientific research often leads to breakthrough new business. Shop-floor experience often leads to gradual on-going business improvement. Both are crucial to Australia’s innovation and resulting productivity.
Australia is ranked 14 out of the top 15 countries in the world for R&D spending as a percentage of GDP at 2.2% pa (UNESCO). Australia has a large proportion of foreign owner companies: 743 out of the 2000 largest companies, or 37.2% (Dfat). In mining and manufacturing it is over 50%. Foreign companies typically spend large on R&D at home near their head offices, not in Australia. Most of the Australian R&D as a percent of GDP is probably spent by Australian companies and institutions They rank quite high at number 14 and ‘hit above their weight’ in innovation ranking.
Japan ranks number 3 in R&D expenditure and Tokyo ranks number 3 in innovation. It spends 3.4% of GDP. America ranks 10 on R&D at 2.8%. Its GDP is so large that its R&D expenditure is very large. New York ranks 2 for innovation and other US cities rank 4,5, and 6 in the world. Innovation appears to be closely linked to R&D spending. Apparently, Australian companies are investing now in AI and robotics.
To achieve and rank higher on innovation, Australia must spend more on R&D in cooperation with its companies and institutions. It should spend 50-100% more to really raise innovation and assure long term high prosperity. Much of the funding should be spent in new innovative cities in the mega-region.
CSIRO should be better funded. It should become the expert broker to find overseas companies to licence Australian new technology, and to bring licenced new technology from overseas for Australian companies to become global businesses. It should form close relationships with its counter-parts in Asia. It should assist in establishing them where they do not yet exist. It would have early access ahead of others to new ideas, technologies and licencing as they develop.
Recently, the CEO of a large international farm produce company operating in many countries said that Australian agriculture is the most innovative and high tech in the world. CSIRO plays a large part in this.
Australians are innovative and accept new innovations. New technology is readily adopted in Australia. It is regarded as a test market for overseas companies with new technology to try-out internationally.
The competition to find better ways of doing things (innovation) should be promoted, encouraged and funded for Australia to become a winning team as well regarded and supported as in sport.
Australia’s high and uncompetitive income and company tax rates do not provide a good enough incentive to innovate. They should be modified. Start-ups and venture capital are growing, but Australia does not have enough new high tech “unicorn” businesses to drive its economy forward. It has some foals, which have not yet developed horns. When they do, good ones are often sold off to American investors on Nasdaq and their annual income leaves Australia, not licenced overseas or the business expanded overseas. Australia needs to encourage many more, new niche and high-tech businesses that can be shared on a deep ‘Australian Nasdaq’ for locals to savour development of the benefits long term.
The big disincentive are historically low interest rates and lower return on investment causing austerity for retiree investors. Superannuation shareholders demand more dividends and cash back, and less company investment in growth to raise their incomes now. This holds down wages, holds up unemployment and slows down productivity improvement. Tax allowances for more investment would be ineffective while interest rates are so low. Monetary policy should increase interest rates to lift retirees’ incomes, after more growth from HSR and mega-region spending, to thereby release shareholders’ grip on investment. This would increase wages, reduce unemployment and increase productivity for broader incentives and more growth and innovation. Consumers would spend more and save less on return of well-founded expectation of strong growth. It would create added incentives across the board.
Australian innovative businesses and institutions need more research funding and less tax for heightened incentive to innovate.
The Australian market of 25m is relatively small, though growing fast. The international market is huge, but small Australian companies find it difficult to become larger by growing their businesses overseas. Australian companies have little opportunity to become players in low cost, high volume global markets because of their high labour costs, e.g. the automotive manufacturing industry, which has just ceased operations here. Remarkably, Australian global niche companies have done well, e.g. CSL and ResMed.
Global niche markets demand high quality and are willing to pay for high cost Australian labour and a premium. Often, the products are a small part of the total cost of a large product or project. A UK $2b turnover company makes 5 totally different products where each has a 50% share of a global niche market. It dominates the niches on scale and quality. It determines premium prices. It invests a large percentage of its sales in R&D for better quality. One of its products is smoke detectors for every new building world-wide. The company is very profitable and more stable through business cycles.
Australia has perhaps two or three dozen of these diverse dominant global niche companies. It needs more. Together they could become the equivalent of many “unicorn” business. It is the way forward for Australian innovation, R&D and more diverse, international competitive businesses growing cooperatively in the mega-region. They are great examples of what can be done.
Established Australian dominant global niche players, who do not compete with each other, have the experience and expertise to come together to mentor and train new businesses that are small here, but have the potential to become dominant global niche players. There are many small innovative businesses that could become dominant international niches, built to last in Australia.
Research, incentives and mentoring should be designed to promote more Australian dominant global niche companies for greater long-term prosperity and liveability, many growing in the new innovative cities of the mega-region. Dominant global niche players would grow to expand the future for Australia. In time, they would broaden the ASX industry spread from mainly resources and financials by including global niches. Australia should become known as the world mega-region for global niche companies.
The paradigm-breaking research of Richard Florida et al. in 2007 identified and measured over 40 mega-regions with over $100b production in the world. Mega-regions are clusters of cities, often with large cities, a mega-city or capital city at its centre. It is an area where businesses are closely connected and symbiotic or mutually supportive in their economic activity. Several are “corridor mega-regions”.
Florida found 40 mega-regions, though none in Australia (Table 6). They concentrated 18% of world population, 66% of global economic activity and 85% of world technical and scientific innovation.
The greater Tokyo mega-region was ranked number 1 in the world. Boston-New York-Washington was number 2. This region is close by air to other US mega-regions. London was ranked 6. It is close by air and HSR to Paris, Amsterdam, Brussels, Antwerp, and Frankfurt. These mega-regions are as close to each other as Melbourne is to Sydney. Britain would fit within the borders of Victoria. The largest mega-region by population was the Hong Kong-Shenzhen-Guangzhou mega-region with 120m and ranked 40.
It has been said that mega-regions rather than countries are driving wealth creation. The negatives are urban sprawl, urban unrest and poor administrative cooperation, especially when across national borders. These negatives can be overcome in Australia in its own mega-region to drive wealth creation.
Mega-regions and HSR
Fast transport for passengers and freight is recognised as critical for mega-regions’ connectivity. Japan has had HSR for more than 50 years. Its network is centred on the Tokyo mega-region and connects to others. Japan was the first to build a new city of 1½ m people on HSR outside Tokyo, a mega-city, some decades ago. More recently, China has developed a large HSR network connecting its mega-cities and mega-regions. Europe has had HSR for several decades connecting its mega-regions. Britain is building HSR to connect its main mega-region, in addition to its HSR connection to Europe and its extensive traditional railway system. The US is considering HSR. The writer has created a new, innovative VFT2 concept for HSR in Australia (www.veryfasttrain.com.au).
Local government authorities in the US held a conference in 2017 to explore the best means to stimulate and support US mega-regions.
In China in 2017, the government introduced a new policy of capping mega-cities’ populations and building new cities on HSR outside the mega-cities to enhance innovation. It had found that congestion caused new high-rise offices in Shanghai CBD to be only 30% occupied. Businesses had relocated to city hubs nearer to where staff lived. However, the hubs (forming a poly-centric city) are not connected to each other by public transport and so innovation was held back.
In 2018, President Xi Jinping of China is personally leading the establishment and planning of a new innovation city to be built at the town of Xionan, 120km from gridlocked Beijing on the HSR line with high speed communications and a major airport. State owned corporations are leading the way in setting up factories and leading hi-tech companies Tencent, Alibaba and Baida are locating offices there. Xionan will concentrate on artificial intelligence, robotics and biopharmaceutical businesses.
President Xi is personally pursuing every detail of the plan and regularly visits the construction sites. He envisages a new mega-region triangle of Beijing, Tianjing and Xionan with a population of 150m. He has appointed Xu Kuangdi, a fit 80-year old engineer, who led development of Pudong, the 5m population financial centre of Shanghai, to supervise the Xionan project. Morgan Stanley estimated that China is investing $500b in building innovative Xionan over the next decade. China is serious in leading the way from congested mega-cities to mega-regions to increase innovation. President Xi Jinping seek to dominate world high-tech industry.
The 4th Industrial Revolution
The 4th Industrial Revolution will introduce the digital technologies of AI and robotics widely in business and government. It will cause rapid change that will be challenging to adapt to during transition. The concern is that it may make many people unemployed. Eventually, if competitive, it will increase productivity, output and jobs. Its main impact is on employee efficiency and replacing people engaged in routine work. It harks back to Taylor and application of “scientific management” 100 years ago when it treated people as things. Technologists will need to relearn modern people management. Work-shop floors and offices are the source of the intelligence for AI that save it much trial and error.
AI and robotics deal essentially with efficiency of the 80% of the work that produce 20% of the results. It does not replace human thought about the 20% of the non-routine issues, creative ideas and innovative activities that produce 80% of the results. With its small population, Australia should adopt AI and robotics where appropriate. More fundamentally, it should focus attention, finance and endeavour on human thought about driving the crucial 20%. It needs to foster creativity and innovation at all levels from school upwards to produce more and better. This will generate more growth, and increase well-paid jobs, not reduce them. It will be the foundation for Australia’s international competitiveness, particularly when focused on dominant global niche businesses and in an Australian mega-region.
An Australian mega-region
Australia has the foundation of a corridor mega-region of substance. Table 7 shows the cities that would form part of an Australian mega-region along the east coast connected by HSR, high speed communications and airlines. Its population is now 15.2m, doubling to 30m, world class in size and potentially in innovation. Rapid population increase would stimulate its growth and innovation.
Hobart would be connected by air and a reformed shipping service (At present, it costs the same to ship freight to Melbourne from Tasmania as it does to Singapore.) Wollongong would be connected to the Sydney CBD by HSR later. Ballarat and Bendigo are being connected to Melbourne CBD by fast traditional rail. Adelaide would be connected by air, possibly at a new airport on the HSR line later.
The objective of an Australian mega-region is to settle +10m people in coming decades in the rural regions in new, large innovative cities on the HSR line between Melbourne, Sydney and Brisbane relieving them of the disruption of over densification, loss of liveability and under-achievement of innovation. Its aims are to lift Australia into the world leading mega-regions group and the top 10 cities in the world for innovation, while retaining its world leading liveability. Greater growth is meaningless without increased per capita wealth through creating innovation and productivity improvement. An Australian innovative mega-region is the best vehicle.
The strategy is to build new innovative cities on HSR for up to 2-3m people each. They would be centres focused on research, creativity, innovation, achievement and economic growth concentrating on the most rewarding 20% of human thought. The new cities would be connected to the major cities’ CBDs within an hour by HSR. The new cities would have excellent internal public transport for connectivity planned and provided for from the start. They would be sustainable cities for water and electricity. The new innovative cities would have excellent health, education and universities in country areas. They would have CSIRO centres and laboratories and hire leading international experts for their city’s speciality focuses. Innovative Australian dominant global niche companies would set up offices, R&D facilities and businesses there. Start-ups would grow there, many to become global niche players.
The mega-region would save huge personal finance and government funds ($trillions) by locating +10m of the population increase in the low-cost rural regions instead of the high cost major cities. It would raise innovation to pay for itself. It would retain Australia as a world leader in prosperity and liveability and grow it closer to innovation world leaders. It would give Australia choice of immigration numbers.
If the Australian population increases to 60-100m in the next 100 years, it would be accommodated in more new cities built on the HSR line in the mega-region without damaging the two major cities.
It would be advisable to build six new cities on HSR near the sea, two of 2m (the future size of Adelaide) on either side of Sydney and Melbourne and two of 1m on either side of Brisbane. The regions would relieve them of +10m extra people. If only 5 cities were built, 2 in Queensland, 2 in NSW and 1 in Victoria, the political glue might come apart. If the HSR corridor favoured by the Government through Albury-Wodonga were selected, there would be only one new city of 2m in Victoria anyway: to the west of Geelong on the way to Adelaide. Two million people would not be attracted to Albury-Wodonga 300km inland from the sea and insufficient water supply. Maybe a couple of hundred thousand would settle around other HSR stations in Victoria, but to little impact on Melbourne’s overall population.
As a result, Melbourne would grow towards 8m, much bigger than the other major cities. It would require more Federal funds for high cost city infrastructure. It would densify and under-perform on innovation. The HSR route should be through Gippsland to Canberra. Two million people would be attracted to Gippsland near the sea and water supply. Then Melbourne and Sydney would be saved an extra 4m people (two Adelaides each) and Brisbane of 2m (one Adelaide). Melbourne and Sydney would remain much the same size.
High Speed Rail
It is necessary to connect the cities in the corridor mega-region by safe, well tested, financeable HSR. Air and road cannot connect new cities to major city CBDs in an hour or less. HSR is a critical means for an efficient mega-region aimed at bringing people together to create greater innovation. It is not primarily an interstate service, though it has advantages for CBD to CBD travellers in time consuming congestion.
HSR would pay for itself during its construction period of 10 years by selling 400,000 dwellings built above its tracks in inner-city suburbs in the three major cities at an average price of $500,000 to yield $200b, the total cost of HSR (i.e. $20b pa). This housing cannot be sold until the HSR is built, thereby preventing speculative property sales without a railway. Sale of housing saves interest expense and debt repayment over 40 years of operations. It means that fares would not need to include debt expense and recovery, unlike the traditional railway financing method. This may halve HSR fares. The project would contribute a huge ongoing increase in productivity shared with passengers. It would lower the cost of living for HSR commuters and people generally. It would add indirectly to Australia’s international competitiveness by making the mega-region possible, effective and productive.
HSR cost/benefit ratio is very positive. The project is remarkably robust, profitable and viable. It would not cause concern that the Government may have to rescue it sometime in the future.
HSR would end the housing affordability crisis. HSR based on renewable electricity would significantly reduce Australia’s greenhouse gas production by road and air towards its Paris targets. Fast Freight Rail (FFR) built at the same time alongside HSR near the east coast (included in the $200b HSR cost, as is the cost of dwellings) would connect all the new cities with the major cities. It would halve the interstate freight rate, which would increase productivity significantly. It would lower the cost of living, increase competition and stimulate further innovation. It would raise Australia’s international competitiveness.
During the 10-year construction, HSR and FFR would create many jobs, especially in rural areas. Building new regional cities and their facilities would create many more jobs over a longer period. The HSR/FFR project could offset the loss of jobs coming from the 4th Industrial Revolution, if the up to two-year feasibility study is started now. The sooner it is built, the more people would be located in the regions.
It is unlikely that the Government could fund and build a project the size of HSR, given its budget deficit situation and history of large cost and deadline overruns. It is likely to be too large a project to take off the Government balance sheet. Credit rating agencies assess on and off-balance sheet commitments and may down-grade Australia’s AAA rating. It is envisaged that the project could be privately financed, with government cooperation and possibly a Federal Government private finance guarantee for this robust, pivotal infrastructure initiative for Australia’s future. A private HSR consortium may be the vehicle. HSR should be one project built in 10 years, not the partial, piecemeal state projects knitted together over 35 years as proposed in the 2013 government HSR study and is present Government incremental policy. This runs the danger of ‘different rail gauges’ again and is too slow for rapid population increase. It is not intended to settle really large population increases to new regional cities.
Infrastructure of all types will require un-skilled, skilled and expert people resources in the next 10 years. They will absorb the under- and unemployed, those redundant from the 4th Industrial Revolution and immigrants, some 2-3m immigrants over 10 years or maybe up to 200-300,000 pa on average.
HSR is presently banned and prevents development of the mega-region. Removal of the ban would transform the future of Australia. Like the stagecoach and canal owners against the first railways in England in 1830, the airlines and road freight companies today oppose HSR and FFR. Like the opponents of early English railway projects, the airlines and freight companies can become members of the private HSR consortium and make profits from the cause of their loss of business. Revenue from daily HSR commuting would add to interstate revenue and exceed the revenue from air on the route. Freight is projected to more than double as population doubles. FFR driverless electric trains would carry the equivalent of 150 semi-trailers at 125-150km/h.
A compromise was put to the Federal Government in 2017. It envisaged HSR would go ahead. Badgerys Creek Airport construction would continue, though operational uptake may be slower because of HSR competition, after 10 years notice during railway construction time. HSR would connect all the new city and major city airports, including Badgerys Creek and Tullamarine Airports, unlike express exclusion of HSR airport connections in the government study of HSR in 2013. Airline, airport and freight companies would become members of the consortium and contribute their technical expertise to the project. Construction of the HSR project would provide many jobs during the 4th Industrial Revolution unemployment coming now, and any other economic crisis that may occur. It would underpin initial construction of new regional cities that would become self-sustaining in time.
Mega-cities of are not the answer to Australia’s high immigration policy, necessary because of lingering low growth, budget deficits, ineffective low interest rates and need for skills. It is an extraordinarily high real cost policy in housing, infrastructure, government infrastructure and the indirect cost of lost liveability. There is evidence that congestion in fast growing, congested mega-cities causes innovation to fade. Poly-centric mega-cities do not solve the problem. The mega-cities policy should be abandoned immediately.
An innovative mega-region in Australia is the answer that does not require the policies and plans for 8m population mega-cities, which are so high in real cost for the people and for government, and high cost in producing less innovation. They miss the benefits of higher, achievable innovation and GDP potential.
Delay and indefinite deferral of HSR has serious deleterious effect on Australia’s jobs, its way of life, its prosperity, its liveability, its innovation future and its attraction to desirable immigrants. It prevents a mega-region. The Government should rescind the HSR ban and initiate HSR now.
Talented high immigration would continue in the mega-region. The best location and way of life will be in new cities in the mega-region. It would nurture greater prosperity and liveability, not destroy them. The disruption in two growing mega-cities is vastly more than HSR, where perhaps only a thousand houses next to the tracks in the cities would need to be demolished, not 1.5 million.
Long established London, New York and Hong Kong are not good models for rapidly growing Melbourne and Sydney. Despite London and New York having high innovation, they have appalling liveability, crime rates and low national prosperity indicated by national wealth per capita. Unlike London and New York, Australia already has world leading prosperity and liveability, low net income inequality, and quite high innovation without the intense densification that would result from continuing the mega-city policy.
Australia’s rapid population increase through high immigration, like China’s high internal immigration, needs a new approach, vision and strategy: an innovative mega-region, not two mega-cities. Toronto and Vienna are better models for new regional cities in the Australian mega-region.
The corridor mega-region justifies HSR. It is the first step in creating the Australian innovative mega-region. Private investment of $200b, most of it from overseas, in building HSR would increase GDP in the new era of low growth and low interest rates. Australia has foregone the innovation, productivity improvement and growth that more private investment would have produced in the past 10 years.
This restraint on investment growth evidently is more powerful than historically low interest rates and deficits to lift investment and growth. When interest rates rise after higher growth has been achieved through HSR, counterintuitively, pressure will be released on companies’ increased investment and there will be a surge in company growth that will reinforce and accelerate GDP growth. The end of restraint would cause greater investment, innovation and productivity, which would lift GDP above the long-term pre-GFC average of 3.5% pa for a period to repair the budget and reduce government debt.
Construction of HSR would create higher average GDP growth, relieve Australia from the grip of the necessity for high immigration to under-pin low GDP growth and the grip on investment that holds back growth. It would reintroduce choice of immigration levels. It would permit high welfare to continue and allow lower tax rates, as tax revenue increases while unemployment benefit expenditure declines.
The mega-region, HSR, concentration on achieving higher innovation through thinking outside the box, outside conventional wisdom, and more dominant global niche companies would lift Australia’s prosperity and liveability. It would remove dependence on immigration, budget deficits and low interest rates. Fiscal and monetary policy would regain their normal control effects, instead of the reverse effects of budget deficits and low interest rates causing low GDP growth experienced in recent years.
Melbourne and Sydney are special. They are low density, high liveability and rapid population growth cities by world standards. They are not yet mega-cities, but policy is heading them in that direction. America and Europe are experiencing decline in urban populations according to McKinsey Gold Institute. Over-densification, congestion, poor public transport and poly-centricity of mega-cities lead to diminishing innovation and wellbeing, as already demonstrated in China in the most advanced form.
Mega-regions with high immigration, low density, less congestion and good public transport make for greater innovation and wellbeing, for example, China’s new policy, plans and action to stimulate innovation. Australia, like China, depends on innovation to create its future, and recreate its world standing, or in Australia’s case, protect its standing from relative long-term decline. Like China, Australia needs to break with conventional wisdom on innovation.
The main conclusion is that growth of Melbourne and Sydney to mega-cities, with higher congestion, poor public transport and high densification, will reach a scale that have the negative effect of causing a decline in the rate of innovation. The best strategy is a mega-region where congestion is not as serious, public transport is excellent, densification remains positive for innovation, research spending and incentives promote even greater innovation, and resilience to crisis is improved. Innovation is the key to the future. An Australian mega-region would raise liveability, attract more aspiring skilled immigrants and their contribution to innovation, reduce the loss of brainy emigrants, accelerate innovation and productivity, generate more growth and higher exports to meet the growing, high-priced demand of global niche markets; a virtuous circle strategy which drives prosperity, liveability and wellbeing.
Australia’s strong position of dominant global niche companies should be promoted, encouraged and expanded as the best way forward to create more large, innovative Australian based, internationally competitive niche businesses paying high wages and salaries that retain the benefits of development for Australia. Research and innovation for these companies needs more funding, incentives and special favourable attention as essential vehicles for raising Australia’s trade and ongoing prosperity. They are germane to the development of the mega-region. The innovative new cities would be home for many.
Australia should become the dominant world centre for dominant global niche businesses.
HSR is the means for building connectivity that brings people together for innovation and makes the mega-region work. It has many benefits over costs. It lowers fares, which adds to the attraction of commuting from low cost homes in new cities to jobs in high cost major cities. It lowers the cost of living. HSR would make the mega-region and world class innovation more readily achievable.
The 4th Industrial Revolution now and in full force in the next few years needs construction of the HSR project to provide greater growth, a little higher inflation and more everyday and skilled jobs, now and during transition. The economy needs normalised interest rates to release private investment spending, and the innovation and productivity that comes with it, to stimulate growth above pre-GFC average GDP growth rate of 3.5% pa and to regain hope and confidence.
The compromise for the forces holding back HSR and the mega-region is viable. The players would all benefit. There are clear compelling reasons not to delay HSR further, to lift the restraint now to initiate and enable HSR and the mega-region for the assured future of Australia. The best conditions for creating greater innovation are critical to the future. The current well advanced, short-sighted, faulty, sub-optimal policy of poly-centric mega-cities of 8m is not good enough for this purpose. Its cost is prohibitive. It is imprudent and lacks foresight. There is a better way forward.
The vision for Australians is to achieve their potential for greater prosperity, liveability and wellbeing.
The vision, the aim and strategy for Australia’s future are comprehensive, practical and achievable. They should not be held back by anything.
The Government should explore bipartisanship to end the conflict between higher welfare and higher incentives during present slow growth, and to share commitment to the new concept for higher growth, consensus and action on which would resolve the problem for all, positively and effectively. This would make the future rather than just redistribute it further instead. It would restore hope for a better life.
Leaders should act now with careful consideration, planning and foresight, not wait complacently for a crisis to force change in conditions of confusion and chaos, heightened stress and pressure that cause mis-steps and sub-optimum policy. They must not accept that Australia’s return on investment, growth and prosperity have been re-rated downwards and there is nothing they can do about it. There is, and they should do it now.
Present leaders have a short time in power before they retire. They have in their hands now the means for the future wellbeing of themselves, their children, their grandchildren, their descendants, and ‘new Australians’. With a simply explained, established public shared vision for the future, they can lead the people forward together towards it. Perhaps the concept could be considered and broached with the people before the next election in the mega-region area, which includes the majority of Australia’s electorates. They must act soon because every year that passes adds another 500,000 people to the population, mainly in the major cities.
The Prime Minister, Mr Malcolm Turnbull needs to personally introduce, lead and drive implementation of this realistic, desirable and innovative vision, aim and strategy for the future of Australia. The Prime Minister has the opportunity to be the statesman who inspires his people and leads them to achieve their vision for the future.
|Table 1||World Wealth Per Adult (1)|
Note: (1) Median wealth.
Source: Credit Suisse- Global Wealth Database
Table 2 Most Liveable Cities in the World
Notes: (1) Out of 1,040 cities
(2) Vienna 2.6m and nearby Bratislava 0.4
(3) Sydney was ranked 7 In 2015
Source: EIU, Liveable Cities, 2017
2thinknow, Innovation Cities, 2017
Demographia, Urban World Areas, 2018
|Table3 World Most Innovation Cities|
|San Francisco (2)||4||49||4.6||2,100||954|
Notes: (1) Wikipedia gives New York density as 10,966/km²
(2) Includes “Silicon Valley”
Source: 2thinknow, Innovation Cities, 2017
World Population Review/ABS
Demographia, World Urban Areas, 2018
EIU, Liveable Cities, 2015
|Table 4 Comparison of Five World Cities|
Source: EIU, Liveable Cities, 2015
2thinknow, Innovation Cities, 2017
Demographia, World Urban Areas, 2018
|Table 5 Australian City Density (1)|
Notes: (1) Total number of world cities recorded with population of 500,000 or more is 1,040.
(2) Gold Coast recorded separately, and density ranked 1,024.
(3) Perth included for completeness, though not part of east coast mega-region.
Source: Demographia-World Urban Areas (2018)
|Table 6 Top 10 World Mega-regions|
Notes: (1) Mega-regions of over $100b production.
(2) Includes New York.
Source: Richard Florida, Tim Guidon, Charlotte Mellander “The Rise of Mega-regions”, 2007.
|Table 7 Potential East Coast Australian Mega-region|
|(Australian Rank)||(World Rank) (1)||(million)|
Note: (1) Rank out of 500 world cities.
Source: 2thinknow Innovation Cities (2017)
ABS, June 2016