Critical Influences November 2019

Vigorous immigration is a necessary policy in Australia for many years to come. It would continue to contribute 1%pa to population. Immigration, together with 1%pa births, would increase the population by 25m to 50m in 5 decades. A population growing to this size would have greater economic depth, breadth and resilience. It would be able to afford better national security, health and education and continue its high wages and welfare.

Immigration would continue to underwrite GDP growth. It would contribute about 1%pa to ongoing slower, post-GFC real GDP average growth of 2.3%pa. Vigorous immigration underwrote GDP growth and prevented technical recession over the previous 29 years. To reduce immigration would be to decrease economic growth and prosperity further.

The central question is where to settle the extra 25m people? Should the populations of Melbourne and Sydney be increased from 5m to 10m and Brisbane from 2.5m to 5.0m? Would they be swamped with people? Or should 6 large new cities of 1-3m be built in the regions two on either side of major cities?

Present government policy is for “fast rail” (not “very fast train” or “HSR”) to connect small regional towns inland from Melbourne and to some extent in Sydney plus Newcastle and Wollongong. Victoria may settle some 500,000 people on fast rail in the next 10 years. It is a step in the right direction but is limited by water availability inland. It would mean Melbourne growing in time to 7.5m instead of 8.0m.

Policy should be to settle 13.5m of the 25m increase in new cities in the regions on HSR near the coast, leaving Melbourne and Sydney with populations of around 6m and Brisbane 3m. New cities in the country for 13.5m would be lower cost, perhaps half, to build the dwellings, government utilities and infrastructure than in existing major cities.

If population increases towards 75m by 2100 as some foreshadow, there is plenty of space to add more large cities on the HSR line to accommodate them all without swamping the major cities.

It is proposed that new cities and major cities form the core of an Australian east coast mega-region as have been developed overseas. Clearly, the Australian regions need more population growth and the major cities less. An Australian mega-region provides this, together with superior economic performance and lower cost of very large spending on infrastructure.

One definition of mega-region is a spatial and structural outcome of urban expansion, exploitation of comparative advantage and increasing international interaction. Another is a large network of metropolitan regions that share several or all the following: environment systems and topology, infrastructure systems, economic linkages, settlement and land-use patterns and common culture. Further, a distribution of a broader range of economic activity across a network of neighbouring separate cities than any one metropolis could hope to encompass. This allows firms located in the mega-region to capture a larger share of global value chains (business) than any individual city. Connecting the mega-region by High Speed Rail (HSR) and a shared identity are the keys. It has been noted that there were 40 mega-regions in the world which contributed 2/3 of global economic output, 90% of global innovation but cover only 18% of world population.

The key ingredients of a mega-region are:

1 Two or more growing metropolitan areas

2 A rapidly growing in-between zone

3 Multiple transport connections

4 Complementary growth patterns

5 A diversified regional economy

6 HSR connecting a diverse but shared workforce

Benefits of a mega-region are:

1 More diversified, less prone to down-turn; more robust

2 Businesses have access to more customers, partners and suppliers

3 Workers gain a wide range of job opportunities

4 Residents gain access to more entertainment, shops and recreation

5 People have access to a deeper housing market and range of prices

6 Maximum agglomeration for innovation

Key factors for success are:

1 Build new large, low cost regional cities attractive to settlers that generate greater innovation

2 Build one uniform HSR system to rapidly connect all new cities and major cities in the mega-region        based on world-leading Japanese technology and finance

3 Grow the Australian dominant global niche industry (e.g. CSL and Res-med)

4 Leadership ensures all pull together for Australia.

5 Establish a mega-region before the next economic crisis when large scale finance for it will evaporate

McKinsey Global Institute noted that China and India are consciously creating new mega-regions while American and European mega-regions are created by sprawl. Australian cities are sprawling enough. Conscious creation is a more attractive and productive approach.

It is envisaged that the mega-region would have six new regional cities of 1-3million people on the HSR line, two on either side of Melbourne, Sydney and Brisbane. They would be within about 100-200km and commuting would take on average 30 minutes to the next new city CBD and to the nearest major city CBD. As the six new cities reach 1-3m, another new city of 1-3m would be established on the HSR line. The mega-region could accommodate even more new cities on HSR and a large, growing population, as required. (Please see )

The mega-region, HSR and new cities would electrify most fossil fuel based public transport and reduce air and road emissions thereby contributing significantly to combatting climate change. They would combat growth of congestion, especially in congestion-free new cities with highly developed public transport. They would end unaffordable housing with housing in new cities half the cost in major cities. Suburban spatial liveability would be protected from growing high density in major cities to become like dense European cities.

The mega-region is the means to raise Australian economic growth back to 3.5%pa which was achieved regularly pre-GFC. Innovation and productivity improvement would return per capita income to pre-GFC levels. The initiative would enable Australia to join the top 10 meg-regions in the world and achieve greater ongoing prosperity.

The aim should be to grow at an average 4.5%pa GDP in the long term. Later, immigration could be cut back with little pain at ongoing 3.5%pa growth. It would be a matter for the next generation. This generation should lay the foundation of 4.5%pa growth. It cannot remain at 2.3%pa, as there is little scope for immigration to decline without considerable pain. The population may decline eventually anyway as in other developed countries, but from what level of prosperity bequeathed today?


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