Projections
The Australian population is projected to double in the next 4-5 decades to 48m. (ABS projections report 3222.0)
The populations of Sydney and Melbourne are projected to exceed 8m and Brisbane more than 4m. Governments are planning for these city populations by major densification of dwellings and population in Australia’s low density and high liveability cities. The projection for Australia in 2100 is for continuing population increase to 70m. These are the ‘high’ projections to be planned for, though they may turn out to be higher or lower. Projections are not predictions, though government is planning for them.
Context
The projected population increase is faster than most countries in the world. It is from a relatively high base. It could reach a total population of 50m, like the UK at the height of its power, by the 2060s. Many western countries are experiencing falling populations.
Australia has achieved the highest wealth per capita in the world, bar perhaps Switzerland. It has developed the most liveable cities in the world. It has the largest houses on average in the world. Australia is successful. It has been built on the efforts of many immigrants in the population who have continued to be attracted to Australia in a virtuous circle. Immigrants and people with one parent born overseas make-up 64% of the Sydney population. This is much higher than foreign cities. Immigration is a success. People have come from many places. Australia is a United Nations in one country.
Australia has developed a comparative advantage: it is attractive to migrants seeking a better lifestyle and wanting to own a detached home of their own, rather than forever renting a small apartment at home. It attracts unskilled and skilled workers, entrepreneurs and technical experts who contribute to Australia’s growth and prosperity. Immigrants encourage their relatives and friends to come here.
The history of city-states and nation-states over previous millennium is growth from investment, work and entrepreneurship. Then decline as these factors evaporate through gross prosperity and decadence. The western world may be experiencing the beginning of something like this as investment shrinks and the will to work declines, after the greatest economic boom in history since WW2.
Previous experience
The Australian population doubling in 4-5 decades is rapid growth, but slower than post-war when it more than tripled in the 70 years to 2016 from a low base. In this period, there was massive immigration from war-weary UK and Europe, with more recently considerable numbers from Asia.
At the same time, Australia grew its prosperity to extraordinary heights. Huge foreign investments flowed into the country and immigrants worked hard to advance. Australia developed world leading liveability, or lifestyle, in cities that expanded into plentiful land for immigrants to settle in their own houses on ¼ acre blocks in leafy suburbs, after initially adjusting in compatriot clusters in or near city CBDs. Space is the ultimate luxury and migrants sought it for their suburban homes with energy. Australia developed the largest houses on average in the world in this period.
Against increase
Australians want to maintain their prosperity, liveability and space. They fear that doubling the population will threaten their lifestyle. Many have little confidence that government will manage to prevent this, if the population doubles and densification abounds.
Some Australians fear that more migrants from non-English speaking and English backgrounds will not adapt to the Australian way of life and values. This adds to the stress during a period of low growth compared to previous high growth and job availability, especially since mining has reduced investment and mineral prices have declined from boom levels.
Further stress has arisen in the western economic context when the stabilising effect of religion has declined, and people are distracted by social issues as less stable narcissism spreads and takes its place.
Some people are against economic growth and the despoiling of nature that it often incurs, particularly those with a green orientation. Most people are not for no growth and no population increase. Those against are really saying they want slower population increase or a stable population to avoid loss of their prosperity and lifestyle. Their slogan is: “Australia is full”.
Slower population growth means fewer migrants. It diminishes the force making for prosperity, but tends to relieve somewhat the pressure for densification and loss of liveability.
For increase
Many people are for rapid population growth and the greater prosperity it supports, particularly through continued immigration and its Australian comparative advantage. Migrants come to Australia to work and achieve more than at home. People are optimistic that investment will grow eventually, and investment, work and entrepreneurship will sustain Australian prosperity.
Governments are planning densification of major cities to accommodate the population increase on the assumption that smart city digital technology will maintain liveability despite the loss of space. They rely on the comparative advantage continuing even though opportunity for better housing and space than at home would no longer be available. They promote better education to create improve productivity and “high wage jobs” in industries of the future. The danger is the loss of jobs for the less able.
Unfortunately, productivity has declined from the time of major reforms and the “accord” between government, unions and employers. Wages have risen to uncompetitive levels. The Government has supported the steel industry and the defence ship-building industry, but not extravagant auto-industry wages. It is correct that other countries subsidise their car industries, but the subsidies are competitive, not extortionate. The mining boom lifted exchange rates which made it even more difficult to bear when the industry imported more cars and exported fewer, since local production became even more uncompetitive, making it more dependent on subsidy.
These are influences with greater force in times of low investment and work. They must be moderated long-term for prosperity to survive. They appear to be at present. It is crucial to increase investment from its very low level after the mining investment boom, even though interest rates are so historically low that they would normally stimulate a new investment boom.
The BHP steel industry capacity matched Australian domestic demand for many years. BHP increased steel prices less than CPI increases, which encouraged steel-using manufacture. It supported the development of Australian industry and growth of jobs, including the car industry. As the market grew, new more efficient installed capacity kept steel prices down. This virtuous circle ended as wages grew disproportionally in Australia to uncompetitive levels. BHP divested the steel industry, which ended up requiring government support together with union wage sacrifice to survive, unlike the car industry.
Australian manufacturing has declined under great wage pressure. This should be discouraged in a period of western decline, if Australia is to maintain its prosperity and projected population increase. As population doubles, demand increase and more businesses can grow to their most optimum economic scale of operation. They are more competitive at this scale and can lower prices below the higher costs and prices when operating at a smaller, sub-optimum scale. For example, Telstra is smaller and higher cost than Telcos in the large US and European markets. It is constrained by the smaller Australian market. It is higher cost and charges higher prices to be profitable. It has much smaller competitors, without the high overheads and full range of services of Telstra, that can make a profit at Telstra’s high prices above their sub-optimum scale of production and high cost in the small market. Consumers have no option to paying these prices. Doubling the population should mean reduced prices across industry as suppliers’ approach more closely to their optimum economic scale of operation in the larger market.
Australia has a distorted interstate freight transport system that is high cost compared to low cost USA. It restrains customer competition and productivity improvement. It leads to higher prices and lower standard of living. Freight that should be carried by sea is carried by rail. Freight that should be carried by rail is carried by road at high cost, especially up and down the east coast. The high cost isolates Melbourne, Sydney and Brisbane to a degree from competition and productivity improvement for lower cost and prices. It adds to a high cost of living and reduces international competitiveness. This distortion should be corrected to sustain a doubling of population and more.
The future holds serious uncertainties. Artificial Intelligence and robotics threatens existing jobs and future jobs, but provides unknown opportunities. The rise of international interest in protectionism reflects the stresses of low growth. It threatens exports and jobs. The trend to lower company taxes overseas threatens any uncompetitive Australian tax policy. The budget must be repaired before another recession to protect the unemployed from pain without too much cost of a blow-out of unaffordable government debt. Asia offers opportunity for growth and engagement.
Government policy
Governments are planning high densification of major cities. This amounts to creating 2½ Londons in Australia: Melbourne and Sydney at 8m and Brisbane at 4m; and world ranking for liveability down to 53. Average new house size here would halve to the size of small average houses in London.
Australian comparative advantage of immigration may reverse to a large scale “brain drain” as migrants flee. Net emigration would lead to less prosperity and densification will lead to loss of the world leading liveability which attract immigrants. Densification of dwellings causes densification of traffic, which reduces liveability.
It may be that densification will lead to lower immigration and lower population increase, and consequently lower prosperity: a vicious circle.
Conclusion
High population increase is acceptable, if well managed. Australia must escape the decline of the western world. It must increase private investment and full-time work, and sustain immigration to maintain prosperity and liveability. It must increase competition which fosters innovation and productivity. It must increase growth to above average for some time and create more full-time work, rather than part-time work and under-employment. Housing must be made more affordable and average house size protected. Interest rates must be lifted back to ‘normal’. Company tax must be reduced. The budget must be repaired soon before the next recession.
Fortunately, there is a large investment that would facilitate all these requirements, create a vision for the future of Australia and provide the means of achieving it. This is constructing the High Speed Rail (HSR) and Fast Freight Rail (FFR) Project between Melbourne, Sydney and Brisbane and building many new cities of +1m on the HSR line around major cities within one hour commuting time to CBDs for jobs.
The HSR/FFR project is financially viable and would pay for itself within its construction period of 10 years through sale of valuable dwellings built above rail tracks in trenches in inner-city suburbs, instead of through higher fares during 40 years of operations. It would serve Australia for the next 100 years.
The project would distribute population increase into the regions in larger, cheaper houses away from the potential high densification of small dwellings in cities. The aim would be to settle 10m of the 24m increase in the regions on HSR instead of in Melbourne, Sydney and Brisbane. The regions would be more flexible and able to settle the population growing to 70m in the long term than ever more highly densified 15m capital cities. Many unskilled, skilled and technical jobs would be created, especially in the regions. Some of the needed resources would be immigrants. FFR would increase competition and productivity of 48-70m mostly living near the sea on the east coast as the population increases.
The HSR/FFR project would stimulate private investment and growth that would assist in budget repair. The problem of unaffordable housing would be ended. Social, economic and political stress would be largely overcome. The project would promote prosperity and preserve liveability, while population doubled. Lifestyle, quality of life and standard of living would grow while Australia would improve its contributed to climate change by substantially reducing petroleum based transport emissions by road, rail and air.
The HSR/FFR project is supported by many Australians. It would lift Australia out of the grip of western decline and enable good management of the huge population increase without diminution of prosperity and loss of liveability. It would secure Australia’s immigration comparative advantage on which its population increase, and continued prosperity are founded.
For further details, please visit website www.veryfasttrain.com.au
PJK©11.11.17
