Can Australia handle rapid population growth?

ScreenHunter_23 Oct. 29 07.31

By Leith van Onselen

Yesterday. Fairfax’s Michael Pascoe asked the salient question: Is Australia ready for 2.3 million more people:

Despite all the headlines, it’s not the boat people we need to worry about – it’s the other 2.3 million arriving… when public investment in the nation is at an all-time low. That’s the investment necessary to accommodate the increased population and maintain our quality of life. Or not…

The nation’s infrastructure, especially public transport, is groaning under its present load yet we’re adding 2.3 million over the next five years…

Thus there’s a difficult contradiction at the heart of the new government. It aspires to small government, but it is responsible for a growth country that requires greater public investment. There is a potentially dangerous faith that everything can be left to the private sector to fix, but our duopoly and oligopoly-riddled private sector doesn’t make for the purest of market mechanisms.

The simple answer to Pascoe’s question is an unequivocal no. At the current rate of population growth – the lion’s share of which is via immigration – Australia’s population is set to grow by 10% over the next five years, putting further pressure on Australia’s already strained infrastructure.

ScreenHunter_24 Oct. 29 07.48
As shown in the above chart, the problem began under the Howard Government wh0, despite talking tough on asylum seekers, dramatically increased Australia’s immigration program in the mid-2000s. This approach gained bipartisan support, with the Rudd/Gillard Governments embracing high immigration (remember Rudd’s “Big Australia” boast), and now both sides of politics want it maintained (actually, Opposition Leader, Bill Shorten, has argued for a significant increase in immigration intake).

The key reason for advocating ongoing high immigration is perhaps best summed-up by the next chart, which shows how high population growth juices headline GDP (more inputs of people equals more outputs), which enables governments to claim that they are strong economic managers:

ScreenHunter_10 Sep. 26 13.10

Remove population growth from the equation, however, and you can see that GDP growth in Australia has been lacklustre ever since the Global Financial Crisis, and that Australia did in fact experience a recession in per capita terms in 2008.

ScreenHunter_76 Sep. 11 10.15

What seems to be lost on the Government is that in a material living standards sense, it is growth in GDP per capita that matters. After all, what’s the point of growing the economic pie through immigration if everyone’s share of that pie remains unchanged (or falls)?

The question around living standards becomes all the more important when infrastructure constraints and the environment are taken into account.

Indeed, as highlighted by Pascoe above, a big negative of Australia’s high rate of population growth is that it is placing increasing pressure on the pre-existing (already strained) stock of infrastructure and housing, which reduces productivity and living standards unless costly new investments are made. Further, controversial investments like desalination plants would arguably not have been required absent such population growth.

Further, when infrastructure and housing investment fails to keep up, it places upward pressure on inflation, requiring higher interest rates, which can then damage productive sectors of the economy. As explained in a 2011 speech by the Reserve Bank of Australia’s Phil Lowe (summarised here), these factors were certainly in play in the late-2000s, when rapid population growth placed upward pressure on rents, as well as a big surge in utilities prices as the capacity of the system struggled to keep pace with the growing demand, requiring costly new investments.

Ongoing high population growth also places additional strain on the natural environment, causing greater environmental degradation, increasing water scarcity and pollution, and making it more difficult for Australia to reduce its carbon footprint and meet international pollution reduction targets.

Lets also not forget that Australia earns its way in the world mainly by selling its fixed mineral resources (e.g. iron ore, coal, natural gas, and gold). More people means less resources per capita. A growing population also means that we must deplete our mineral resources faster just to maintain a constant standard of living.

So why, then, are Australia’s politicians continuing to follow the high immigration path when the benefits to the pre-existing population are so questionable?

Well, apart from juicing headline GDP growth (explained above), high immigration allows the Government to delay the costs of an ageing population by replacing retiring baby boomers with new blood. However, such an approach is also spurious, since importing more workers only delays the ageing problem, pushing it onto future generations. The migrants that arrive today will also grow old, retire and need taxpayer support, requiring another larger influx of immigrants to offset their departure from the labour force.

Perhaps the bigger factor is the Government’s desire to appease big business. As noted by Pascoe above, Australia is ruled by duopolies and oligopolies, which see a rising population as an easy way of selling more goods and services. Big business also receives, through immigration, access to lower cost workers. And there’s less need to become more efficient when your customer base is growing inexorably. Rather, just sit back and watch the profits flow.

The situation is perhaps most pervasive for Australia’s banks, which get the double bonus of not just having more consumers to sell debt to, but also extra demand for housing, which helps to support house prices and their loan collateral, especially given the urban consolidation policies operated by Australia’s states. No wonder their share prices are at record highs!

However, while the big end of town is the clear winner from rapid population growth, it doesn’t wear many of the costs. That is borne by you and I.

As argued previously, while I believe that Australia could probably support a substantially larger population with improved policy settings and investment, like many Australians, I don’t hold much faith in our political class or policy making processes, which have time and again proven to be deficient in providing adequately for the pre-existing population (let also tens of millions more people), or that a substantially larger population would improve living standards anyway.

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Leith van Onselen
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  1. Great post. I suspect Pascoe got caught in one too many traffic jams. Good. Hopefully a few more of these bleeding heart, vested interest, media heavy hitters will open their eyes too.

    Judging by the overwhelming trend in the comments to that article, our leaders are not listening. That being the case I think we might see a number of one term Governments in future. They’ll make great promises on this issue whilst in opposition and then ignore it once they win power.

  2. I wonder why the great ‘populist’ John Howard totally ignored the desires of the Aus people when he decided to bring a few more million people here?
    Then of course we have Labor, who are so in touch with ‘working families of Australia’, completely ignoring the quite open feelings of those families on this subject.
    Just more evidence that the people who are really running this country are not elected!

    • “Just more evidence that the people who are really running this country are not elected!”

      Well, yes. But this is not new. Tony is saying whatever the collective wishes of HIS electorate / sponsors are (I mean Tony is by no means unique in this regard). I doubt that he has any ideas or opinions of his own……

      • dumpling ….why single out Abbot? You’re just making a throw-away unthinking Labor leaning comment that seriously erodes the very important question.
        I’ve asked this before and nobody bothers to answer so I’ll ask again. Why, when Rudd came to power, did he not point to the CAD and massive sale of our heritage to foreigners as evidence that the Howard/Costello good economic management was fake? He could have destroyed the Liberal ascendancy on this topic once and for all. He didn’t! Why not? Because he was told not to?
        Keating’s Prime Ministership was finished from the moment he made the ‘banana republic’ observation. How the hell does that happen?
        How can this all go on, every day, day after day, year after year, decade to decade, we’re selling our natural resource and industrial heritage to foreigners yet not a single mainstream media commentator, repeat NOT A SINGLE ONE, will go near it as an issue?

        Something is seriously wrong!

      • Jumping jack flash

        Business lobby says to bring in more consumers.

        Business lobby says to bring in “skilled” (cheap) workers.

        Banking lobby says to bring in more borrowers.

        Housing lobby says to bring in more buyers.

        Boomer lobby says to bring in more greatest fools.

        Government brings in more.

        All the while, government espouses and promulgates popular opinion.

        Sounds like politics to me!

      • dumpling…OK sorry! Tony just seems to be the emphasis around here so I guess I’m sensitive!
        Wolf was doing a bit of rewriting of history there and still ignoring simple maths. Over the years he has been a constant proponent of more and more QE and more and more fiscal deficits. He is still ridiculing any thought of tightening in the UK economy. He can’t have it both ways. You can’t be pointing to CAD’s as a problem and yet be advocating QE and fiscal deficits.
        MB has always posted his writings as some great source of wisdom and I’ve always questioned those writings.
        In this case he is being somewhat hypocritical.

      • dumpling ….why single out Abbot? You’re just making a throw-away unthinking Labor leaning comment that seriously erodes the very important question.
        FFS, you need to get out of your binary mindset.

        Just because someone is critical of Abbot, doesn’t make them “Labor leaning”.

        How can this all go on, every day, day after day, year after year, decade to decade, we’re selling our natural resource and industrial heritage to foreigners yet not a single mainstream media commentator, repeat NOT A SINGLE ONE, will go near it as an issue?
        The same reason there are few critical comments about rising wealth and income disparity, reduced class mobility and the ongoing reductions in workers rights and protections.

        Because it’s aligned to what contemporary (neoliberal) economics – which both major parties embrace wholeheartedly – thinks is “good”, and thus no-one thinks it requires any sort of comment.

      • @flawse, “Why, when Rudd came to power, did he not point to the CAD and massive sale of our heritage to foreigners as evidence that the Howard/Costello good economic management was fake?”

        The answer is that when Rudd himself opened the floodgates and reinflated the bubble, many hailed him as a hero because he saved us from the GFC. All he did was kick the can down the road, a long way down the road but he fooled a lot of people.

  3. With an ageing population and a host of young people who only care about coke and x-box, I say bring it on. The lack of infrastructure and investment is a real worry though and I forsee a two-tier Australia, if one does not already exist. We really should demand more from our Governments but we’ve simply lowered our expectations and just about given up. I’m no better; I voted informal. In fact I only turned up to buy a sausage.

    • Turnitup, pretending you voted informal in the hope swinging voters follow your lead does you no credit. One sniff of your paid commentary reveals you exist to deflect the debate and disempower the citizenry.

  4. Well said Leith

    The bipartisan neglect of this issue is clear evidence that our political duopoly is captured by big business.

    We must return population growth to an internationally comparable 1%pa asap

    • I am tired to repeat it, but I will do it again.

      In a global economy until the conditions for labor market get almost the same everywhere, just like the conditions for financial capital, e.g. interest rates, we are going to experience high immigration, which point is to lower the Australian labor cost.

      Growing population is a MUST for capital growth. Without population growth there is no capital growth or it would be very slow compered to any developing country. This is something fundamental and not a choice for any western government serving the national businesses not the population.

      I am personally for lower immigration, but can we stop the government to serve the big oligopolies? The corruption is a plague on any government level. It is crony capitalism and we have to deal with lower living standard in the future. It is very sad, because it will hurt badly our kids. Their standard will be very different from that of last half century.

  5. All policies that pump the property bubble are bipartisan. So unless people vote for an alternate party, which they will never do, it will be business as usual as our rent seekers control the policies that matter to them and should matter to Australians but don’t.

    • I’m sorry to break it to you Phroneo, but the bubble has already burst. This from David Collyer 30 months ago…..

      “The era of towering prices – of superhuman personal sacrifice by every young couple to fund a mortgage to buy a simple home – has just come to an end. Now comes the grand unwinding, where house prices go into free-fall, owners despair, buyers sit on their hands and our banks call in ‘underwater’ loans where payments are not being made, selling homeowners up for whatever they can recover”……. “The federal government has no further tricks in its bag. I can’t think of anything it can do to turn public sentiment around this time.”

      So there you have it.

      • Combing through comments from 30 months ago to try and find an inconsistency, or a missed prediction comes across as a little desperate. Is the ‘don’t buy now’ thing really that offensive to the property interests out there?

      • @cfsn, it’s not offensive per se, and who knows, it may even prove to have some merit one day, but it just occurred to me (OK, a colleague pointed it out to me) that peoples’ fear of a housing bubble may be discouraging spending, which obviously has broad-reaching ramifications for the rest of the economy. TBH, I’m not big on anyone who tries to manipulate people’s fears. There are people on both sides of the fence who do this, and none is any better than the other.

        You’ve got to question a fellow citizen who calls renters “a minority group of underpriviliged people”. (Here at about 4.40 Hang on, I thought we were *choosing* to rent! Which is it?

        Furthermore in this video (which was produced last year) he claims that the most optimistic outlook on housing was that it would stay steady. He obviously doesn’t read Stephen Koukoulos.

        Also in this video he claims that he rents a 1.2M home for ‘about 500 a week’. Now I’m sorry to burden you with that unfortunate beast called reality, but here is what 500 a week gets you in that suburb If that joint’s worth close to 1.2M then I’ll drive out to Balwyn North and cook him dinner.

      • Just in case it appears that I have something against David, let me assure you that I do not. I share his political beliefs and I have no reason to believe that he is not a decent human being. My only suggestion to him would be to keep it real. No need to fudge. Isn’t that what the enemy are supposed to do?

      • @ff, is that the same joint!? If anyone pays 1M for that they’re insane. Balwyn Nth, no offence, is a colonial outpost near freeways but not the beach or city.

        Seriously, if that’s the joint and it goes for even close to 1.2 then I am happy to admit I was wrong and I hope David likes Spaghetti Bolognese.

        EDIT: Hmmmm, ok, they’re not the same place. So how are you sure we’re comparing apples with apples?

      • @Turnitup Thsta not teh same joint but a simliar one. Same number of beds baths etc and in a similar condition. Just picked one up after < 2 mins of searching. Have a look. I am giving everyone a bit of leway. David said ~500 almost 2 years ago.

        I can guarantee you that the place I linked goes for more than 1.1 or gets passed in. In it's current state you will not get more than 550 for it per week. If I am wrong on either of these predictions I will take your entire family out, twice and you pick the joint.

        Similar situation in Malvern, East Malvern, Camberwell, Ashburton take your pick.

      • Perhaps you’d like to subject Chris Joye’s prognostications from 30 months ago to the same degree of scrutiny?

        No … thought not.

      • @ff, well if that’s the case it’s madness. And totally unsustainable. We bought a house (obviously not that big) for half that in a far more desirable ‘burb earlier this year. As I heard earlier today, there are something like 1000 property markets in Oz. This is why I don’t like dont buy now. It assumes one size fits all. But it does not. If I was always looking at the equation just illustrated then I would be running for president of dont buy now.

        Anyway, all eyes are on the auction of that joint. If it sells for less than 1.1, we’ll be eating at the flower drum. I’ll buy the beers 😛

      • @chipmunk, the same degree of scrutiny? Really? It’s a 5 minute video on youtube! You seem to imply that it’s not ok to seek the truth, especially if it contradicts a long-held belief.

        Tell you what, you break the other dude down for me, save me the time

      • @Turnitup Most capital cities are overvalued by most indicators. That’s does not mean you can’t pick up a good deal and what you should do is dependant on your personal situation.

        But on average, it does not make sense to buy and more so in cases like DCs. From my anecdotal evidence rent yields for houses fall the closer you get to the city. Very easy to the math for yourself.

        My partner and I could, in theory with help from our parents (and no, because I can doesn’t mean I will) and our savings, buy what you did outright. However in our case it is not only cheaper to rent but more convenient

      • Turnitup! How terribly amusing that you find my ravings of note, have collated, studied and sifted my words from your cubicle in the politico-housing complex. I can now proudly describe myself as a job creator, making a genuine contribution to economic activity.

        I confirm I live in a nice 2 story 4 bed 2 bath 2 garage renovated ~8 years ago quality Balwyn North house on 700m2 and the owner did not seek a rent increase at renewal. My back of the envelope calculations on her returns leave me shaking my head. The opportunity cost of holding this property are staggering.

        I decline your offer to make me dinner as my partner is a truly fabulous cook. You may wish to contribute to the RE agents retirement fund instead.

        My bubble burst prediction 30 months ago has been delayed by the RBA expending its interest rate ammunition to keep the enemy – a land price correction – beyond range. That enemy of alleged prosperity is simply awaiting RBA exhaustion before it closes and destroys.

        Australia’s macroeconomic settings are a mess. We have staggering foreign private debt, an embarrassing speculative appetite, a profoundly uncompetitive industrial base, a land zoning system that promotes the private capture of infrastructure funds and a tax net that captures minnows and lets sharks swim free.

        We remain a land-based economy. Land is the single largest asset class at around $3 trillion. We have the lowest population density in the world, yet somehow the stuff is as scarce as on Manhattan Island. Land should be a national competitive advantage, not an handbrake on activity.

        You may fear the giant economic cost of a land price correction. My fear is the reverse: if official manipulations of the land market prevent prices from reverting to mean, a significant proportion of the population will be denied the prosperity, economic independence and freedom our forebears designed this country to deliver to all.

        I repeat and restate my assertion today is the worst time in 70 years to buy property. I commend the following graph of Australian constant quality real housing prices to all who may not have seen it:

        Don’t Buy Now!

      • @David Collyer

        Thanks for the response. I managed to understand a lot of it. But I did notice you refer to your bubble burst ‘prediction’ 30 months ago. Now David. Please. It wasn’t a prediction. You declared that it had already happened. It was wrong of you to do that and I cannot understand why you’re trying to distance yourself from reality.

        The offer for dinner is still there if you have a change of heart.

      • @David Collyer, that may or may not be true, but I am an honest one.

        Burying your head in the sand and resorting to personal insults is a rather poor response. Did I read your article incorrectly? Did I misinterpret what you wrote? We all get things wrong from time to time. Why can’t you man up and move on?

      • Turnitup, to be described as a reptile is a profoundly Australian compliment. They have delightful blue tongues and beautiful scales. I cannot see why you would characterise my words as insulting.

        I think I gave a very full explanation. You don’t have to accept it, but nor need I elaborate.

        I take your pointed pursuit of me as evidence the politico-housing complex is desperately short of ‘greater fools’ to sell wildly overpriced property to. The correction is imminent.

        Don’t Buy Now!

      • @DC, your agenda is a noble one and I do not begrudge you one bit. But sometimes when one gets swept up in a single point of view, it makes one a little drousy and it’s time to pull over for a power nap. This freshens one up and allows one to see what everyone else can. I hope you don’t mind, but if I spot the BS-meter roaring its head off, I am going to call it.

        As for ‘The correction is imminent’, I suppose that if you keep repeating it and then describe any slow-down as a ‘grand-unwinding’ and ‘free-fall’, then you’re bound to be right every so often. Actually ‘The Correction is Imminent’ would make a very fitting epitaph for yourself.

        One more thing…. you seem a little confused about landlords. On one hand you say things like ‘they are wonderful, they are putting money in my pocket and subsidising my lifestyle’, but on other occasions you paint them as the devil’s spawn, dirty fat-cats who are profiting from our misery and turning the rest of us into second and third-class citizens. Would you be so kind as to enlighten us which version is the ‘real’ one, and which is BS?

        And finally (and this is serious), should I move out of my place and rent it out so as to claim the interest I pay so as to reduce my tax? Doesn’t this categorise my place as an investment and have me liable for CGT when I sell? Or can I simply move in again for 12 months and have it re-classified as my principle place of residence?

    • Jumping jack flash


      Government is obviously listening to the lobby groups

      Plus their own vested interests.

      • Amen.

        Although the term “house prices go into free-fall” may, with the benefit of hindsight of course, have been made a little prematurely. In fact, I think prices have actually risen a little since then…… oh dear.

  6. “What seems to be lost on the Government is that in a material living standards sense, it is growth in GDP per capita that matters. After all, what’s the point of growing the economic pie through immigration if everyone’s share of that pie remains unchanged (or falls)?”

    Now, that’s where you make your mistake!

    It is not growth in GDP per capita which matters. It is growth in the incomes of the top 1%, on whose behalf the politicians of both parties rule.

    The essence of the problem was set out in the chart from the Financial Times you linked to on Saturday. For those who missed it, here it is again: The chart that explains the world.

    If per capita incomes of the majority of Australians (and other developed country majorities) are not rising, then the elite cannot make more money by selling to their existing captive domestic market.

    In Australia, the elite can’t compete internationally because they’re utterly incompetent, and they’re addicted to rent-seeking which promotes industries (such as the funds management industry, the various domestic oligopolies, the new infrastructure monopolies and the tax farms) which enjoy no comparative advantage (often at the expense of industries which do).

    There is only one variable left to alter: the number of “capitas”.

    This is a policy designed to enrich the oligarchy which owns the government (of either party), while transferring the costs to the majority of people who have no say in government.

    If you want to address this problem, look to the underlying cause: the complete absence of democratic government (true democratic government, on the Swiss model) in Australia.

      • Mr Quinn condemns the ignorance of the masses, but I think it is he who is ignorant – ignorant of game theory.

        It is not the ignorance of the masses which is the problem. On this issue, I’m sure the “masses” know exactly what they want.

        The problem is translating the preferences of individuals into a joint preference under conditions of Prisoners’ Dilemma (in the form of a deeply entrenched, well organised, well funded duopoly of political parties).

        The problem is this:

        a) each voter correctly reasons that if he or she invests the time and resources to overturning the entrenched system, and if insufficient others join in, then the effort will have been wasted, so the optimal strategy is to do nothing;

        b) each voter correctly reasons that if he or she invests the time and resources to overturning the entrenched system, and if sufficient others do join in, then his or her own contribution will be negligible and unnecessary, so the optimal strategy is to do nothing; and

        c) each voter correctly reasons that every other rational voter will have reached conclusions (a) and (b), so the dominant strategy is to do nothing irrespective of his or her own preferences.

        It is a classic Prisoners’ Dilemma.

        It is true that that there are some eccentrics who will make an effort nonetheless. And there are some well placed individuals (Silvio Berlusconi or Clive Palmer) who have the individual wealth to establish a political party from scratch.

        But even there, the power of the duopoly is such that they either make minimal inroads (like Palmer) and will soon find the rules changed to eliminate their threat, or (like Berlusconi) they simply rule for their own benefit.

        The other “minor parties” (like the Greens) also fail because they disperse their firepower, concentrating a little fire on the many and varied things that motivate them.

        In contrast, the two major parties concentrate their firepower on just one thing: grabbing power and holding on to it.

        As I said above, if this problem is ever to be cured, the solution lies in concentrating firepower on the one thing that can cure it. That is the introduction of Democracy in Australia.

      • Hm Stephen I have long been an advocate of participatory democracy along the lines you outline. I discerned, almost 50 years ago, that every Saturday we conducted nationwide plebiscites on which horse would win which race across five states. I couldn’t see why that could not be applied to democracy.
        So my remarks should not be interpreted as opposing your views.
        Perhaps you’re taken what you wanted to see from Quinn. I think, in all his writings, he attacks the ‘elitist’ regime that you oppose.
        Re game theory I don’t think it is that Quinn doesn’t understand game Theory so much as that we are too far into this game. As pfh observes, quite correctly, everyone has given up seriously thinking about these issues long ago. Multi-decades of distorted economics, negative RAT interest rates, over-consumption, indulgence and debt, has brought us to where we are with a distorted economy, distorted society, distorted education system and distorted brains. On most issues I think you would find Socrates was correct.

      • When voting it is easy to number all the boxes and put Labor and Liberal last.
        I do it every time.
        Does game theory explain why millions of people don’t vote this way?

      • As mentioned earlier, it’s all about concentrating firepower.

        Imagine a simplified example in which there are 10 generic issues, each of which is “most important” for 10% of the population and that they are equally divided on the other issues.

        Imagine 12 parties:

        Party A supports issues 1 to 5 and opposes 6 – 10;

        Party B opposes issues 1 to 5 and supports 6 – 10;

        Parties C to L are single-issue parties supporting each of the 10 issues.

        Supporters of Issue 1 will vote for Party A if – on balance – they prefer its position on the remaining 9 issues. Party A may be expected to receive about half of the Issue 1 supporters. The same applies for Issues 2 – 4. In total Party A may expect 25% of the vote in this way.

        Likewise, Party B may expect 25% of the vote.

        Each of the remaining 10 parties may expect on average about 5% each. They will have no effect. Under a single transferable vote system, votes for them will simply find their way to the major parties.

        In the absence of transferable votes, even voters who might find Issue 1 of most importance to themselves might still not vote for the corresponding party because it would be a vote wasted.

        This assumes that there is no collusion between the major parties. In practice, the major parties may collude with one another and with particularly well-organised lobby groups or campaign donors or other influential individuals or groups to ensure that certain policies are not offered at all.

        In light of the obvious futility of the battle and the high costs involved, even supporters of Issue 1 may not bother to organise a Party. They will confine themselves to lobbying the major parties – which is what is observed in practice.

        This also doesn’t even begin to account for the initial advantage created by the disengaged voter, the voter who recognises the futility of the process and has lapsed into “sullen acquiescence”. In Australia, such voters are still forced to attend the polling station, and – in front of everybody else – forced to take a ballot paper and are “directed” towards a voting “booth” where there is little privacy anyway. In such circumstances, the easy thing to do is to follow the instructions on one of the how-to-vote cards, most of which are provided by the well-funded and well-organised political parties.

        The system of elective government simply cannot reflect the underlying preferences of the population. Voters can only choose between the two blocs of Oligarchs who will rule them for the next three years.

        Of course, there is a simple way to check if the People really do prefer this form of government: hold a referendum with the question Do you support a review of the system of government, with the details of review to be determined by a subsequent series of initiatives and referendums?

      • Who is to blame for this ignorance? The education system prepares the young for some kind of employability, not for thinking and for knowledge thirstiness. Where is the world classics in literature, where is maths, physics etc. in school programs? Look at the children’s book and you can be shocked by the lack of any sensitiveness, only selfishness and stupidity is promoted.

        Look at the advertisement, which is one of the richest industry today. They sell lifestyle, not just products and they sell empty lifestyle of celebrities, who are rich, because they are celebrity, not because they have created something in their life. They sell the worst consumerism.

        How could a young person be guided in such poisonous environment, where both parents have to work to get roof over their heads? Ignorance is nurtured by the society and its values and today the families have much less power over their kids upbringing and values. The corporations on the other side have increasing power over young minds.

        Who is to blame for that?

      • Claw

        The more eloquent answer to your question is given by commenter Davey below:

        Voted for Greens in 2010 on the hope they would look out for the little guy and stop such large migration numbers.

        Instead got a carbon tax.

        Never again…

        That sets out the voter’s dilemma more eloquently than any hypothetical game theory scenarios!!

      • @Lori,

        “Who is to blame for that?”

        Of course, it is us (who else?).

        Being shallow & showy -> Overpaying / outbidding for popular items -> Too much time spent for trying to raise cash -> Too little time spent for teaching kids -> Kids watching & learn what you are doing -> Go back to square one & repeat

    • “It is not growth in GDP per capita which matters. It is growth in the incomes of the top 1%, on whose behalf the politicians of both parties rule.”

      Sigh. The evidence all points to that being true.

  7. The key difficulty is not that our leaders are loonies and controlled by some conspiracy of {insert your conspiracy of choice} and are enjoying making people suffer.

    Most of them, not all certainly, really do want to improve the country.

    Rather it is something far far more mundane.

    They simply are too busy running around doing the polly side-show routine to update their ‘chip-sets’ with some new economic data, thinking and ideas.

    And that goes for many senior people in the 4th estate as well.

    Most people in their late 40s and beyond would have not engaged with economic ideas and debate for well over 20 to 30 years.

    They are still listening, thinking and grooving to the economic equivalent of Skyhooks, Elton John and Dire Straits (no offense intended to any of those fine musos).

    They simply do not know what has been going on in economics since the mid 1980s and are just chugging away with what they know.

    The worst bit is that they think they are up to date because Skyhooks and Dire Straits are modern compared to what THEIR bosses listened to – Bing Crosby and bit of Cranky Franky etc.

    Possibly the best solution is to set up a few chairs Clockwork Orange style and strap them in and force them to do a re-fresher course in economics (not run by most uni economics faculties however as they seem to be a bit archaic as well judging from what I hear in the interwebs).

    A few journos should join them.

    But most importantly, their advisors and staffers should receive also some fresh data and thinking to replace the half remembered mantras of their undergraduate and honours years.

    A bit like getting grandad listening to Triple-J.

    • GunnamattaMEMBER

      I watched QandA for the last time last night (I was never that big a watcher anyway) and they concluded with a five minute question about Lou Reed and the panel (all babybooming pontificating wankers – plus Joel and Christopher there to help bring some political biliousness to the party) about their favourite Lou songs – the last word in indulgent.

      Dont get me wrong, RIP Lou (saw him live in Melbourne and London myself -20-30 years ago) and thanks for the memories, but as the conclusion of a panel show ostensibly looking at political issues it was embarrassing.

      • Yep – I have no doubt that their economic ‘head space’ is circa Lou Reed as well.

        Most people in Australia are suspicious of thinking too much in the first place.

        Once they have finished school or university they roll down the shutter doors on new ideas even quicker than a new LP/CD entry to their collection that is not a greatest hits, remaster or ‘live’ release by ….someone that they used to know.

      • GunnamattaMEMBER

        I think the ‘run the immigration taps full bore’ approach is a 1950s -1970s mantra as well.

        Dont get me wrong I have no problems with how many extra people we bring in and where they come from. But I do certainly think that we are setting ourselves up for a mighty economic rogering by bringing them in without an economic narrative underlining ‘development’ and I fail to see how that ‘development’ can simply revolve around primary industries (particularly if we are selling the industries themselves and the processors of them).

        To bring them in simply to have a very short term demand sugar hit – and of course could I not mention the real estate ponzi support – without that overarching economic narrative and policy positioning is just begging for a knee in the economic nads.

      • “I think the ‘run the immigration taps full bore’ approach is a 1950s -1970s mantra as well.”

        I agree I should have been a bit clearer.

        It wasn’t that the economic thinking was bad in the 1980s just that the limitations of some of the more simplistic ideas of 1980s and 1990s economic thinking have not filtered through to the policy makers – including the RBA.

        They are still pulling levers and mouthing mantras that are as dated as pastel suits worn by police working vice in Miami.

      • Argh – just watched QandA from Monday night.

        Listening to the dimwit discussion of foreign investment and how it is Australian destiny to sell out ownership was frightening.

        The moronic idea that concern about foreign ownership is somehow racist got a nice airing.

        Judith Sloan made the only valid point – allowing some foreign interest MAY be necessary to secure market access.

        Ray Martin and Joel were playing lead breaks of 1980s Economic rock classics.

        Joel was questioned about that the limits just about every country places on foreign ownership – he said it was irrelevant because we don’t want to buy – WTF!

        Selling off Oz remains a fundamental chunk of unquestioned received wisdom.

    • Sorry but I think that to assert that most people over 40 haven’t engaged in economic ideas and debate is probably cr4p Ray.

      Wages, unemployment, superannuation, stock market performances, government budget outcomes and debt levels, carbon pricing, mining taxes, immigration, standards of living are mainstream topics of conversation.

      I would accept that most people don’t have a coherent framework or deep technical understanding, but not that they don’t engage.

      • Explorer,

        “I would accept that most people don’t have a coherent framework or deep technical understanding, but not that they don’t engage.”

        Well that was my point. Of course people are talking about economics in mainstream conversation – often incessantly.

        But if the reference to people over 40 caught your eye, I note that my point is that most people ‘set’ their attitudes and thinking to cruise after they leave school or university – if not before.

        So my comments are directly to plenty of 20 somethings and 30 somethings as well.

        Now I must fly as the postman just arrived with a stack of remastered Jethro Tull live albums to help wash down a few Hawkewind epics.

    • There’s where you’re wrong pfh007. The implication of your comment is that policymakers need to “progress” to more modern music / economic thinking.

      On the contrary, they need to go all the way back … beyond “classical” … to the simple, primal sounds of the music of the “ancients”.

      The “primitives”, according to our pride-dominated “modern” thinking.

      Ban Usury. Problems Solved.

      • Op8red,

        Not so much as progress to modern music as to listen critically to the music and be open to new ideas or interpretations. Or perhaps a new verse or refrain.

        “The “primitives”, according to our pride-dominated “modern” thinking.”

        I agree more than you might imagine.

        I recall reading somewhere that the idea of a composer of music was largely unknown in pre-modern times because the assumption was that music was merely revealed and not composed by the individual. Thus revealing music was by the grace of the divine or whatever connected you to the universe.

        To claim to have composed the music was considered pompous and egotistical.

        One of the more destructive and wasteful obsessions of our age is the idea that the only good idea is an original idea. How many pointless PHD’s have been earned and time wasted in the pursuit of gratuitous novelty.

        How many good ideas are not acknowledged or promoted because they were ‘revealed’ by someone else.

        I think there is a lot to be said for attributing good ideas to the universe rather than the person who first uttered them.

        By all means acknowledge the person who uttered them and if any property in them is to be granted it should be of the minimum duration possible. But always keep the focus on the idea not the revealer.

      • “How many good ideas are not acknowledged or promoted because they were ‘revealed’ by someone else.”

        Wait…… I thought all creative minds started from imitating?

        Besides, if I had to come up with my own story of star wars, as opposed to improvising the ones made by George Lucas, nobody would have any idea of what I am talking about, right?

      • Very good!

        Likewise Elton foreshadowed QE with “Too low for zero”

        And Billy Joel’s Allen Town gets the feel of Australian manufacturing.

  8. whilst gdp growth per se is a terrible indicator, I also thing GDP per capita misses the point a bit. I’m sure gdp per capita growth in Hong Kong and Singapore has been great over the past 50 years but that dont mean I want to live in those places. Aus and NZ are rapidly losing the things that separate them from the rest of the world ie wide open spaces, backyards, uncrowded beaches, short commutes etc etc etc. Yes, it is being a bit selfish to want these things to ourselves but lets not kid ourselves that high immigration is of net benefit to existing citizens (other than rent seekers). It aint. I’m all for upping our humanitarian intake (who have less money and put less stress on house prices) and reducing the immigration quota (especially the rich peoples visa).
    … but it wont happen. 50 million by 2035 i reckon.

    • “1. 460,000pa growth pa is complete BS”

      We are currently growing at 400,000pa. Why is 460k pa so hard to believe?

      “2.Our NOM is not projected to rise that much”

      That is the whole point Willy. Any shortfall in natural growth will be topped up from the NOM fire hose.

      There is a clear bipartisan strategy to drive pop growth at well above the av international rate. Abbott said as much, Hockey said as much, Shorten said as much, Albanese said as much, Gillard said as much, Rudd said as much.

      Why do you refuse to accept that they will not do exactly what they say and continue to do as they have done?

      • Dear me…
        1. 60% of our NOM are temp visa holders and 150k of that 400k were babies minus deaths.
        2. 3 anti-immigration parties now and very much an anti-population growth taking hold here.
        3. Our demographic momentum means that the actual growth in real numbers is in the aged, who do not require extra infrastructure as much as working folks.
        4. Our natural growth may drop to zero as the death bust (80 years after the baby boom) takes hold.

        And your argument is that the NOM tap will be turned on? Good luck with that…

      • 4 attempts and missed the mark with every one.

        Try again.

        What evidence do you rely on for your theory that our current political leaders will not continue to grow NOM to maintain or increase current pop growth levels?

      • Easy, staying in power. People vote and people are becoming anti-immigration as evidenced by the rise of the Dick Smithers…

      • Let me get this straight.

        You believe that Joe Hockey (even after his NY statements) will let population growth fall because the Stable Population Party got less than 1% of the vote and the “rise” of Dick Smith.

        That’s it? That’s your best case?

      • “Nothing to do with Joe at all”

        This is a revelation.

        So the Govt has no control over immigration levels but the random commenters in the SMH do?

        Please enlighten us Willy, who determines where the immigration levels are set?

      • Willy has a point there about 60% of NOM being temp visa holders. Immigration do not have a clue on how many actually stay back.

        However, the pollies deflect and re-direct anti-immigration anger by pointing the angry people in the direction of that small, but shiny object called “illegal asylum seekers”.

        We, i.e., majority of voters, are such mugs – we even take the first part of the quote “Australia is a lucky country, run by second-rate people who share its luck.” and consider it a compliment!! 🙁

      • Easy, staying in power. People vote and people are becoming anti-immigration as evidenced by the rise of the Dick Smithers…
        The anti-immigration feeling is trivially misdirected towards refugees, as it has been for the last decade.

      • Agree with Dr Smithy. Howard, and everyone who followed, has been spectacularly successful at misdirecting the population’s frustrations and anger, at the paltry numbers of refugees that arrive by boat. I swear there are many people who believe that every Islamic looking person they see in the street turned up on a boat….

        Meanwhile, he was able to crank up immigration to 11 in broad daylight, and it’s been kept there ever since.

  9. I don’t enjoy seeing Melbourne turn into a 3rd world city. Great Post UE. Thanks for all your obvious hard work. I know it is a passion but sometimes I think you work too hard.

  10. Thanks for this UE.

    I have a question regarding your GDP per capita plot. Probably I dont understand it correctly, but are you saying that since 1998 GDP per capita would have tracked real GDP growth in the absence of population growth? Are there any studies/models or examples that justify this? If there are, it should totally nail the argument.

    And yes, I have to say this: “Can Australia handle its population growth?” Of course it can! “With the current policies?” Of course it CANNOT.

    Increasing population is not a problem — it is policies set by our leaders and us who elect them.

    • it is policies set by our leaders and us who elect them

      I refer you to the discussion of Prisoners’ Dilemma above.

      Consider the simplified problem:

      a) party or candidate A offers policies X and Y;

      b) party or candidate B offers policies not-X and not-Y; and

      c) a voter (perhaps most voters) prefer policies X and not-Y.

      There is mathematically no way that voters in this situation can have their preferences reflected in a vote for either of the parties or candidates.

      In a free agency market (with no transaction costs or Prisoners’ Dilemma) other parties and candidates would enter the market to fill the void. But these conditions do not apply.

      Where voters are operating under conditions of Prisoners’ Dilemma, it is wrong to suggest that undesired policies adopted by political agents are somehow the responsibility of those voters.

      [For those who would respond with Hotelling’s Theorem, it simply doesn’t apply when parties are competing in a multi-dimensional space of policies or where it is possible to negotiate effective collusion.]

  11. Thank you for posting this graph! We keep hearing over and over that Kevin Rudd saved Australia from “recession”. If “recession” was defined in terms of GDP PER CAPITA, as it should be, the nonsense of this claim would become obvious.

    • The Rudd government “averted a (technical) recession” by fudging the GDP data — including the “historic series” — when they introduced the new System of National Accounts:

      “*The 2008-09 Annual National Accounts show a substantial increase in the level of GDP over history due to the ABS adopting the new System of National Accounts 2008. Given the degree of increase in the level of nominal GDP, the Government has released updated tables of fiscal aggregates contained within Appendix D of the 2009-10 MYEFO.”

      My ham-fisted reverse calculation at the time suggested the artificial increase in “GDP” was of the order of 4.5%.

    • Foreign ‘Investment’ aka ‘selling off our heritage’ saved Australia. Stimulus packages are not possible without that concurrent process.

  12. GDP itself is not a good indicator of increased standards of living. When natural disasters strike and homes are destoyed and rebuilt, little new is added but the total is included in GDP.

    GDP has no depreciation of plant or buildings, no diminution of resource through miniing, no reduction in arable areas through salinity or desertification, no reduction in fertility due to loss of topsoil or depletion of nutrients, no calculation for replacement of personal domestic labour or volunteer labour with paid staff, no depletion of fish stocks from overfishing, no deduction for environmental damage but repairing it adds to GDP, cigarette sales add to GDP and so does the treatment of the lung cancer.

    The list goes on and on as to why GDP is not a measure of the quality of life or even of net economic benefit.

    But I commend the focus on measuring on a per capita basis and on looking at the dilution effect on resource wealth and the costs of faster utilisation of existing infrastructure investment.

  13. Population growth has never been such a “negative” in the past, when the economy was NOT a “rentier” dominated one, and it still is not a problem in Texas, which is far less rentier dominated than most.

    The amount of zero sum rent being paid by Aussies, especially first home buyers, could have paid for new infrastructure, which would at least be a self liquidating investment. As it is, the money has been sucked out of the real economy, without actually paying for anything productive.

  14. More people more consumers?! More people higher unemployment, lower wages, and credit bubbles going boom.

  15. If you’re against this level of immigration and you voted for Liberal, Labor or the Greens, Palmer or Katter, you are a moron.

  16. Voted for Greens in 2010 on the hope they would look out for the little guy and stop such large migration numbers.

    Instead got a carbon tax.

    Never again…

    • So you voted for the Greens in 2010, but were surprised by their support of carbon pricing ?

      Does not compute.

      • I think the point of the comment is not that a vote for the Greens translated into a carbon tax, but that a vote for the Greens failed to translate into a limitation on migrant numbers.

        This is a classic example of the voter’s dilemma under a non-democratic system of elective government. (See the lengthy discussion thread earlier for a more detailed analysis.)

      • I think the point of the comment is not that a vote for the Greens translated into a carbon tax, but that a vote for the Greens failed to translate into a limitation on migrant numbers.
        The Greens don’t have the power to command legislation changing immigration.

        My understanding of their immigration policy is that they are not in favour of larger numbers of immigrants (but do believe a larger proportion should be for humanitarian reasons).

        I’ve yet to meet someone who votes Green that thinks Australia (or, indeed, the world) should have significantly more people in it.

      • Returning to the problem of the Voter’s Dilemma under a non-democratic system of government, if a voter prefers a lower rate of immigration, for whom does does that voter vote, assuming that he or she does not want the vote wasted??

      • Returning to the problem of the Voter’s Dilemma under a non-democratic system of government, if a voter prefers a lower rate of immigration, for whom does does that voter vote, assuming that he or she does not want the vote wasted??
        Yes, Stephen, I agree with you that our system has flaws.

        However, that’s entirely separate from someone voting for the Greens, then being surprised/disappointed/whatever that they supported legislation that implemented one of their core policy platforms.

  17. Sounds like some here may be ready for the Mutual Party. They’re the outfit got Cathy McGowan elected in Sophie Mirabella’s seat of Indi.

    From their blurb:-
    We welcome people from across the traditional left-right spectrum by emphasising:

    – the empowerment of citizens and civil society;
    – collaboration across social divisions and political backgrounds;
    – local initiatives and practical solutions to economic, social and environmental challenges; and
    – stronger community relationships and responsibilities.

    Why The Mutual Party?

    Much of the dysfunction in Australian politics has its roots in the adversarialism of the Westminster system. Anyone who wants constructive action on climate change, or a more nuanced and consensual approach to asylum seekers, has to find a way of transcending the debilitating adversarialism generated by the Westminster tradition.

    The Scandinavian tradition of social consensus and inclusion stands in sharp contrast to this model. The gridlock, paralysis and cynicism that characterises American, British and Australian politics is increasingly at odds with the outcomes of Scandinavian mutualism.

    This mutualist tradition has shaped our thinking about a name for our project. It has spawned The Mutual Party, as a name and concept that can fit a broad-based centrist movement uniting people of many different backgrounds.

    Labor. Liberal. Mutual – From partisanship to partnership. From conflict to cooperation

    Australians are fed up with mindless adversarialism in politics. Mutuality points to working together, moving beyond adversarial argument. It implies give-and-take and social consensus.

    Labor. Liberal. Mutual – It’s for all of us, not just a few, not just sectional interests

    Mutuality refers to the relationships and shared interests between all of us. Shared obligations and trust. Not just rights and benefits for a few, or privileges for particular sections of society.

    Labor. Liberal. Mutual – Not just the state and markets, but society.

    Labor’s focus is the state. The Liberal’s focus is the market. Mutuality refers to society as an equal partner with states and markets. Social and economic balance.

    Labor. Liberal. Mutual – Public sector, private sector, third sector

    Labor’s base is the public sector. The Liberals’ base is the corporate sector. The third sector is bigger than both:

    13 million Australians are members of organisations with a mutual structure (shared ownership) – associations, service clubs, sporting clubs, cooperatives
    6.4 million Australians are volunteers in associations.
    665, 000 voluntary associations keep society ticking.
    2.4 million Australians are self-employed, providing a livelihood to another 7 million workers outside the public sector and the corporate sector

    Labor. Liberal. Mutual – Because relationships matter as much as the economy

    Labor and Liberal are defined by the economy. But the most important parts of life occur outside the economy – the activity of carers, parenting, creative expression, sporting competition, community life, spirituality, cross-generational ties.

    Labor. Liberal. Mutual – Beyond liberalism and socialism

    The big ideological dispute in the 20th century was between liberalism (based on individuals) and socialism (based on the state). That dispute is now over.

    Where can we look to as a model of mutuality in practice?

    Sweden: home of social consensus, participation, innovation. Sweden has the highest per capita income in the world; the least inequality; the most advanced social inclusion; the lowest rates of crime; the highest rates of citizen participation; a world-renowned culture of innovation; and an independent profile in world affairs.

    Further information:

  18. The ignorance in the comments on the SMH article is astounding.

    Get it through your heads…

    1. The baby boom turns into a death bust and our NOM will not double or treble to compensate.
    2. Global population growth peaked in 1962 and has been declining since.
    3. Half the nations now have less than replacement fertility.

    I support a peaking and then declining population, as THAT IS WHAT IS GOING TO HAPPEN!

    • “2. Global population growth peaked in 1962 and has been declining since.”

      Perhaps they went into a cave as the Cuban missile crisis escalated?

    • Ronin8317MEMBER

      Global population peaked in 1962? Pretty sure that is humbug. The population growth in China, India, and Africa is really, really scary. For example, the population of Egypt tripled from 1960, while Australia’s population doubled over the same period.

      Population growth is exponential rather than linear. Look at those petri dish experiments with yeasts, there appears to be plenty of space and resources until it suddenly runs out, and the population collapses.


        As I recall, 110 million were being added per year at its peak and now down to 85 million per year.

        Note that the demographic, more people living longer, is 1/3 of the actual growth in real numbers now.

        Population growth is not exponential at all. That is false.
        China is not a population problem at all, unless you count the possible population decline a problem?

        “China’s ministry of education announced that in 2012 more than 13,600 primary schools closed nationwide. Between 2011 and last year the number of students enrolled in primary and secondary schools fell from nearly 150 million to 145 million. It also added that between 2002 and 2012, the number of pupils in primary schools fell by 20 percent.”

      • What is “scary” is that the current AUS pop growth rate (at 1.8%) is nearly double the current world rate…

        …and our Treasurer thinks that’s a good thing.

      • Yes, but you need to run the demographics out a few decades.

        Population decline, and supporting a population bulge of retirees, is going to be a crisis all over the world.

        Australia needs to be thankful it has a population growth rate of 1.8%; so what if that is double the international average, the international average, taking into account the demographics, is heading for disaster. Australia is closer to “about right”.

      • Oh dear….
        In 2006 we started to count temp visa holders into our official population growth rates, against OECD advice.
        Our permanent migration is about 90,000 pa at the moment and no data source, outside of Oz, counts the 1.8% as being accurate at all.

        All internal OZ projections predict a fall in the pop growth rates.

        5.3 million boomers will leave the home planet in the next few decades….

      • PhilB
        I am not convinced that population decline will be a disaster at all. It will change policy from ‘rear view mirror’ policies to ‘looking forward’ policies.

        I feel very optimistic about peak global population and then its decline.

      • Deny and obfuscate all you like Willy, our pop is growing at ~400,000 pa and this government will do everything in it’s power to keep it there or higher

      • Deny? Lol….60% of our NOM are temp visa holders. That is not denial, that is knowledge, something you seem to be lacking in.
        Just how do you think the govt can stop the boomers dying?
        Are you going to continue to troll?

      • “Gov. can close the temp door tomorrow if they want.”

        That’s the whole point ff, they don’t want to.

      • @flyingfox
        The 400k also includes our births minus deaths, approx 150k. That is what is going to change the most over the next few decades as our natural growth falls as our deaths climb.

        No-one is also talking about our trending up emigration, with over 92,000 leaving permanently over the last reported 12 mths.

      • @Patrician Thats a whole different discussion. Unless they convert these temp visa holders to permanent (and by all accounts this is tightening up), When unemployment hits, the temp visa holders don’t have an option. They don’t get unemployment benefits yadayadayada.

        Same goes for their kids born here. they are not classed as Oz citizens anymore unless one parent is Oz PR or citizen.

  19. notsofastMEMBER

    As pointed out by WN in the next two decades, without immigration, Australia’s population is going peak and then go into rapid decline.

    And it is important to note that this was even the case under the previous $5k baby bonus and all the middle class welfare to support families. Its just that the population decline, in the absence of immigration, would have been less rapid if the baby bonus was maintained.

    Australia has had sub replacement fertility since the mid 1970s, which continues to this day.

    • @notsofast
      Yes, the ‘demographic paradox’. The wealthier a society becomes, the more fertility falls.

      The IGR next year should map out our natural growth falling.

      It seems like the majority do not understand the death bust to come (80 years after the baby boom) and the implications for our population growth. So be it, as no one can stop the deaths rising dramatically. Oh and yes, that will effect house prices considerably.

      For more reading…

      “Some have argued that immigration levels can be increased to address population ageing.

      Because migrants are predominantly of workforce age, migration will assist in keeping up workforce growth. Moreover, if they are skilled they will raise general skill levels and productivity.

      This is in fact happening. The Government recognises that the greatest gains to Australia come from young skilled migrants, and has shifted the balance of Australia’s Migration Program from less than 30 per cent skilled in 1995-96 to more than double that proportion in 2002-03.

      But increased migration cannot prevent our population from ageing. This is because migrants who come to Australia will age along with the rest of the population. To maintain Australia’s existing age structure through immigration would require increases in immigration every year — and the increases would need to become progressively larger and larger to take account of the ageing of the migrants themselves. While there are undoubted benefits in maintaining net overseas migration, migration cannot stop the ageing of our population.”