Kohler: Soaring population killing budgets

ScreenHunter_277 Nov. 14 12.57

By Leith van Onselen

Alan Kohler continues his recent conversion to skeptic of Australia’s population ponzi, arguing today in The Australian that government budgets are failing to keep up with population growth, which is placing pressure, in particular, on the nation’s infrastructure and requiring increased investment:

…Australia’s population grew by nearly 8000 people per week last year and more than half of them landed in Melbourne and Sydney.

That population growth results in overall GDP and domestic consumption spending growing at close to trend, even though in per capita terms it is flat. It’s great for businesses, but governments can’t keep up. Roads are clogged and public transport is groaning. The health and education systems can’t cope with demand.

The fundamental problem is that none of Australia’s governments can fund capital works from recurrent revenue because they are running deficits. All ­capital expenditure has to be ­borrowed…

Kohler’s latest warning follows the declaration of an “infrastructure emergency” earlier this year on the back of rapid population growth:

Immigration has increased five-fold since the Howard government came to office…

One obvious consequence of Australia’s population boom, apart from disguising a fundamentally weak economy, is rising house prices because not enough houses are being built as a result of restrictive planning laws and high construction costs.

Not enough infrastructure is being built either, to the point where a national emergency is approaching.

I obviously support increased infrastructure investment on the proviso that it is well-targeted, based on robust cost-benefit analysis, and adds the productive capacity of the economy and/or living standards. Investment of this kind offers Australia the double dividend of supporting growth and jobs as the mining investment boom fades, whilst also expanding Australia’s productive base and improving living standards.

Increased borrowings required to support such infrastructure investment should also not necessarily be seen as a roadblock. Since benefits from infrastructure investment are spread over many years (even generations), it makes sense to also spread their cost. Further, projects that significantly boost productivity can be “self-liquidating” – essentially funded by the increased productivity (and therefore tax revenue) that they create.

That said, infrastructure investment required merely to support Australia’s population ponzi can be problematic, in that it can drain the nation’s productivity by crowding-out productive investment and capital deepening. As explained recently by Dr Katherine Betts from the Monash University Centre for Population and Urban Research:

The Productivity Commission report on ageing points out that the infrastructure spending needed to manage population growth over the next 50 years will be five times the total that was needed over the last 50 years. This investment in capital widening must seriously weaken Australia’s capacity to invest in the capital deepening that would boost productivity…

Population growth imposes pressures on infrastructure and adds to congestion; in so doing it depresses productivity.

International comparisons show that there is no association between population growth and growth in per capita GDP. This is not surprising as comparative data on 32 OECD countries show no positive association between population growth and growth in labour productivity…

Assertions that immigration-fuelled population growth will boost productivity remain conjectural. There is no empirical evidence that such growth in an advanced economy increases productivity.

High immigration and population growth is fine if it is for a purpose and fits an overall plan. But instead, Australia’s governments have pursued an uncoordinated approach, now setting the scene for a mad sell-off of state assets in a bid to raise funds necessary to overcome infrastructure bottlenecks caused, to a large extent, by its own population growth fetish.

However, with ongoing strong immigration, the resulting infrastructure is likely to hit peak capacity shortly after it is due to be built, likely requiring further significant investment to once again cope with the growing population (chicken meet egg).

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Unconventional Economist


  1. This population ponzi is feeding to the real estate ponzi, and you cannot blame any Government but all Governments which have been influence by the rent seekers and lobbyists, and not by the voters.

    • +1.

      Even if this phenomena were to disappear and the agenda turned to the matters of infrastructure development, network capacity and productivity, most of these pollies have NEVER spent a day in the real world and wouldn’t have a clue about real world business issues. Yes, their Departments might offer some advice in the form of briefings, reports etc etc, but they may as well be written up as chinese arithmetic.

      • migtronixMEMBER

        Absolutely jimbo, you’ve nailed it there! Experience in the real world? Negative.

  2. migtronixMEMBER

    Bloody well said UE!!!

    If you shout #libspill into a mirror three times, Malcolm Turnbull will appear and MAKE IT HAPPEN

    • Malcolm lives in a leafy, well appointed inner city suburb with lots of amenities.

      The closest thing to an “immigrant problem” is when his local greek deli runs out of his favorite imported olives.

      • “Name 1 member of the Fiberal party that doesn’t?”

        Yep. And most of the Labor ones too, for that matter.

        Bill Shorten sipping tea on the lawn at Yarralumla is hardly an iconic “working class hero”.

      • migtronixMEMBER

        What with his mother in law Dame Whatever? I’m shocked you don’t think that the average union member relates to that

    • notsofastMEMBER


      The world is a population PONZI. You can push back against the irresistible force all you like but in the end it will only overwhelm you.

      • migtronixMEMBER

        You can push back against the irresistible force all you like

        You forgot “Mr Beale!” — love Network 😀

  3. 1. 8000 per week is false.
    2. Most are temp visa holders who do not buy houses.

    • How temporary is temporary? How many temp visa holders are leaving per year? According to permanent departures stats, the majority of overseas-born people leaving permanently have been here 5+ years.

      Temporary or not, our net migration intake is huge and this has a significant affect on infrastructure usage.

  4. notsofastMEMBER

    While it is sobering to think that over the last 30 years Australia’s population has increased by about 50%, with the majority of this being due to immigration, it is worthwhile pointing out that other countries in the developed world have had larger increases over this time also. Both Singapore and Israel have had population increases of close to a 100% during this time. While the US, Canada and New Zealand have had similar increases to Australia of about 40%.

    All these developed countries are suffering from significant infrastructure deficits due in part to immigration fuelled population growth.

  5. Good to see a mainstream business commentator taking on the elephant in the room / golden goose.

  6. Poor Alan, must have driven his car to work recently. Here’s a tip Al, buy a helicopter, you can afford it.

  7. elasticMEMBER

    Maybe we shoud consider an infrastructure levy on all the large businesses that benefit directly from population growth because the local population sure doesn’t.
    It is clear that business is driving population growth.

    • Strange Economics

      e.g A mining tax, a bank excess profits fee, or remove diesel subsidy and negative gearing, increase capital gains tax and superannuation taxes.
      These big companies are supposed to make enough profit without needing govt help (or are they vulnerable citizens…)
      End the age of entitlement first for overpaid executives of govt protected industries.

  8. Population growth is the one an only “get out of jail free” politicians have to cover up poor economies and poor economic management.

    The “small Australia” policy did do much good for Julia.

    There is no sustainable medium or long term plan as to what population growth should be.

    I’m happy to have Asia’s, Euro’s, African’s in the mix but I’d like to have a logical, informed population policy rather than just bring them in because it is good for short term budgeting and political needs.

  9. I will continue to argue that population growth was beneficial in the past and is only “not beneficial” now because of political changes to the underlying system – especially the housing racket and the allowance of low quality immigration in excessive amounts.

  10. Ok guys we really mucked up this time. All that remains is to find someone to blame. How’s about those foreigners, always a popular target with our redneck fascist constituency. They’ll believe it, because they WANT to believe it.

  11. More propaganda from Monash university’s CPUR? Hardly a credible source….. and is Kohler not using to spruik for more investment in infrastructure i.e. BS’s constituency?