Part of the perception of supply constraints comes from our view of Australia as a big country. Yes, we have a lot of land. What we don’t have much of is land where people actually want to live. In general, desirable land is the land within or adjacent to existing settlements. Australia’s population is heavily urbanised compared with other developed countries, let alone most emerging countries.
It is also quite concentrated in a couple of large cities (Graph 6). So the range of acceptable locations is actually more limited than the map would lead you to believe.
And in last week’s speech, Ellis made a similar argument in trying to explain the gaping dwelling price difference between Australia and the United States:
What we can do is get some sense of the relativities between countries that you might expect, given those institutional and other differences. For example, we can reasonably expect that countries where much of the population lives in smaller, cheaper cities will have lower national aggregate ratios of housing prices to incomes than other countries. That might partly explain why the price-to-income ratio for the United States is relatively low.
Last year, Gareth Brown at the Bristlemouth Blogshowed comprehensively that that the RBA had juked the stats on urbanisation rates by wrongly comparing the greater metropolitan areas of Australia’s cities against only the central inner city areas of other nations. This is why Australia’s urbanisation rate is around 75% versus just under 30% in the United States (see above chart).
In contrast with what Ellis is claiming, here are some facts:
29% of Americans live in cities larger than 7 million people, versus 0% in Australia
37% of Americans live in cities as big or bigger than Sydney vs 21% in Australia
51% of the population in both nations live in cities as big or bigger than Brisbane
72% of the population in both nations live in cities as big or bigger than Canberra
76% of Americans live in cities larger than 100,000 people, slightly lower than the 79% in Australia…
It’s time for RBA staff members to stop spreading this nonsense and perhaps book into a Demographics 101 course.
I will simply add that Gareth Brown’s analysis is supported by Gerard Minack, who compiled the below chart showing median house price/median income ratios for Anglo cities:
As you can see, housing in Australia is incredibly expensive even outside the major capitals. In fact, there are no cities with less than 100,000 people where house prices are over 7 times income – aside from Australian cities.
Yet again, the RBA propaganda has been caught red handed juking the housing stats to maintain confidence in Australia’s housing bubble.