Solving Melbourne’s population squeeze? The answer is obvious

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By Leith van Onselen

Following its “investigation” last weekend, which found that Victorian’s material living standards have tread water since the Global Financial Crisis hit in 2008, with the state’s economy held-up purely by manic population growth, The Age produced ten possible “solutions” to Melbourne’s break-neck population problem:

[Victoria is] adding a city the size of Ballarat each year, a level of growth that’s challenging our housing affordability, urban boundaries, infrastructure and patience.

The response from experts and the public has been overwhelming, but the quest for a workable solutions has met with great enthusiasm. Here, we canvass the ideas of some of Melbourne’s leading minds in search of a better way forward.

1. DENSIFY MIDDLE MELBOURNE
John Daley, chief executive officer, Grattan Institute
We should prioritise further planning reform that encourages more sub-division of middle ring suburbs…

2. FREE UP CAPITAL FUNDING FOR SCHOOLS
Danni Addison, chief executive (Vic) Urban Development Institute of Australia
The Education Department has to seek capital funds to buy school sites through the annual budget. This slows the delivery of much-needed schools in new suburbs…

3. FIFTY PER CENT PUBLIC TRANSPORT BY 2050
Bill Forrest, planner and long-time local government executive
We should have a planning policy of 50 per cent of journeys in Melbourne being by public transport, cycling or walking by 2050: 50 by 2050. The biggest issue we face is how to efficiently move ever-increasing numbers of people around…

4. MORE GOVERNMENT-BUILT HOUSING
Terry Rawnsley, economist and partner SGS Economics & Planning
The Andrews government’s new housing strategy is a good start, but there will have to be more of it…

5. REPLACE STAMP DUTY WITH LAND TAX
Saul Eslake, independent economist
Victoria should get rid of stamp duties altogether and seek to collect the same amount of revenue, over time, from a more broadly-based land tax…

6. DIRECT POPULATION TO REGIONS
​Peter Tesdorpf​, planner and member of Victorian Coalition’s population taskforce
Managing Victoria’s rapid population growth is Victoria’s single biggest challenge… We need a minimum target for the regions to absorb 2 million additional people instead of the projected 690,000 by 2050. Investing in the regional rail network to reduce travel times is the most powerful tool to achieve decentralisation and spread opportunities to all Victorians…

7. PROTECT OUR FOOD BOWL
Rachel Carey, food policy specialist, University of Melbourne
By 2050, Melbourne is likely to need at least 60 per cent more food, but we’re paving over the places where our food grows and putting the city’s long-term food security at risk…

8. SLOW POPULATION GROWTH
Michael Bayliss, Victorian president, Sustainable Population Australia
The Victorian state government should lobby the federal government to reconsider economically-driven population growth policies. Australia could maintain a broadly stable population and meet humanitarian obligations without any changes to the current birth rate or the humanitarian program. The skilled migration program is the largest driving force behind Melbourne growing at 100,000 people per annum, which is driven by economic ideology. Future economic population policies should be in keeping with current realities of infrastructure and housing costs and a slowing job market. It is increasingly obvious that Victoria cannot afford the infrastructure budget required to keep up with federal population policies under the current skilled migration program…

9. TRIAL TOLLS ON KEY ROADS
Marion Terrill​, transport program director, Grattan Institute
There’s much new infrastructure under construction but we can’t build our way out of congestion. We will find that before long, new roads and trains are just as congested as they are now…

10. DOWNSIZE AND DIVERSIFY
Kerstin Thompson, architect
Australia boasts the largest average house size in the world – around 240 square metres. Architecture can respond by developing new, more compact house types and rethinking existing ones. The bloated single house could be converted to several and thus yield more dwellings within established suburbs, and within existing infrastructure…

Of all the proposed “solutions”, only one addresses what is actually causing the population pressures in the first place. And that, you guessed it, is number 8. All the other solutions merely treat the symptoms, and some not in a way that would actually boost living standards of incumbent residents (eg. since when has stuffing people into smaller homes represented “progress”?).

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As I have noted many times before, it is the federal government’s mass immigration program that is the primary driver of Australia’s (and by extension Melbourne’s) strong population growth. The federal government has raised Australia’s permanent migrant intake from around 80,000 at the turn of the century (and a historical average of 70,000) to 200,000 currently:

And the lion’s share of these migrants have flooded Sydney and Melbourne, as confirmed by the latest Census, creating the population pressures in the first place.

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As shown in the next chart, which comes from the Productivity Commission, Australia’s population will reach more than 40 million mid-century under current mass immigration settings, at least 13 million more than would occur under zero net overseas migration (NOM):

That’s a heck of a lot of extra people to build infrastructure and housing for versus a lower or zero NOM policy.

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The fact remains that it is a direct policy choice how ‘big’ Australia becomes, not a fait accompli. So why isn’t the Victorian (and New South Wales) Government lobbying its federal counterpart to slash the immigration program and relieve the intense population pressures afflicting Melbourne (and Sydney), lowering the living standards of incumbent residents?

The most heartening this from this Age article is that the overwhelming majority of reader’s comments see through the spin and want immigration slashed. They overwhelmingly agree that solution number 8 is the obvious and least painful answer to Melbourne’s population squeeze. And why wouldn’t they? It’s hardly rocket science.

unconventionaleconomist@hotmail.com

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.