I have noted previously that one of the key reasons why Australia’s high population growth (immigration) is lowering the living standards of existing residents is because of the strain that it places on infrastructure, which inevitably leads to more congestion on roads, public transport, as well as more expensive housing.
Basic math (and commonsense) suggests that if you double the nation’s population, you need to at least double the stock of infrastructure to ensure that living standards are not eroded (other things equal).
And if you don’t build-out the infrastructure efficiently to match the population influx, then productivity and ergo living standards will be reduced, as explained previously by Ross Gittins:
What economists know but try not to think about – and never ever mention in front of the children – is that immigration carries a huge threat to our productivity.
The unthinkable truth is that unless we invest in enough additional housing, business equipment and public infrastructure to accommodate the extra workers and their families, this lack of “capital widening” reduces our physical capital per person and so reduces our productivity.
Think of it: the very report announcing that our population is projected to grow by 16 million to 40 million over the next 40 years doesn’t say a word about the huge increase in infrastructure spending this will require if our productivity isn’t to fall, nor discuss how its cost should be shared between present and future taxpayers.
In practice, however, the solution is not that simple. In already built-up cities like Sydney and Melbourne, which also happen to be the major magnets for new migrants, the cost of retrofitting new infrastructure to accommodate greater population densities can become prohibitively expensive because of the need for land buy-backs, tunnelling, as well as disruptions to existing infrastructure.
In the case of Sydney, we have already witnessed these diseconomies of scale with: 1) the North West Rail Link, which is expected to cost an astounding $8.3 billion; 2) the WestConnex road project – the $17 billion 33 kilometre motorway under construction that is more expensive per kilometre than the Chanel Tunnel; and 3) the F6 freeway extension in southern Sydney, which is estimated to cost an insane $14.5 billion.
Not only are these projects hideously expensive, but they often create major indigestion for Sydney residents during the construction phase. Moreover, in the case of WestConnex, existing free public roads like the state-owned M4 (that have already been paid off) will be tolled to help fund the project, raising costs for residents.
The story is similar in Melbourne – whose population is expanding at an unprecedented rate – with expensive projects like the $11 billion Metro Tunnel and the $5.5 billion West Gate Tunnel currently under construction.
Regarding the latter project – the West Gate Tunnel – is has been revealed today in The Age that an expert was cut for voicing concerns about the efficacy of the project to Victorian Treasurer, Tim Pallas:
A transport expert employed by the Andrews government to assess Transurban’s proposed West Gate Tunnel was moved off the project immediately after raising his concerns about it directly with Treasurer Tim Pallas, a Senate hearing has been told.
Transport modelling and economics expert William McDougall gave evidence to a Senate inquiry into the nation’s toll roads in Melbourne on Thursday.
Mr McDougall was employed by the Victorian transport department in 2015 to assess Transurban’s planned $5.5 billion toll road through Melbourne’s west…
Mr McDougall was auditing aspects of the business case being developed to justify this proposed public expenditure.
So alarmed was Mr McDougall by what he believed to be the weak economic case for Transurban’s toll road that he personally contacted state treasurer Tim Pallas to raise his concerns.
He told the Senate inquiry he contacted the treasurer directly after unsuccessfully raising his concerns within the transport department.
“I raised my concerns at a higher level and it was about a week after that I was unexpectedly taken off the project,” Mr McDougall said…
He was due to give open evidence at the Senate hearing on Thursday.
But Labor senator and inquiry chairman Chris Ketter agreed to the Victorian government’s request that most of Mr McDougall’s evidence on Thursday be kept secret…
Mr McDougall was allowed to give only a short public testimony before most of his evidence was heard by senators behind closed doors.
He told the public part of his hearing that he and another expert employed to review the project, New Zealand transport planner and strategist John Allard, “were both extremely concerned” about both the economic and transport modelling behind Transurban’s proposed motorway…
Opposition roads spokesman Ryan Smith said there were growing concerns the West Gate Tunnel project would do little to combat road congestion. He said Thursday’s testimony should make Victorians “very concerned” about how Daniel Andrews was spending public money.
In November 2013, the Productivity Commission (PC) released its final report on An Ageing Australia: Preparing for the Future, which projected that Australia’s population would swell to 38 million people by 2060 [since upgraded to 40 million] and warned that total private and public investment requirements over the 50 year period are estimated to be more than 5 times the cumulative investment made over the last half century:
Total private and public investment requirements over this 50 year period are estimated to be more than 5 times the cumulative investment made over the last half century, which reveals the importance of an efficient investment environment…
Blind Freddy can see that running a high immigration program requires massive investment and costs a lot, and that these costs are made worse by the diseconomies of scale and political incompetence discussed above.
Clearly, the most obvious and least cost policy solution to mitigate the big cities’ infrastructure woes is to significantly dial back Australia’s immigration program and forestall the need for costly new infrastructure projects in the first place. Because under current mass immigration settings, expensive solutions like the ones mentioned above will be required over and over again as rapid population growth continually outstrips the supply of transport infrastructure.