I have noted repeatedly 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-out 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, tunneling, as well as disruptions to existing infrastructure – basic ‘dis-economies of scale’.
Indeed, just last month, the PC’s Shifting the Dial: 5 year productivity review explicitly noted that infrastructure costs will inevitably balloon due to our cities’ rapidly growing populations:
Growing populations will place pressure on already strained transport systems… Yet available choices for new investments are constrained by the increasingly limited availability of unutilised land. Costs of new transport structures have risen accordingly, with new developments (for example WestConnex) requiring land reclamation, costly compensation arrangements, or otherwise more expensive alternatives (such as tunnels).
The $5.5 billion West Gate Tunnel project is a textbook example of the dis-economies of scale so often attached to modern Australian infrastructure ‘solutions’.
Back in August, it was revealed 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… was employed by the Victorian transport department in 2015 to assess Transurban’s planned $5.5 billion toll road through Melbourne’s west…
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…
“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…
Mr McDougall… 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…
Then in September it was revealed that the Andrews Labor Government was trying to keep Victorians in the dark about the West Gate Tunnel Project by keeping an expert’s report critical of the modelling confidential:
The report by New Zealand transport expert John Allard is critical of traffic modelling done by project builder Transurban and the government.
That modelling helped Premier Daniel Andrews justify his support for the toll road, and to claim it would return $1.30 to the Victorian economy for every $1 spent building it.
Despite Mr Allard’s report and equally negative findings of another government-appointed consultant who reviewed the plan, the road is proceeding.
The move to keep the negative report confidential leaves government-appointed experts in the unusual position of having to decide whether to force its release…
Yesterday, despite the major misgivings mentioned above, the Andrews Labor Government approved the West Gate Tunnel project. From The Age:
Planning Minister Richard Wynne announced on Monday that he had given the project environmental approval, and that it would go ahead with minor changes…
The government will offer to purchase houses in Yarraville as part of the project, after residents requested they be bought out…
The project was successfully pitched to the Andrews government by Transurban behind closed doors.
The government and Transurban want to start work on the project in 2018.
However, some residents are devastated that the project has gained approval.
The project will funnel 4000 extra trucks each day along Millers Road in Brooklyn…
About $3.8 billion of the $5.5 billion cost of building the proposed road is to be paid by Transurban.
In return, the Andrews government will hand Transurban the right to toll CityLink for up to 12 more years. CityLink delivered Transurban revenue of $687 million last year.
Transurban’s contract to toll CityLink will expire in 2035 if it is left unchanged.
Mr Wynne said the toll road was an “important project for Melbourne” in dealing with population growth in the West…
Anybody with half a brain can see that running a turbo-charged immigration program requires massive investment and costs a lot, and that these costs are made worse by the dis-economies 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 West Gate Tunnel will be required over and over again as rapid population growth continually outstrips the supply of transport infrastructure.
