Here’s an interesting take on Australia by American Joel Kotkin and the publishers of The City Journal. Cross-posted with permission:
Few places on earth are better suited for middle-class prosperity than Australia. From early in its history, when it was a refuge for British convicts, the vast, resource-rich country has provided an ideal environment for upward mobility, from the pioneering ranches of the nineteenth century to the middle-class suburbs of the late twentieth. Journalist Donald Horne described Australia in 1964 as “a lucky country run mainly by second-rate people who share its luck.”
Over the last decade, though, Australia’s luck has changed, as the country develops many of the pathologies of crowded, socially divided societies like the United Kingdom or the United States. Despite being highly dependent on resource sales to China—largely coal, gas, oil, and iron ore—Australia has embraced green domestic politics more associated with Manhattan liberals or Silicon Valley oligarchs than the prototypical unpretentious Aussie, often someone dependent on resource-based industries. The result: a dramatic reversal of the middle-class uplift that so long defined Australian society.
In Australia, according to the OECD, the portion of households considered middle class—that is, earning between three-quarters and double the average income—has been dropping by more than a percentage point per decade since the 1980s. The size of the country’s middle class now ranks below the OECD average, and Australia’s middle-class millennials are likelier to sink into poverty than are those of all other advanced nations, except Greece and Latvia.
Historically, the Australian Labor Party, like its counterpart in Britain, was a party of the working class. After World War II, Prime Minister John Curtinhelped push through reforms—including financial support for homeowners—that accelerated middle-class prosperity. His approach was later adopted, and enhanced, by his liberal (in the classical sense) rival Robert Menzies, who recognized the family as “the cornerstone of Australian life.”
These views seem almost quaint today, particularly for a Labor Party increasingly dominated by those operating outside the tangible economy, as part of the professional class—media, finance, public service—and concentrated in the largely family-free urban cores. These information-economy elites may benefit from the flow of natural resources to East Asia, through tax policies or financing deals, or by pushing climate-change mitigation programs, but they have little stake in domestic production that makes use of Australia’s mineral wealth.
The gradual deindustrialization of Australia stems directly from policies imposed by local governments in New South Wales, Victoria, and Queensland, the home states of Sydney, Melbourne, and Brisbane. The country’s financial and cultural capital, Sydney has steadily deindustrialized, with manufacturing as a percentage of employment down 50 percent in the last two decades, as new apartments and luxury developments have replaced what was once called Australia’s Birmingham. Australia’s commitment to renewable energy dwarfs that of even the most committed green-leaning countries. Per capita, Australia has installed roughly five times as many renewable-energy installations as the E.U., the U.S., or China, and even two-and-a-half times more than climate-obsessed Germany. Not surprisingly, its energy costs are now among the highest in the world; energy prices rose 130 percent between 2015 and 2017. The Labor Party wants to boost renewables from 20 percent to 50 percent by 2030, though for greens, that’s not good enough—they demand a 100 percent renewable-energy grid by then.
Ironically, just as Australia is poised to replace Qatar as the world’s largest producer of natural gas, industrial enterprises in Australia are under enormous pressure from sky-high energy prices. Many are closing, and imports from China, India, and the Philippines are replacing what was once made domestically. These same countries are being powered by Australian coal and gas.
New Liberal Party leader Scott Morrison can’t help seeing the Left’s planning policies as an opportunity to shift working-class voters away from their traditional Labor allegiance. After all, plans by both Labor and Greens to block future coal plants or new offshore gas wells can’t be appealing to miners or people dependent on fossil fuels. New City coeditor John Muscat, a longtime social democrat, contends that the Labor Party and its putative green allies have been transformed into an instrument of the bureaucracy and “progressive” gentry, including academics, green activists, media stars, and business interests well-positioned to flourish in a hyper-regulated state. “Green planners,” Muscat says, “engage in a form of class discrimination. The costs of climate change are heaped on outer-suburban working people, who lose jobs, mobility and housing amenities, while the affluent emerge unscathed.”
The most pernicious assault on Australia’s middle class comes from regulation of land and expenditures to promote urban density. Between 1981 and 2016, property-ownership rates in Australia—a country with a strong tradition of middle- and working-class homeownership—fell among 25- to 34-year-olds from more than 60 percent to 45 percent. It’s not, as some suggest, a lack of developable land. Even in the relatively crowded United Kingdom, only 6 percent of the land is urbanized, while barely 3 percent of the United States and 2.1 percent of Canada is urbanized. In Australia, only 0.3 percent of the country is urban.
As in major cities in Great Britain, Australia, the U.S., and Canada, “smart growth” has helped turn Australia’s once-affordable cities into some of the world’s costliest. Home prices in Sydney—even in the current downturn—are higher than in Los Angeles, London, New York, Singapore, and Washington. Sydney’s planning regulations, according to a Reserve Bank study, add 55 percent to the price of a home. In Perth, Melbourne, and Brisbane, the impact exceeds $100,000 per house. Australian cities once filled with family-friendly neighborhoods are becoming dominated by dense apartments.
These policies are widely supported by planners, academics, and the media, who favor investment in public transit, which fails to meet the needs of most suburban working- and middle-class families. The elites are even pushing for high-speed rail, an absurdity in a country the size of the continental United States, with two-thirds the population of California. But logic or numbers won’t change their minds.
“The suburbs are about boredom, and obviously some people like being bored and plain and predictable,” Sydney Morning Herald urban affairs writer Elizabeth Farrelly has written. “I’m happy for them . . . even if their suburbs are destroying the world.” But this condescending attitude does not sit well with many Australians, notes Brisbane-based property analyst Ross Elliott. The inner core of the country’s three largest cities—Brisbane, Sydney, and Melbourne—represents just 11 percent, 7 percent, and 13 percent of the greater metro population. “Boosters might claim that inner urban renewal has seen an explosion of inner-city residents because ‘that’s where most people most want to live,’” notes Elliott, but in fact 80 percent of people in metropolitan Australia live in suburbs, with more than four-fifths of families living in single-family homes.
Telling Australians where and how to live could portend a financial disaster. Australia’s density-first policies, which make little sense in such a land-rich country, have essentially created a glut of expensive urban dwellings and a shortage of the suburban single-family homes desired by the new generation. Some once-idyllic middle-class areas, like Sydney’s Ku-ring-gai, are losing their tree-lined appeal, and much of their native wildlife, with apartments scattered on the narrow suburban roads. To be sure, most Australian cities remain largely suburban in form, but almost all the new supply, in response to planner demands, comes from apartments. According to projections from the Urban Taskforce, apartments will make up half of Sydney’s dwellings by mid-century, whereas only one quarter of Sydney dwellings will be family-friendly detached homes. Already up to 40 percent of Sydney’s 35- to 49-year-olds live in townhomes or apartments—overwhelmingly rental units. The average in the rest of the country’s urban areas is around half that.
This market-distorting approach is now contributing to a potentially devastating decline in the value of high-end, high-density development. These buildings, never much in demand among homeowning middle-class Australians, relied on Chinese and other Asian investors. But now Beijing’s currency controls, and growing scrutiny of Chinese influence on Australian politicians, are making the country less amenable, or less attractive, to these investors. Prosper Australia’s 2018 Speculative Vacancies Report estimates that up to 16 percent of investor-owned residential properties in Melbourne are effectively vacant, based on water-usage data. The pullback of Chinese investment could reduce apartment prices in some areas by as much as 50 percent.
The threat of a financial meltdown as urban-core property prices decline is real. Australia’s economy, like that of many advanced countries, has become increasingly dominated by the property industry. As sales prices have fallen almost 8 percent in Sydney over the past year, reverberations could be felt among the country’s largest financial, real-estate, and construction firms.
“Middle Australia is grumpy, and no wonder,” notes columnist David Uren. It’s sobering to watch the transformation of the socially democratic “lucky country” into yet another nation advancing toward feudalism and social division. But the process may not be inexorable, since it reflects policy decisions, not economic or social fundamentals. The key issue will be whether Australia’s middle class fights back; with grassroots communities in Sydney and suburbanites in Brisbane, the country’s third-largest city, battling against mandated densification, that awakening might be underway.
Today, many Australians face an uncharacteristically bleak future. Urged to settle where the planners and pundits prefer, they’re stuck in places both unaffordable and inhospitable, as part of a needless governmental drive to make life there more like that of the more congested, socially riven metropoles of Britain, the U.S., or China. What’s at stake are many of the long-established pleasures of life Down Under.
Joel Kotkin is the presidential fellow in urban futures at Chapman University and executive director of the Center for Opportunity Urbanism. His latest book is The Human City: Urbanism for the Rest of Us.