Australia: The Once Lucky Country

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 worldenergy 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.

Comments

  1. HixtarMEMBER

    This:

    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.

    And yet we seem to accept it as if we’ve always had a say. Fkn mental.

    • The Traveling Wilbur

      At least our Commander in Chief isn’t an orange backstabbing ethically moribund mates-supporter who places his own interests and those of his colleagues above the majority of the population.

      Well… at least he’s not orange.

    • DominicMEMBER

      This, despite one of the highest minimum wages in the West. Now then ….

  2. Yeah blame solar panels for our failure not neoliberal deregulation ideologies

    • Kensz0MEMBER

      yes this felt like a strange point, no mention of why people are opting for renewables

    • Fact check; Can anyone show a report which prove the point we are drastically building renewable energy therefore raising power prices? Do we not have more coal fired power stations than ever before? Was it not Howard who gave away our gas reserves to the USA as protection money which has caused a lack of a suitable alternative being Gas for cleaner generation.

    • Torchwood1979

      This is the one part of that article that was waaaaaaay off. Howard’s privatisation coupled with the gas cartel’s price gouging are far more to blame for our high power prices than renewables.

      Otherwise it’s a spot on article. As usual, it takes someone on the other side of the world to spot and state the painfully obvious about the absurd situation we’ve got ourselves into.

  3. Kensz0MEMBER

    I don’t know why but Australians are quite servile/passive as a people. If the French government try anything funny the French people riot all over the place.
    Our ‘she’ll be right’ mentality works against us sometimes.

    • Two points why:
      Thanks to our British heritage we know that revolutions never help ordinary people – we still live in feudalism
      Our police is nasty and would beat and kill protesters

    • robert2013MEMBER

      It wasn’t always the case. 19th and early 20th Century unionism here was popular and often violent. In Brisbane during WW2 there were running street battles between Australian and American soldiers. Australian men had got tired of Americans taking the local women for themselves. Consider that most people don’t even know their neighbours and even fewer have regular conversations with them. If there were masses of people living in a neighbourhood and not going to work everyday I reckon they’d start talking and figuring out what to do. Internet forums are no substitute for face to face interaction.

    • Because they can’t stand together … Everyone is trying to gouge the next guy!

  4. The urban consolidation push is mostly a result of cash strapped State governments wanting to protect AAA credit ratings by saving on building infrastructure for greenfield development. Even with developer contributions State govts are still on the hook for about 50% of infrastructure costs associated with greenfield development. Far easier for State governments to push urban consolidation to ‘utilise under-utilised infrastructure in built up areas’.

    If the State governments created the means by which the private sector could fund infrastructure associated with new development, for example the infrastructure bond model used in Texas by Municipal Utility Districts, and if in turn the State Govt abolished it’s iron fisted grip on land release (read re-zoning from rural to residential) the market could decide where new housing went rather than govt planners. It would be a win win.

    The current NZ labor govt proposed essentially the same reforms but absolutely zero progress has been made on implementing them. There’s no political appetite for it.

  5. Even StevenMEMBER

    Hit and miss:
    – wrong about the driver of energy price increases (it’s not because of solar panels)
    – doesn’t mention huge levels of immigration relative to other countries
    – doesn’t discuss carry capacity of Australia

    But overall, gets the deteriorating/bleak outlook about right.

  6. The elites are even pushing for high-speed rail, an absurdity in a country the size of the continental United States

    Most Aussies live in NSW and Vic.

    Heck, most immigrants move to NSW and Vic.

    Nobody is proposing a high speed railway from Perth to Sydney.

    The top 10 busiest routes in the world

    Jeju – Seoul Gimpo: 13,460,306 passengers
    Melbourne – Sydney Kingsford Smith: 9,090,941 passengers
    Sapporo – Tokyo Haneda: 8,726,502 passengers
    Fukuoka – Tokyo Haneda: 7,864,000 passengers
    Mumbai – Delhi: 7,129,943 passengers
    Beijing Capital – Shanghai Hongqiao: 6,833,684 passengers
    Hanoi – Ho Chi Minh City: 6,769,823 passengers

    Looks like there is demand. But nah, just keep building more and more road tunnels. Road tunnels cost nothing. And build 12 diesel submarines when 6 imported ones will do.

    • Er, what percentage of airport “passengers” is relevant to a calculation of potential for rail, which of necessity has to be “domestic only”?

      • Why would people use a 200 km/h train instead of flying? And remind me, how much subsidy per passenger trip do the airlines get, and how much would rail passengers get including the costs of capital and its replacement?

        People all over the world aren’t “getting it” that when you vote for something that is a black hole of subsidies, allegedly to “replace” a status quo that is not a black hole of subsidies, that places a strain on public finances. Portland’s Light Rail, for example, is crowding out more and more of the budget not just for suburban buses, but all sorts of other line items in the local budget are ending up having to be axed.

        If you think HSR between Sydney and Melbourne would run on fare revenue, you don’t understand the chasm in all these projects, between the value available to sell riders, and the costs of the system. Potential riders will simply NEVER pay a fare that will actually cover the costs. Increasing ridership by lowering the fares, is a “Concorde Project”; the “success” will increase, not decrease, the subsidy cost.

  7. Urban density increases the availability of Lattes!
    Thats whey people love living in apartments.
    Put a gym on the ground floor, a pool on the roof, and a Woolies metro on the corner, and your in heaven.
    The article appears to have missed that.

  8. NathanMEMBER

    Ahh, the “City Journal”, which is a mouth piece of the Manhattan Institute, which is an arch conservative think tank. Loved by Reagan, etc.

    The institute is:

    – against acting on climate change
    – against universal healthcare of the the kind Australia has
    – against acting on inequality, in fact they think it just fine

    Importantly, the the City Journal has been used in contexts we have no modern experience of, like inner city ghettos. It doesn’t understand urbanism in this country because it only understands urbanism in the American context, which is very different to here because America has an insidious racial caste system.

    • DominicMEMBER

      Did you actually read this article through objective eyes or did you skip that bit?

      Perhaps you didn’t like all those truthy bits crushing the elites from media and academia for their criminally arrogant attitude to the average Joe and wishing to impose on the lifestyles of the citizen at large? I found it quite accurate on the whole, especially the conclusion that Progressives are basically the most wretched of cancers.

    • “…America has an insidious racial caste system…”

      President Obama.
      Oprah
      Clarence Thomas
      Ben Carson
      Quincy Jones
      Thomas Sowell

      Name me Australia’s equivalents. Or Britain’s, or France’s, or Sweden’s, or Germany’s.

      Australia perhaps does have an equivalent to the US’s urban ghettoes; the location is different but the culture and the politics that are responsible, are the same. The “Reserves”.

      Here’s another interesting point worth noting. Noted US Law Professor Nicole Garnett criticises the fad for “smart growth” policies that drive up house prices, curtailing suburbanization “just at the point when previously excluded minorities were making the biggest gains in housing conditions”. Like all progressive Lefty ideas, the effects in practice can be the exact opposite of the “social justice” they claim to represent. The great Thomas Sowell calls this “Green Disparate Impact”.

      Ironically the least segregated cities in the USA are Houston and Dallas; still hated completely falsely by “progressives” as bastions of southern wedneck wacism, and also hated for the “sprawl” that “prices in” minorities to a greater proportion of locations.

      Joel Kotkin is one of the greatest researcher- writers and the above piece is typical. It stands in its own right well above the fray of ad hominems and constructed narratives from “progressives”.

    • kodiakMEMBER

      The article was written by a seppo. Therefore it can have no merit. You hve the strangest of sicknesses.

    • Good points, Nathan!

      No wonder the article is ranting against solar panels. And the article basically makes no mention of tax and health!

  9. Fantastic article. Nicely sums up the MB editorial line too. Constantly deploring Australia’s role in climate change with no mention of the carbon based exports keeping this welfare ponzu scheme economy going.
    I wish the coal exporters would go on strike for six months to give the socialists and their media cheer leaders a taste of the future.
    My kids generation will be living like those in 19th century England. If you have a family mum and dad together bath every day and have three meals you will part of the upper class. Everyone else will be totally rooted.

  10. Very unpleasant American hubris. Not a “refuge “ for convicts. 70 %of Aus have Irish ancestry from 1800s mostly.
    On that the important point is Aus began to lose its identity in the early nineties with o much immigration. Going back to the film Newsfront the American colonisation was just beginning. And the film was nostalgia by the time it was released. Aus is a vassal state and governance has been deteriorating from late 1970s post Whitlam.
    As he stats there is deteriorating disaster everywhere. The electoral system is such we don’t get to vote change agents in. Th e hell plus jail term given to Pauline way back showed the incumbents all side by side shoulder to polyester shoulder at any threat to the career corruption. Decisions were made and continue which screw the inhabitants every which way from middle class down to the increasing number of battlers as once known.that in everything, education, loss of industries, lowering of standards. Less economic diversity than Zimbabwe. No accident.
    In the 80s govt policies were refusing to utilise CSIRO research for jobs and wealth creation and maintenance and sold o China at bargain rates. And cutbacks on CSIRO kept going. Like cutbacks on ABC media which was holding a flame for Aus identity.
    We don’t have ranches. Most importantly for this entitled fool, is the pointy end for us is that Aus is the oldest and driest continent. Sure for the robber barons there re mineral and gas deposits especially where Aus and India broke apart way back with the earths expansion. The critical point is that the 2025 population level plus gdp pt together by CIA and it’s cohorts have Aus at a population of 16 million and gdp at less than a third it is currently. It has us population of 99 million which might give the writer one thing acutely important to consider. Russia however with slightly higher population booming economically by the CIA forecast. Many countries are fine. We however are fked. Which fits with bank energy rba govt policies. Surface is only part of the Aus story.
    Thank you H&H an outside view lights up the surface seen by through their paradigm, and in our case the painful truths beneath. Paddling madly into disaster,