The mainstreams of politics (and even many of the side streams) have adopted as conventional wisdom that population growth is a necessary ingredient of economic performance in Australia.
That argument is echoed across virtually all industry groups. It’s also one I find hard to disagree with but increasingly I find myself challenging my own faith in population growth and ‘a big Australia.’ I am yet to convert but am increasingly agnostic on the issue.
Australia is highly reliant on net overseas migration for our 1.6 percent per annum rate of population growth. In the year to September 2018, our population grew by just under 400,000 people. Of this, 155,000 was the ‘natural’ increase (more births than deaths) while migration added 240,000 people. So without overseas migration our rate of population growth would be less than half of what it is.
The benefits of high population growth are felt across many industries – retail and property among them – where it generates additional demand. They are also felt in the service sectors – education and health amongst them – where the demands are often (though not always) at an increased marginal cost. The question (put very simplistically) is whether the additional benefits outweigh the additional costs.
This often depends on the nature of the migrants. For example, when Queensland’s net interstate migration was peaking in the late 1980s and early 1990s, it was drawing in skilled interstate migrants who brought with them capital (often from the sale of a house) and who were going into a full time job when they got here (Queensland’s rate of full time jobs growth was back then ahead of NSW and Victoria). As a result, interstate migration growth contributed further to Queensland’s prosperity at the time. However, if Queensland instead was attracting a large number of pension-reliant retirees or low skilled and unemployed people, the economic impact would be very different.
So the nature of in-migration can have a significant bearing on the economics of population growth.
Another feature of population growth which I hadn’t appreciated until recently is that much of Australia’s export earnings comes from industries which are not reliant on population. Iron ore is our top export (16% of the 2016 total) followed by coal (13%). Education is third (7%) while gold (6%) and natural gas (5%) round out the top 5. As a noted economist explained to me, Australia would be earning as much from most key exports with 20 million people as it would with 30 million. The extra population, they explained to me, only serves to dilute the per capita value of the foreign exchange earnings, which in turn contribute to the things we use to measure our quality of life (in material terms at least).
Plus, an increasing population places increasing demands on infrastructure – which has to be funded. This particular aspect of growth has become a common meme of political debate in recent years.
Comparing our growth to other nations might help keep things in perspective. And when you do, there are some surprises. The comparisons that follow aren’t precise: data sources aren’t consistent from one measure to the next nor are the time periods the same for each country due to differences in reporting times (and data availability) but the results are useful nonetheless.
Of nations we tend to think of as advanced with high standards of living, many also feature low rates of population growth. Canada for example is growing at half the rate of Australia, has more affordable housing and broadly comparable GDP per capita. And Denmark, often cited as a model Euro economy, is barely growing its population at all yet enjoys a GDP per capita equal to Australia. Even our Kiwi cousins are growing at half the rate of Australia and – other than some very expensive housing – seem to be doing quite well economically.
|Country||POP GROWTH RATE||GDP PER CAPITA (IMF data)||Housing median multiple (Demographia, major markets 2018)|
So where does Australia sit in terms of countries that are growing at the same speed as we are? And if high growth is by its nature good for the economy, then countries with higher rates of growth than us would be worth emulating, or so the logic might follow?
That list is below (UN data various sources) and you can make of it what you like. Personally, I am still a believer in growth and in a bigger Australia. We have the room, the resources, the governmental systems and the social infrastructure which logically can support more people. But maybe, just maybe, the rate at which we get there could be dialed back a notch or two, allowing us all to keep up.
Countries with faster population growth than Australia:
|27||United Arab Emirates||2.37|
|28||Congo, Democratic Republic of the||2.37|
|35||British Virgin Islands||2.25|
|39||Turks and Caicos Islands||2.16|
|40||Central African Republic||2.12|
|41||Congo, Republic of the||2.11|
|60||Sao Tome and Principe||1.72|
|61||Papua New Guinea||1.71|