Why We Need Population Growth (And Where to Put It)

Last Updated Sep 2, 2010 11:10 PM EDT

Australia's high population growth helped the economy to grow through the economic downturn. We're now trapped in a cycle where an ageing population demands a migrant intake to help keep a productive balance, but we have to get smarter about where everyone lives.

Back in 1990 Australia's gross domestic product (GDP) was around US$19,000 per capita, 17 percent below the US. Twenty years later we've switched places --- at US$54,000 our GDP per capita is 13 percent higher than the US. Thanks, in part, to the mining explosion, the Australian economy is doing very well, but it's unlikely this meteoric rise would have occurred without a 29 percent rise in the Aussie population over the last 20 years.

As this graph shows, accelerated population growth seems to have helped with economic prosperity, contributing not just to total income but to our earnings per head of population. It puts paid to any argument that increasing population has meant our wealth has to shared out more widely --- more people really are making everyone richer, at least so far. Okay, these figures are not adjusted for inflation, but you can see that compared to the US we are each better off than we were.

Generally speaking those countries with the highest growth in population have seen the largest rise in GDP per capita. New Zealand, for example, falls between Australia and the US in population growth, and it's growth in GDP per capita is positioned the same. Conversely, Japan's GDP per head has grown significantly less (by 65 percent) thanks to a stagnated population growth.

Without Migration We Go Backwards
Migration is key to our future. Our population would decline without it. Over the last decade between 250 and 300 thousand Aussies are born each year, but half that number die (different people of course) and 230 thousand or more of us migrate overseas. So, to grow at all we need a fairly big migration target, even before we consider countering the productivity issues associated with the well documented ageing of our population.

The problem is, many of these migrants want to live in the state capitals --- after all, that's where the jobs are. This has to be the biggest issue. Let's take NSW as an example: Sydney City has grown 30 percent in the last eight years, along with many of the city's suburbs. Yet up and down the road Newcastle and Wollongong have grown less than 9 percent. Head inland and it's a tale of short-term population decline --- Bourke, 22 percent down for example.

So the issue of population sustainability in regional Australia is the opposite of the capital cities. These local economies need people to improve the viability of local businesses and to justify local infrastructure. But will people move there with the infrastructure we have?

It's the Infrastructure, Stupid!
People still want to be connected to major centres. Most countries realise this. While the train between Newcastle and Sydney averages 66 kilometres per hour, the TGV in France has been plying it's way from Paris and Marseille at four times that speed for decades. In China they're topping 400 km/hr, with construction of an extensive high-speed rail network underway.

Isn't it time we stopped thinking about our capital cities, and put the infrastructure in place to grow regional centres? And who knows, if we continued to see high population growth we might create enough of a domestic market for goods that we could add-value to the minerals we extract and really leverage the benefits of our natural resources.

Data sources: Regional Population Growth, Australia, 2008-09 Australian Demographic Statistics, December 2009 International Monetary Fund World Outlook Database
See also:
Ahead in the Crowds | BTalk - Ralph McGaughlin on a big Australia

BonaFide NIMBYism | BTalk - Tony Recsei argues for less urban development