A sustainable population strategy for Australia

January 22, 2011 • Daily Email Recap

Thanks to Mark O’Connor for this latest update on the population debate in Australia. See a related article below. Here is the text of an email from Mark.

Kelvin Thomson has sent out a superb response to Minister Tony Burke’s woeful Issues Paper on Sustainable Population for Australia.

The issues paper is called ‘A sustainable population strategy for Australia’ and is available at
http://www.environment.gov.au/sustainability/population/publications/pubs/issues-paper.pdf

Sustainable Population Australia put out a strong Media Release identifying some of the paper’s many faults. Kelvin’s response was much more tactful about his colleague Burke’s work, but masterful in sweeping away its obfuscations. Here are, first SPA’s Media Release, and second, Kelvin’s Response to the Issues Paper.

-SPA MEDIA RELEASE –17 December 2010

Burke’s Issues Paper shows Labor insincere on Sustainable Population

Australia’s first Minister for Sustainable Population, Tony Burke, has just released the government’s Issues Paper on “A Sustainable Population for Australia” and alarm bells are ringing, says environment group Sustainable Population Australia (SPA).

SPA spokesperson, Mark O’Connor, says that talking up decentralisation as an imaginary solution to overpopulation is an old trick. Burke’s introduction to the Issues Paper shows him still at it:
The key to understanding policy for a sustainable Australia begins with a principle of regional difference. In some communities infrastructure and services have not kept pace with population growth, while in others employers are facing a chronic shortage of skilled labour.

“Yet research published in People and Place confirms that country people do not want a “big Australia” imposed on them. They know that more people would not reverse the forces that draw people to move away from farms and small towns.

“This is not a recipe for getting the right answer for Australia, but for letting the Minister say what he wants.

“Burke has been talking up the ageing population scare (which has been refuted by research from the Australia Institute) and the myth that employers can’t find skilled workers. In reality Australian employers have got used to paying less than world market rates for skilled labor. Hence young Australians either don’t or can’t invest in getting skills or take them overseas, while employers beg for more imported skilled labor to keep driving down wages. Hence 100,000 young Australians dropped out of the workforce last year.

“Significantly, one of Burke’s three committees was chaired by Heather Ridout, whose “Australian Industries Group” is the mouthpiece for big employers. Though Australia has by far the most aggressive immigration program in the OECD, she claims that scaling back skilled immigration would be “restrictive”.

“The Minister who defined a sustainable population as “one where you can get a seat on a bus” has dumbed down the notion of sustainable population, and ignored the imminence of Peak Oil.

“One can only conclude that Federal Labor is no more sincere about sustainable population than it was about greenhouse emissions” said Mr O’Connor.

Further comment: Mark O’Connor ph. 0415 317 466

Mark O’Connor is co-author of Overloading Australia: How governments and media dither and deny on population, by Mark O’Connor and William Lines

NOTE
This release was pruned down to fit on the traditional 1 A4 page. The following paragraphs had to be cut, though they explain what Burke is up to:
As Minister, Burke has argued that he deeply feels the pain of people in suburbs where population growth has overwhelmed infrastructure, but what can he do ¬ granted that he also feels the pain of people in country areas who are suffering from depopulation? This last claim is untrue. Small towns are suffering from depopulation, but research published in People and Place confirms that country people do not want “big Australia”. They know that more people would not reverse the forces that draw people to move away from farms and small towns.
Burke appointed 3 panels, one at least of which will have diametrically opposing views at least one of the others. This is not a recipe for getting the right answer for Australia, but for letting the Minister say what he wants.
Burke claims that because previous Australian governments had failed to heed the Academy of Science’s warning that our population should not exceed 23 million, he won’t either “The federal government would not set national population targets because they have not worked in the past”. This is a cop out.
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Now, here are Kelvin’s comments
Comment on Sustainable Population Strategy Issues Paper
The release of the Sustainable Population Strategy Issues Paper is a welcome step forward in the national debate we need to have about Australia’s growing population.

Minister Tony Burke is right to say we shouldn’t have an arbitrary target, but that doesn’t mean we shouldn’t have a considered target. Otherwise we’ll stay on our present path, sleepwalking our way to an environmental disaster.

Minister Burke is also correct to say that sustainable population goes to “how much sunshine is left at the end of the day after a long commute.” It also goes to how much sunshine you get in your backyard if developers build high-rise buildings next door or behind you.

Unfortunately one of the Reports, by the Productivity and Prosperity Panel, shows no understanding of the downside of Big Australia, and trots out all the hoary, discredited old myths about the alleged advantages of population growth.

MYTH: “If it is balanced and managed well, living standards will rise with population growth, not fall.” (p.2)

FACT: A recent examination of the 100 largest US metropolitan areas from 2000-2009 found that faster population growth rates are associated with lower incomes, greater income declines, and higher poverty rates. Unemployment rates tend to be higher in faster growing areas. The 25 slowest-growing metro areas outperformed the 25 fastest growing in every category and averaged $8,455 more in per capita personal income in 2009.

MYTH: “Population growth will help lift living standards, not make them fall.” (p.5)

FACT: If this were true, the wealthiest countries would be the most populous countries of Asia and Africa. In fact they’re the world’s poorest. The nations in the world with the highest living standards have small populations – eight of the top 10 nations in the world in terms of per person GDP have populations of less than 10 million.

MYTH: “A bigger workforce as a proportion of a larger population will mean more people paying taxes which will allow government to pay for essential services.” (p.5)

FACT (1): One of the reasons the smaller nations are wealthier is because they have a higher labour force participation rate. Because they’re not running big skilled migration programs job vacancies are filled by their unemployed.

FACT (2): The bigger the population the more essential services and taxes you need. Bringing in more people doesn’t make the task of providing essential services easier, it makes it harder.

MYTH: “The ageing of the population if ignored could produce labour market bottlenecks because there would not be enough skilled workers to go around.” (p.8)

FACT: Australia does not have a shortage of workers. Broadmeadows has an unemployment rate of 15.9%. An ageing workforce will help reduce unemployment, and provide opportunities for people with disabilities and indigenous Australians to enter the workforce. As Simon Crean recently pointed out, they should be our priority.

MYTH: “Slowing population growth would not make the infrastructure problems go away.” (p.9)

FACT: It would certainly help! The reason Zurich has a much better public transport system than any Australian city, even though it is just as spread out, is that Zurich’s and Switzerland’s stable population gives its policy makers time to address the needs. In rapidly growing cities infrastructure provision is like a dog chasing its tail, we never catch up. Jane O’Sullivan from the University of Queensland has calculated that population growth of 2% per annum doubles the amount of money required to maintain adequate infrastructure.

MYTH: “Slowing the rate of population growth will not make housing more affordable.” (p.9)

FACT: Yes it will! During 2009 housing affordability around Australia declined by over 22% due to a massive gap between the number of dwellings being built and the number of new people wanting housing. The Housing Industry Association said Australia’s fast growing population was pushing new dwelling requirements to record high levels. The inevitable consequence of this is rising house prices, rising interest rates and declining housing affordability.

MYTH: “The environment need not suffer from population growth.” (p.11)

FACT: But it has. In 2002 the Biological Diversity Convention pledged countries right around the world to stop the rate of biodiversity loss. This year, the International Year of Biodiversity, saw countries right around the world confess they had failed to stop the rot. Australia is no exception. We have hundreds of species of endangered birds, plants and animals, and every year their numbers deteriorate.

I encourage Australians who care about the future of this country and its beautiful wildlife to take advantage of the Government’s opportunity to provide comments on the issue, which is open until Tuesday 1 March 2011, by writing to:

Sustainable Population Strategy
PO Box 787
CANBERRA ACT 2601

Or emailing sustainablepopulation@environment.gov.au .

Kelvin Thomson MP
Member for Wills

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Thanks to Mark O’Connor for this item. See http://www.smh.com.au/business/beware-gurus-selling-high-migration-20101219-19201.html

Beware gurus selling high immigration

Sydney Morning Herald 20 December 2010
The economic case for rapid population growth though immigration is surprisingly weak, but a lot of economists are keen to give you the opposite impression. Fortunately, the Productivity Commission can’t bring itself to join in the happy sales job.

Not Economic Impacts of Migration and Population Growth

Productivity Commission Research Report 24 April 2006

I suspect that, since almost all economists are great believers in economic growth as the path to ever higher material living standards, they have a tendency to throw in population growth for good measure. There’s no doubt a bigger population leads to a bigger economy; the question is whether it leads to higher real income per person, thereby raising average living standards.

Of course, business people can gain from selling to a bigger market, regardless of whether the punters are better off. So I’d be wary of advice coming from economists employed by business or providing consulting services to business.

In 2006 the Productivity Commission conducted a modelling exercise to assess the effect of a 50 per cent increase in our skilled immigrant intake. It found that, after 20 years, real gross domestic product was only about 4 per cent higher than otherwise.

And the increase in real income per person was minor. What’s more, most of the gains accrued to the migrants themselves, with the existing population suffering a tiny net decline in income. Why this lack of benefit? You’d expect the extra skilled labour to raise the proportion of the population participating in the labour force, thus boosting production per person.

But most of the productiveness of workers are achieved by the physical capital they’re given to work with. So unless your extra workers are given extra capital equipment – a process known as ”capital widening” – their productivity is likely to decline, thus offsetting the gain from having more workers.

Note, too, that we have to increase the housing stock to accommodate the migrant workers and their families, as well as providing the extra public infrastructure for a bigger population. So the migrants are paid to supply their labour, but the rest of us have to provide the extra economic and social capital they need if standards aren’t to fall.

Last week Tony Burke, the federal minister responsible for developing a ”sustainable population strategy” next year, released an issues paper to encourage discussion. It was accompanied by the reports of three advisory panels, including one on the economic aspects, led by Heather Ridout of the Australian Industry Group.

Ridout’s report sets out to talk up the economic case for high migration by dispelling ”myths” and pointing to hard-to-quantify benefits ”often ignored by low-growth advocates when they skim the literature” (that’s what they call a professorial put-down).

The main hard-to-quantify benefits left out of the Productivity Commission’s modelling are the economies of scale arising from a bigger market. But why after all these years have economists been unable to produce good empirical evidence of something as straightforward as scale economies?

And why wax lyrical about unmeasurable benefits without mentioning unmeasurable costs? In its recent booklet on population and immigration, the commission acknowledges that as well as economies of scale there could be diseconomies.

The Ridout report objects that the commission’s modelling measured the benefit of increased immigration only over 20 years. Sorry, but if you have to wait more than 20 years for the payoff you’re not talking about a powerful effect.

A relatively new argument in favour of high immigration is that it could foster economic growth by countering to some extent the decline in labour-force participation caused by the ageing of the population. But, since immigrants age too, all this can do is put off the evil hour (not a course of action usually promoted by economists). To continue postponing the crunch you have to keep upping the dose of immigration.

The Productivity Commission is blunt: ”changes in migration flows are unlikely to have a significant and lasting effect on the ageing of Australia’s population”.

The Ridout report argues that a faster-growing, immigration-fuelled economy would require greater levels of investment by businesses and in public infrastructure. This greater capital spending would generally involve investment in more productive capital equipment, as recent technological improvements will be embedded in the newer stock. In this way, faster growth of the size of the economy would drive the productivity gains that are central to advances in material living standards, we’re told.

Huh? The proposition is that by taking on a need for considerable investment in capital widening (to provide the extra workers with the equipment and infrastructure they need to be as productive as the existing workers) we’re increasing the scope for capital deepening (giving each worker more and better capital equipment).

Am I missing something? This is a twist on a common economists’ argument I’ve never managed to fathom: we need to grow more and do more damage to the natural environment because when we’re richer we’ll be able to afford to fix the damage we’ve done to the environment.

The Ridout report asserts that provided population growth is ”balanced and managed well”, living standards will rise. It needs to be ”matched by greater commitments to education and skills development, more and better investments in infrastructure, greater attention to the development of our cities and regions and to our natural environment”.

In other words, to give business the extra population it wants but prevent this from worsening all those things, governments at all levels will really need to lift their game as well as spend a lot more. Turn in a perfect performance and high immigration won’t be a problem.

I prefer the commission’s way of putting it: ”population growth and immigration can magnify existing policy problems and amplify pressures on ‘unpriced’ entities, such as the environment, and urban and social amenity”.

Ross Gittins is economics editor at the SMH.

http://www.smh.com.au/business/beware-gurus-selling-high-migration-20101219-19201.html


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