No, Alan, population is not an economic boom

April 2, 2014 • Daily Email Recap

No, Alan, population is not an economic boom


Alan Kohler has today uncovered the key ingredient behind Australia’s recent economic growth: the population ponzi:

It’s perfectly clear what is now taking over as the main driver of Australia’s economic growth: population.

In the 1990s, it was the productivity growth that resulted from the microeconomic reforms of the Hawke Government. In the 2000s, it was the increase in commodity prices resulting from Chinese demand.

Productivity growth finished long ago, and the investment boom is coming to an end now. Although mining and energy exports will continue to support GDP, the burning question is: what will replace resources investment as the new driver of growth?

The answer is people, or more specifically, the infrastructure required to house, feed and transport them.

Last year Australia’s population grew 1.8 per cent — the most in the Western world…

Without that, the new boom in city infrastructure needed to cope with the increase in population will simply lead to higher costs. Its impact would be negated by making Australia less competitive, leading to higher interest rates to deal with inflation.

The key issue in all this is whether expanding Australia’s population by more than 1 million people every three years is beneficial to the existing population. Sure, while it might be great for Australia’s business elites – who enjoy the fruits of an expanded market – it imposes real costs on the rest of us, who must endure increased costs of congestion, higher infrastructure costs, lower environmental amenity, and minimal uplift in material economic well-being.


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