Higher population equals poorer housing: RBA

by Crispin Hull on March 13, 2010

WHEN will these politicians and economists get it?

This week the assistant governor (economic) of the Reserve Bank, Philip Lowe, said he would “like to touch on three of the broad challenges . . . . The second is the need to increase the supply of housing for a growing population.”

Wrong, wrong, wrong. The challenge is to reduce the supply of population so that further increases in the supply of housing become unnecessary.

It is not only a “challenge”. It is one of the most important things for Australia to do.

So much would follow from it. Stop the manic increase in population and most of the woes that all of the politicians are carrying on about can be mostly or at least partially solved: housing scarcity and cost; infrastructure wearing out; parental leave; environmental degradation; loss of agricultural land to urbanization; crowded public transport; dams that cannot provide enough water; long hospital waiting lists; congested roads; and so on.

How is it that an assistant governor of the Reserve Bank just takes it as a given that the population will have to soar and that this “challenge” will have to be “met” by essentially lowering the standard of living of most of the population for the greater wealth and power of the few?

Can’t the Reserve Bank see the ease of the proposition that if we do not boost population through things like Peter Costello’s baby-subsidising idiocy and John Howard and Kevin Rudd’s massive increases in immigration there would be no “challenge”? We would have plenty of housing, schools and hospitals and other infrastructure.

Housing, of all things, proves the point. Why has housing become so unaffordable? It has nothing to do with construction costs. Even with all the mad planning bureaucracy, construction costs have increased by less than inflation over the past 30 years.

The reason houses cost an ever greater proportion of income is the increased cost of land. They are not making any more of it. And while ever Australia brings in 300,000 or so people a year and has another 150,000 births it is going to cost a lot more.

The land is getting more expensive. It is either prime agricultural land near present population centres, or it is peripheral land that will require large infrastructure costs like transport, water, power, all the things whose costs are increasing.

The ACT, for example, is about to embark on the agricultural destruction of the Molonglo valley to build houses for 40,000 people. Yet we can’t even provide water for the present population without heavy restrictions. We are not maintaining our infrastructure, let alone after we put more strain on it.

Lowe said the share of GDP devoted to new houses over recent years was above the average, but more of it was going to bigger houses and to renovation.

“As a society there has been a trade-off between quality and quantity; in particular, we have implicitly chosen to build bigger and better-appointed dwellings, rather than more dwellings,” he said, as if that were some bad thing.

It sums up the point precisely, in order to house the increasing population we will have to make do with smaller and poorer housing – or at least the bottom 85 per cent will. It’s now official: higher population equals crappier housing, according to the Reserve Bank.

Politicians and economists miss the point. The aim is not to cram in as many people as the country or planet will hold. The aim is for every human on the planet to lead a fulfilling, prosperous life. There comes a point when more people means less prosperity and lower standards of living, as Lowe so succinctly, yet unintentionally, pointed out.

Incidentally, the 40,000 people planned for Molonglo will provide for just seven weeks’ worth of population growth in Australia. Unless population policy changes, we will need a new Molonglo every seven weeks.

Alas, the folly will go on for some time while wealthy people who profit from increased population in the short term, like some immoral Ponzi scheme, keep pouring money into the major parties. No wonder TweedledeeRudd and TweedledeeAbbott support higher population growth.

Fortunately, some business people, such as Dick Smith, are seeing the folly of it, particularly as they look at the future for the next generation or two. Opinion polls in Australia are showing large majorities against an Australia of 40 million people or more by 2050.

Even if you are mad enough to think an Australia of 40 million will be a prosperous, wonderful place to live, the growth is like a huge ship. You cannot stop it suddenly.

The two per cent population growth imposed by the Howard and Rudd Governments will cause strains for decades. For a start, it chews up most, if not all, of the two to three per cent economic growth we record.

By the way, don’t be fooled, Australia did have a recession. When you look at GDP per head, we went backwards for several quarters during the global financial crisis, but total growth notionally went up because population increases are foolishly not accounted for in GDP growth figures.

Secondly, it requires almost unsustainable investment in infrastructure, just to stay still. Infrastructure on average lasts about 50 years. Some tunnels, bridges and buildings last more. Most fit-outs last a lot less. So you have to replace about two per cent of it a year.

But if you add two per cent to the population each year, you have to provide for them with infrastructure from scratch – a further two per cent.

In short, if you have a two per cent increase in population you have to double your investment in infrastructure to stay level. We are no longer doing that. That’s why people are feeling the strain.

In the past that has been achievable, but it is becoming less so, as strains in hospitals, water systems, traffic congestion reveal. And the burden is self-inflicted and unnecessary.

The Reserve Bank’s conclusion that higher population equals crappier housing can be applied across the board. Higher population equals crappier hospitals, schools, road use, water supply, you name it.

Yet we allow in an increasing number of immigrants with hair-dressing diplomas we don’t need or qualifications that their home countries desperately and we hand out ever larger subsidies and incentives for families to have third and subsequent children.
CRSIPIN HULL
This article first appeared in The Canberra Times on 13 March 2010.

{ 6 comments… read them below or add one }

Geoff Buckmaster 03.13.10 at 9:42 am

Thanks Crispin, for another dose of logic and commonsense. Sadly, I remain somewhat pessimistic on the capacity of the broader voter base to appreciate the gravity of this situation and send a clear message to major party politicians (I refuse to call them leaders). For the sake of future generations, I hope they surprise me.

Warned about population 03.14.10 at 2:33 pm

I also wish to thank you Crispin for your article in p15 of the Forum section of The Canberra Times of 13/3/2010 (reproduced here). I have similar views to Geoff Buckmaster. I have never been in favour of a system that supports ever-increasing human populations. All these years I have warned them against increasing our population but the warnings are ignored, and now we have to pay and subsidise for their selfish desires and wishes to multiply, by having to put up with a reduced quality of life (as described in your article) because of all the extras they have put on this planet. It’s disgusting in the extreme.

Keith Ross 03.14.10 at 8:01 pm

Dear Crispin,
Yet another sterling article on the problems with the myopic policy of accepting unrestrained population growth as inevitable. Congratulations. As you point out, there is no political will to move towards a sustainable population policy that will take the pressure off a fragile environment and scarce resources.

You many be aware that a new political party the Stable Population Party of Australia is in the process of being formed. For the first time, it may make the major parties take notice of the major issue that faces Australia, its population growth.
Regards Keith Ross

Bill 03.16.10 at 5:10 pm

Spot on – as usual. The current scheme of rampant population growth only benefits few and is to the detriment of the vast majority of the Australian population, who is against it, as relevant surveys show. Our government has no mandate to carry it out against the will of the people, and – because of this – I regard the scheme as undemocratic and un-Australian.

Our current far too high immigration number is not set in stone and should be greatly reduced as soon as possible, in order to prevent further damage to our environment and to ensure a better future for our children. A good government would see to this and strive to improve the life quality of its people. I hope that the Australian population wakes up before the next election, and I think that your above article should be widely distributed for informing the people accordingly in this respect. Can you do this?

I would be in favour of a new party, which benefits the whole population and not only a few groups. But for getting enough votes, such a party should have not only a program for stable population but also other programs with the view of lifting the life quality of the people.

Ian Clark 03.17.10 at 2:01 pm

Can’t fault it, Crispin. Thank you for again telling the fundamental challenge facing the world precisely as it is.

In case you don’t know it or have it, can I suggest you secure a copy of Kenneth Cook’s Play little Victims. Pergamon Press, 1978. A brilliant allegorical tale that should be on every mantelpiece.

VivKay 12.31.10 at 12:29 pm

Like the child who stares at the Emperor with not clothes, you make complete sense. It’s not rocket science that high populations create poverty and lower living standards. That’s why people from Africa, SE Asia, India and China and many other countries prefer to live in Australia. India and China may have booming economies, but the costs are high. Few politicians or the media dare to mention the costs of ongoing population growth, or point to the symptoms but don’t relate them to the root cause.
What is say is true and our politicians are on a one way course to grow the economy at all costs! Population growth is not something we are forced to accommodate, and our “boom” is not inevitable. It is due mainly to immigration – and also our “natural” growth – and so numbers could easily be tweaked.

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