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.
This article first appeared in The Canberra Times on 13 March 2010.