The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Thursday, April 8, 2010

On population and productivity

Rebecca Weisser at The Oz has outdone herself with a selection of excellent op-eds on population and productivity today. Although, as I remarked several days ago, The Oz was well behind its online rival, Crikey, in invigorating the national population debate. Notwithstanding their sluggish start, Weisser has got mooted Wentworth candidate, Arthur Sinodinos—who would make an outstanding addition to parliament—offering up some support for the Big Australia school of thought while not-so-subtly smacking-down his old Treasury colleagues:

“Rudd was initially in favour of a big Australia but, under a barrage of criticism, pulled back to a more equivocal position. Treasury has been given the task of working out Australia's carrying capacity and the challenges and opportunities that a larger population will bring. Tony Abbott seems to support this investigation. Should the Treasury analysis drive whether we think a bigger population is desirable?

Population, like immigration, brings a whole range of benefits that are not easily reducible to a neat cost-benefit calculation. A bigger population does create challenges for our resource base and infrastructure systems, but it can also create a more prosperous and cosmopolitan nation that can punch way above its weight internationally. Geopolitics and population are intertwined.

Ronald Reagan once said there were no great limits to growth because there were no limits to human intelligence, imagination and wonder. The generation of John Curtin and Robert Menzies did not need a Treasury paper to tell them what to think about population and immigration.”

Next The Oz’s Foreign Editor, Greg Sheridan, reinforces Sinodinos’s line of thinking employing some more novel national security arguments:

“The term "resources curse" is familiar to economists. It refers to the syndrome whereby a nation is both blessed and cursed with resources wealth. This wealth makes the currency too strong to allow other export industries to develop and it concentrates economic power in the hands of government and a few companies, giving much of the rest of the economy the morally, economically and politically crippling status of rent seekers.

The best way to avoid this syndrome is to have a big, booming domestic economy full of diversity and internal competition. It's true that rapid population growth poses infrastructure challenges. But the pathetic failure of state governments to provide and manage infrastructure means they all need to be turfed out or reformed. The growth we are contemplating is not big by our past standards. In 1945 there were seven million Australians; in the following 65 years we grew by more than 300 per cent. In 1966 there were 11 million Australians, so in the 44 years since then we have grown by 100 per cent. In the Treasury estimate of 36 million by 2050, we would be growing by only 63 per cent from today. This strikes me as nothing more than a credible minimum.”

And then we have the always-thoughtful ALP economist, Craig Emerson, telling us that in order to finance an ageing population Australia will have to seriously boost its productivity, which is emerging as a key policy theme within the Rudd Government:

“As our population ages, productivity growth will again be called on to do most of the heavy lifting. Today there are five working-age Australians for every Australian over the age of 65; by 2050, the number is expected to fall to a little more than two workers for every older Australian. Are we up to the productivity challenge? Judging by our miserable performance during the first decade of the 21st century the answer would be no. But if we were able to repeat the sparkling performance of the 1990s the answer would be yes.”

Interestingly, Emerson also forcefully takes the sword to Australia’s major bank oligopoly on competition grounds, which does not augur well for NAB’s bid for AXA’s assets (emphasis added):

“Big corporations in Australia often claim they need to become even bigger to enable them to achieve the economies of scale needed to become national champions in tough global markets.

But is bigger necessarily better? It is true that cost-reducing efficiencies may be achieved through greater size. But if in the process the competition is obliterated, the incentive to be efficient falls away. Australia's big four banks have long wanted to merge into two megabanks, they say to enable them to be national champions in the world arena. Thank goodness successive governments have ignored them.

In Australia's relatively small and geographically dispersed market there is a persistent tendency towards oligopoly or even duopoly. Until the Hawke government undid it, two airlines had a legislated agreement to carve up Australia's skies. In the past, two big supermarket chains have benefited from restrictions on the entry of foreign rivals. The Rudd government is tearing down those barriers, enabling rivals such as Aldi and Costco to expand their presence in Australia.”

But it would appear that Crikey’s Sophie Black has once again trumped Weisser. Yesterday Crikey delivered arguably the most valuable contribution to the population debate thus far, which was penned by the research scientist, Michael James. While his piece is pay-walled, the following excerpt gives you a taste for the logic, which reiterates in a rather more learned fashion the arguments I yielded in Crikey the week prior (Sophie also had Bob Carr present the other side of the debate the next day):

“Australia’s overall population density is less than three people per square kilometre. At about 46 people per arable square kilometre we are a bit denser than Canada at 38 but both countries are in a completely separate league to most developed countries such as the UK (837), France (332) Japan (2,570) and one quarter of the USA (163). Canada has the highest per capita immigration rate in the world.

The big difference between Canada and Australia is that the latter has been preparing for this growth for the past five decades. In the 1960s Toronto decided to invest more in public transport rather than adopt the US road-based city transport paradigm. The city also has a strong cycling culture. Along with Montreal and Vancouver these Canadian cities are studied as models of how to cope with a growing population against a strong tendency to be car-based.

Carr claims that for our east coast cities all development plans are based around public transport. The problem is that not one of these cities has a plan that anyone takes seriously. Sydney has no end of plans for upgrading its inadequate rail transport — several in just the past year alone.

By his statement “our cities will be more congested with 36 million, no matter how much goes into public transport” he is confusing crowded versus congested. He left the city in the latter state. All large cities with even the best public transport still suffer crowding at peak hours but people still get to their destination in a consistently predictable time. On the other hand congestion prevents people (and goods) getting to their destination on time and is predicted to cost the Australia economy up to $30 billion per year as soon as 2020. That is just the tip of the iceberg of a business-as-usual strategy.

Sydney may well have the highest proportion of commuter journeys using public transport in Australia but at 23% it is still woeful compared to 54% in New York (all five boroughs, much higher on Manhattan), 80% in London, 52% in Paris, 78% in Tokyo (57% in Greater Tokyo). And not just in those very large world cities (which actually Sydney and Melbourne like to compare themselves) but also in comparable sized cities such as 90% in Hong Kong, and 32% (plus 16% cycling) in Toronto...

Two days after Carr called for an inquiry into population and Australia’s carrying capacity, Tony Burke was appointed federal Population Minister. It is not yet clear what a “population strategy” will encompass. The problem of trying to determine Australia’s carrying capacity will be in defining the key parameters. If one uses our current practice and simply extrapolates our lamentable infrastructure, then yes it is clear that we are probably beyond the limits.”