At 12.51am on Tuesday, the estimated population of Australia as measured on the population clock passes 24 million.
It is interesting to note just how quickly we have reached 24 million given previous expectations.
The population clock was unveiled in the latter half of 1999 by Minister Hockey when the population hit 19 million, and at that time it was projected by the Australian Bureau of Statistics (ABS) that the population would not reach 24 million for another 33 years.
In fact, we have made it to 24 million some 17 years ahead of schedule, as I have charted below.
You might choose to read one of a few different things into this.
Firstly, you might quite rightly decide that forecasts can be wildly wrong. Secondly, you might argue that the sheer strength of the population boost was a one-off due to the mining boom. Or thirdly, you may conclude that there is a bias towards population growth in Australia – “populate or perish”.
Indeed, little secret is made of this, as I looked at in more detail here following a review of the Intergenerational Report and the Infrastructure Audit background paper findings.
Population growth of the future
The “three Ps” model of economic growth applied by the Australian Treasury has population growth at its core:
In the 2015 Intergenerational Report population growth was assumed to drive for almost half of the projected economic growth, measured in real Gross Domestic Product (GDP), over the next four decades.
Projected population figures quoted in 2015 by the Infrastructure Australia audit background paper were somewhat higher than the equivalent figures released in 2008, and tended to mirror previous the most recent projections made by the ABS reasonably closely.
Notably, it is clearly articulated that state governments are planning for their capital cities to acount for a continually greater share of the state’s population, particularly so in the most populous states.
As such, going forward an ever greater share of the actual population growth must correspondingly take place in the capital cities, as confirmed by the projections.
Infrastructure plans and peri-urbanisation
Projected population growth between 2011 and 2031 is evidently huge – the equivalent of an entirely new Melbourne and Brisbane combined – while the projected growth to 2061 is more than all of the existing population of the capital cities cobbled together.
However, according to the Australian Government, regional development and decentralisation policies tend to have a short life span, and thus regional population growth is forecast to decline as a share of the pie:
“It is unclear whether governments and the Australian community would support material ongoing interventions over the long term to encourage decentralised growth. Proposals for investment in regional areas need to be supported by rigorous and transparent analysis.”
A handful of areas which are close to the capital cities might be expected to grow appreciably, being “peri-urban” locations with social and economic linkages to the capital cities. These are cited as follows:
Noted the Government: “In the absence of employment growth in these locations, ‘journey to work’ trips to and from the capital city may increase appreciably.”
Infrastructure investment: cities are critical
The Infrastructure Audit background paper could hardly have been more explicit in its conclusions, so to wrap up I will simply quote it directly:
“Within the capital cities, the location of new development and population growth will be critical. While the cost of providing new infrastructure in ‘greenfield areas’ is substantial, the cost of retrofitting or augmenting some infrastructure (for example transport links in tunnels) in established areas can also be high.
With a few exceptions, the population case for expanding infrastructure networks in regional areas is less obvious. Arguments for investment in infrastructure in those areas will be driven more by social considerations.”
Housing market implications
I have always believed that the best bet for property investors is to follow the future demand by owning properties within easy commuting distance (ideally 10-15 minutes) of the capital city employment hubs, in landlocked inner- or middle-ring locations where there is limited scope for land release.
Having made no exertions of note while actually in government, now in Opposition the ALP has proposed restricting negative gearing legislation to new properties prospectively (a moot point, perhaps, since at $6.50 an election victory is priced as remote, with the Liberal/National Coalition sitting at just $1.13).
Of course, endeavours to hose down investor activity at the precise time when tens of thousands of students are set to hit Australian shores increasing demand for rentals would be a fiasco, but I can’t deny it would be interesting to watch the experiment unravel (although the likely outcome would be a debacle).