Introduction

Recently, the Victorian Government sponsored a summit on Australia’s future population.  It is a very important long-term issue but it may be that in arguing for a much higher population – or a population of any particular size, we could overlook really important issues concerning our strategy for the future.  Accordingly, we summarise some of the points of view and then apply some reality checks to the rapid population growth scenario.  We conclude that a target of very rapid population growth is unrealistic and is not a guaranteed entry to Utopia.  Innovation and investment are likely to be better strategies for growing per capita income. 

Case for Population Increase

The Australian Financial Review editorial of 25 February 2002 was headed “Population rise vital for growth”.  Two aspects of population policy were raised.

First, Australia needed to increase both immigration and the birth rate just to stave off the effects of population ageing.  Failure to act would result in labour force growth slowing from 180,000 a year currently to zero in the 2020’s (according to BIS Shrapnel).  This will cause economic growth rates to fall (Access Economics predicts growth will fall to 2% by 2005).  Also, rising pension and health-care costs will pose serious challenges from 2010 and labour shortages will emerge.

Second, some argue that a low-growth Australia will slip right off international investors radar screens.

The editorial says that we should be optimistic that technology can ameliorate environmental problems already created and those that would occur if the population was more than doubled to 50 million.

Case against Increase

Michael Krockenberger, strategic director of the Australian Conservation Foundation, argues that anyone advocating a higher population should also be a vigorous environmentalist (The Age February 23 2002).  He points out that most migrants come from countries that are less profligate users of water and carbon but quickly adopt our usage patterns.  This results in a heavier environmental “footprint” on the earth.

Case for no Policy

The Minister for Immigration and Multicultural and Indigenous Affairs, Philip Ruddock, says that Australia does not need a population policy (The Age, January 11, 2002).  He says that we already have an informed and clear vision of Australia’s population future based on a thorough understanding of, and research into, the underlying demographic trends.  The likely trends in immigration, fertility and life expectancy place Australia with a stable population of about 24 to 25 million mid-century.

He says it is important that the debate shifts from a focus on extreme targets (both up and down) to what is the appropriate response to the most likely outcome.  He isolates four responses.

First, we need to maintain and enhance our competitive advantages, in order to attract young, highly skilled migrants with good English skills.

Second, we need to encourage a higher level of labour force participation amongst older Australians.

Third, we need to research and understand the causes of fertility decline so that this can be mitigated.

Finally, we need to ensure that the impact on our environment of future population levels is sustainable. 

Reality Checks

It is important to begin by pointing out that population decline is about to be experienced by several countries and that global population could peak by about 2050 (New demographic evidence shows that it is at least possible that a child born today will live long enough to see the peak of human population, Bill McKibben "A Special Moment in History"; The Atlantic Monthly, May 1998).  World fertility rates have dropped from 5.0 births per female in the early 1950’s to 2.7 in the late 1990’s.  Many countries have fertility rates well below the replacement level of about 2.1.  These include Italy (1.2), Japan (1.4), France (1.7), UK (1.7), China (1.8), USA (2.0).  Fertility rates in developing countries are falling too.  Fertility rates are influenced by choices but male sperm counts have been falling for some decades.  Pollution is one touted cause and another is that high levels of estrogen, present in the urine of women who take the contraceptive pill, are spilling into sewage systems that run into rivers and then finds its way into drinking water (“girl power” according to Newsweek, April 8/April 15 2002, page 4).

By 2050, the population of Japan is expected to fall by 27 million and Europe can expect a decline of 100 million.

Many countries will need to develop adaptive strategies for coping with falling populations.  In fact, just by having a static population, Australia could become larger relative to many other countries.  Australia’s fertility rate is currently 1.7 and deaths are expected to exceed births by the 2030’s.  Forecasts of Australian births to 2015 by broad age group of mother are available from foreseechange.

The first question with regard to a population target of 50 million or so within 50 years, is how realistic is it?  Births are falling and there seems little prospect of boosting fertility rates.  Hence, a very large increase in immigration would be needed – to about 460,000 per year, far above any past or realistic future achievement.  It is very unlikely that the community would support such an intake.  It is also unlikely that Australia could consistently attract such a number given likely competition for skilled migrants from other countries such as USA and those with populations about to fall, such as Italy, Germany, and Japan.  In fact, we may be hard pressed to hold onto our homegrown talent in the future.

The second question about a large population increase is what would it achieve? 

There are countries with larger populations than Australia but with smaller economies.  A good example is Argentina, a country with similar potential to Australia about 100 years ago.  Their population is nearly double ours but per capita income is only just over one-third of ours.

There are countries with smaller populations but with higher per capita income.  A good example is Singapore.  Their population is about one-sixth of ours but per capita income is 20% higher.

A population of 50 million will not guarantee:

• Higher per capita income;
• A market with sufficient critical mass for manufacturing;
• That we will be taken seriously by international investors.

The third concern about increasing population is the environment.  Australia already has severe and worsening soil salinity plus scarce water supplies.  In 2000, research commissioned by the Australian Conservation Foundation and the National Farmers’ Federation estimated that $6.5 billion in investment will be required each year over the next decade to repair salinity damage.  Rapid population growth without improvements in agricultural capacity will result in fewer exports and/or more imports in order to feed the population.

The editor of The Australian Financial Review displays a cargo cult mentality towards the environmental problems in Australia.  We should be proactive about finding solutions, rather than hopeful they will arrive, before accelerating population growth.

Does size matter?  Not on its own.  It is how clever a country is that matters more.  For example, analysis by foreseechange has shown that the value of the Australian dollar has fallen, as has net investment inflow to Australia, because we have reduced Research and Development spending as a proportion of GDP since 1996 (see Business Review Weekly, April 18-23 2002, page 57).  A low dollar, while good for exporters in the short term, is not a basis for prosperity.  Australia has fallen off international investor radar screens because we have not sufficiently encouraged innovation.

The way forward for Britain was articulated recently by their Prime Minister, Tony Blair.  He said that they could not be the biggest or the mightiest.  But they could aspire to be the best.  There is a message here for a low-population country such as Australia. 

Towards a Vision

The important issues for Australia’s future are:

1. How can we maximize quality of life in Australia, whilst
2. Minimizing unsustainable exploitation of the environment; and
3. Without reliance on high population growth and a young population.

Quality of life is not just average per capita income.  It should also embrace the distribution of income, achievement of individual potential, quality of leisure, and participation in democratic decision-making.  It is only by having world’s best quality of life that we can have the potential to attract the best migrants and retain our homegrown talent.

What are the sources of growth, other than growth in the population?  Growth in net exports and productivity improvements are needed to offset low population growth.

According to an article by David James in a recent Business Review Weekly (March 28 to April 3 2002):

Australia does not have a strategy for competing in the global economy and is not doing what is necessary to get one.  That is the message from Michael Porter, the world’s most influential thinker on national economic strategy and company competitiveness.  The Harvard Business School professor, whose 1990 book The Competitive Advantage of Nations profoundly influenced thinking about a nation’s positioning in globalisation, has a stern warning for Australia.  Sound macro-economic settings are necessary for competitiveness but they are only part of the equation.  Countries that do not know how to exploit their unique advantages will lose economic strength.

Porter cites the wine industry as one successful “cluster” in Australia.  Industry clusters are what Porter calls groupings of companies that are world-leaders in an industry or product type.  They create something similar to critical mass – a collective ability to set the global standard.

Domestic population is not a factor in setting global standards.  Nokia is a prime example.

Apart from wine, other clusters in which Australia could develop unique advantage with the right conditions include: 

• Biotechnology and surfwear, according to Rod Brown of Clusters Asia Pacific;
• Quality food (GM-free) including native food;
• Tourism;
• Education;
• Health;
• Solar energy.

Productivity improvement is not well understood.  Professor Robert Gregory of the Australian National University argues that a closer examination of the economy of Australia and other nations revealed that there could be many other factors influencing productivity growth other than simply reforms to the labour market, relaxation of tariff protection, improving education standards, and technology advances.  He has called for more investigation to understand the influences (The Australian, April 5 2002).  

Conclusion

A population target of 50 million is unrealistic and has dubious benefits.  In a world where declining populations are imminent, certainly in Japan which is Australia’s largest trading partner, we must devise adaptive strategies to improve income per capita and quality of life.

The debate over Australia’s future population should not be allowed to distract attention from issues that are of vital importance irrespective of the outcome of the debate.  Whether we opt for the likely population outcome of about 25 million or agree to boost it to a higher figure, the important issues remain the environment, innovation, export growth and productivity improvements.