The role of population growth in hoodwinking the public is often ignored, and domestically, is a massively underappreciated driver. Population growth is manna from heaven for economists and politicians. They can quote GDP figures that show rising activity, even if per capita activity doesn’t move. It creates the means to make people feel richer (rising house prices) when in reality these can only be wealth transfers. Business will always campaign for it as it beats the hard yards of productivity gain. What it doesn’t do is improve living standards (about the only economic measure which matters).
As Ken Henry pointed out, continuing to cram more people into Sydney and Melbourne without commensurate infrastructure investment is not a viable long-term strategy. The only reason we are currently building more than 200,000 dwellings a year is because we choose to foster a high rate of international immigration, often fuelled by incentives such as significant investor visas. With between 150,000 and 200,000 people entering the country nearly every year in the past decade (a significantly greater number than natural population growth), much of the additional housing stock requirement, not to mention the supposed ‘land shortage’, emanate directly from the assumption that these levels will continue.
To generate the cherished ‘growth’, which remains the most misused and poorly measured term in economics, these levels of immigration will need to continue to rise. The lessons from the US and the election of Donald Trump should perhaps be a harbinger that the general population may not always remain inured to the illusory benefits of growing population. It is a factor we continue to watch closely given changes are likely to invalidate most of the core assumptions incorporated in corporate Australia’s business plans.
Extract from blog, and available in full here: (VIEW LINK)
Martin is the Head of Australian Equities, and leads the portfolio construction process for Australian Equity portfolios, while also retaining analytical responsibilities for a variety of sectors including Diversified Financials, Gaming and Insurance