Home' Border Enterprise : Winter-Spring 2010 Contents 16 enterprise
There are various reasons advanced to explain
why Australia avoided the global recession over
the past year, writes CRAIG JAMES.
THE Federal Government's aggressive
fiscal and monetary stimulus played
a key part in insulating Australia
from the global financial crisis. But
one less documented reason for
Australia's out-performance has been super-fast
In fact the latest figures show that Australia's
population expanded by just over 450,000
people in the year to September or 2.1 per cent.
Not only was this close to the fastest pace of
population growth in 40 years but it has been
broadly growing at this record-breaking pace for
more than a year.
So where have all these people come from? In
part, our bigger population reflects the fact that
more babies are being born, but the bulk of the
extra people -- around three-quarters of the total
--- have come from other parts of the globe.
Interestingly, the latest figures reveal that
the statistician has been under-estimating
how many people have been coming 'Down
Under'. In fact an additional 77,300 people have
called Australia home over the past two years
--- roughly the size of Darwin's population.
But getting back to the big picture, in simple
terms more people translates to increased
spending and demand for homes and, as a
result, increased momentum for our economy.
And while population has been going backwards
in Japan and stagnating across the European
nations, Australia has been moving ahead.
Of course that raises the question: why have
all these people been coming to our shores?
One reason is demographics. The share of
young people in the working population is
close to record lows. Businesses need more
workers; they can't get them locally, so they
have been forced to go overseas. And Australia
is recognised as an extremely attractive place to
work and live.
The other reason is that China, India and the
rest of Asia are actively buying our coal, iron ore
and other resources and that has added to our
demand for workers.
But while some believe that our soaring
population growth is largely caused by foreign
demand for raw materials, and therefore
confined to the resource states, the data
shows otherwise. In fact population growth is
above decade averages across all states and
territories. In particular, Victoria is the stand-out
with population growing at the fastest pace
since the early 1960s, while in South Australia
population growth is expanding at the fastest
rate since 1974.
Even in NSW, the 1.7 per cent annual rate
of population growth is well above the decade
average of 1.1 per cent, and just below the
fastest rate recorded in 30 years.
Of course, fast population growth isn't without
its consequences. While all the extra people
increase the demands on economic and social
infrastructure --- roads, bridges, schools and
hospitals --- it also lifts retail spending, the
demand for housing and economic growth.
Certainly, the recent focus has been on
housing with claims that our growing population
is pushing up home prices and reducing
affordability. But the solution to higher demand
is clearly higher supply of homes --- whether
by producing more land --- or rezoning existing
residential and industrial properties.
Still, some probably believe in trying to turn off
the population tap. But that would be to ignore
the current demographic imperative --- we
just don't have the skills to go around. And
it ignores the future demographic imperative
--- our population is ageing and immigration is
important to address the future challenges.
As the Reserve Bank has previously
highlighted, the unemployment rate is far lower
than previous downturns and the problem of
skill shortages and capacity constraints are likely
to become the norm in the future. However,
the good news is that near record migration
is playing its part in helping to alleviate some
of these pressures. The sharp lift in migration
is also serving to reduce the extent to which
the population is ageing, thus reducing the
demands on health and other social resources.
Overall, the Federal Government is opting for the
positive response. Huge infrastructure building is
currently underway, and Australia's fast population
growth should ensure that building remains
strong in coming years. And governments are
increasing the amount of planning necessary to
accommodate a bigger population.
If businesses and planners aren't scrutinising
the population figures, then they aren't doing
their jobs properly and are missing valuable
opportunities. And, in a longer-term sense, rising
population growth lifts the sustainable rate of
economic growth, boosting the potential growth
rate of investment funds and returns.
Craig James, chief economist for
Commonwealth Securities (CommSec), will be
the keynote speaker at a Commonwealth Bank
business seminar to be held on July 30 at the
Commercial Club, Albury. For details contact
Rod Bramich at email@example.com
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