Limits to Growth

Our grim future: it's an age-old problem

The catchcry of "populate or perish" has lost its impact as Australia approaches the next century. The Coalition is grappling with the immigration debate, and there are growing doubts that a low population can deliver economic prosperity. PAUL CLEARY and DIANE STOTT report.

A frightening future awaits Australia in the 21st century as fears of high immigration and related population growth persist in determining Government policy.

Australia is heading for a small, stable but rapidly aging population within a generation. And this threatens to undermine future economic growth and integration with the Asia-Pacific region.

These fears reach from the Prime Minister, John Howard, down to the proverbial fish-and-chip shop owner.

They will result in Australia's population stabilising at around 23 million by around 2020, the over-65 population doubling to around 20 per cent.

The engine of Australia's economic growth for half a century will have seized up. At the same time, populations in Asia will have surged ahead. It's estimated that by 2050, Indonesia's population will be 320 million, up from 194 million. Malaysia, now on par with Australia, should double to 38 million.

Such an equation suggests Australia's low population growth presents a huge risk to both economic and security interests.

Australia's looming population slowdown stems from a birth rate falling below replacement levels and immigration cutbacks to an effective net intake of 50,000 from net 150,000 in the late 1980s.

It has major implications for sustaining a bright and vibrant economy. The reality is dawning on Australia business.

The Housing Industry Association represents the sector which will be hit first and hardest. It now plans a major research project to examine the impact of immigration on the economy. The Business Council's Australia 2010 manifesto also underlined the role of immigration in Australia's development. It states "as a sparsely populated nation, the size of our population must grow".

But it failed to advocate a target and said further "study and debate" was needed to determine policy.

Population policy is something that Australia should be thinking about now. Yet it is amazing that population as an area of public policy is virtually non-existent.

In the last Budget, the Federal Government axed its only research arm on this crucial issue, the Bureau of Immigration, Multicultural and Population Research (BIMPR).

The debate about an appropriate population objective stretches back to the first settlement. The post-WWI era Imperial plan to "stock the Dominions" raised the notion of a 100 million population for Australia.

It was Prime Minister Billy Hughes who voiced the catchcry "populate or perish" after WWI. And Arthur Calwell as Immigration Minister made it the mantra of Australia's post-WWII development program.

There have been numerous population inquiries, from 1975's National Population Inquiry (the Borrie committee), to the four Federal Government studies under various guises since 1990. A common feature of these latter studies is their reluctance to nominate a population target while advocating greater population planning.

A 1994 study by the House of Representatives Committee for Long Term Strategies, chaired by Labor MP Barry Jones, said that aiming for a population of 50 to 100 million-plus would be "politically and socially impossible". But it conceded a 30 to 50 million target could be adopted "with political consensus".

The executive chairman of IBIS Business Information, Mr Phil Ruthven, makes the bold prediction that the creation of a regional government in the Asia-Pacific region, similar to the European Union, would take population control out of Australia's hands. And being a member of the most densely populated region in the world would see Australia accepting free movement within the region, leading to a population of around 150 million by the end of the next century.

He argues that Australia could easily accommodate such a population with environmentally friendly, medium- to high-density cities of one million to three million at intervals of 400km around the coast. Cities such as Sydney would be capped at five million to six million. Ruthven is not an advocate of higher population. But he says it will happen because of integration with the region. It will be similar to the way State governments lost control of immigration when the Federal Government was created in 1901.

Australia's own security interest will force acceptance of a bigger population, he says, because this and our involvement in a regional government "is the best way to avoid war". There is also a moral imperative. If Australia is "fair dinkum about a fair world", he says, it should accept a higher population density. In Asia, the average population density is 85 people per square kilometre. Australia's is just two.

The population debate is skewed towards support for low population growth - and this is a view that the Coalition is keen to endorse. Few people, apart from housing groups, are advocating much higher immigration to lift population growth. Most Australians seem to believe that huge open spaces are an integral part of their quality of life.

The Australian capital, Canberra, is symbolic of that. This city of 306,000 people spans 40km from north to south and, with eight people per hectare, it has one of the lowest densities of any city in the world.

Its density is a 10th of European cities - and yet this doesn't seem to make Canberra a more pleasurable place. More Australians prefer to fly to Europe for holidays rather than visit their capital.

The doyen of the low-immigration movement, Professor Bob Birrell at Monash University's Sociology School, argues that Australia will have difficulty coping with an increase of five million people between now and population stabilisation.

Even Birrell concedes, reluctantly and with qualification, that the population slowdown will have significant implications for the economy.

He told the Herald there was "no doubt" that a higher immigrant intake created "extra demand" in the domestic market.

"The domestic market is important. It's one of those arguments you can make for immigration, but you'd need to grow very fast, with major social upheaval to make it meaningful." And he adds: "One of the stronger arguments is from the point of view of getting going ... it's a help to establish in the local market, but what sort of scale you need with the domestic market is the telling factor."

But drawing on the experience of globalisation, Birrell and others argue the domestic market is becoming increasingly less important and that focusing on it is a throwback to the protected economy of the 1950s. Australian firms should be looking outside to the fast-growing Asian economies for their expansion and economies of scale, he says. "The investment opportunities here have little or nothing to do with the arrival or more manpower. It's got to do with external markets," he says.

Professor Bob Gregory, head of Australian National University's Research School of Social Sciences, says big companies in Australia with a significant market share must look outside Australia for their future growth, otherwise they will have to content themselves with prevailing national growth rates of 3 per cent-plus.

"For a whole bunch of big companies, their growth potential is outside the country," he says. But it seems a basic tenet that the domestic economy will continue to matter, just as it mattered enormously during the last recession.

The current debate over the economy's slowdown bears witness to this, notwithstanding the inroads into fast-growing Asian economies.

Professor Steve Dowrick, of the ANU, says there is a clear link between population growth and economic growth. "If your population growth increases then the growth rate of the economy increases in line with that," he says.

He says that 1.5 percentage points of Australia's annual economic growth rate of about 3.5 per cent was the result of population growth, and that slower population growth would lead to a commensurate reduction in economic growth.

A recent paper by Dowrick on demographic change and growth in the Asia-Pacific region says the transitional effect of a reduction in birth rates - a sudden demographic change - produced an increase in per capita income that stemmed from having a higher working age population.

But Australia is also about to experience a demographic change that is quite the reverse. The aging of Australia's population will produce a slowdown in population growth and a rise in the dependent population from 20 per cent to almost 40 per cent by the middle of next century.

Professor of Demography at the ANU, Peter McDonald, says the aging of several European countries is much further advanced than Australia's. In many, more than 20 per cent of the population is above the age of 65. They will provide some real-life examples of the implications of the population slowdown. Some, such as Germany, are expected to experience population reductions in the order of 25 per cent.

Already, these countries are being plagued by pathetic rates of economic growth of around 1 per cent.

McDonald says Australia has avoided the European population slowdown partly because of more flexible support for working mothers.

In Europe, where women have fewer opportunities to work while raising children, the birth rate has plummetted in response to around 1.3 children per woman, compared with 1.9 in Australia.

He says maintaining Australia's high birth rate will be a real challenge for the future. Support for child care will be critical.

High immigration is another reason that Australia is 20 years behind Europe in the aging process. So cutbacks, coupled with retirement of the Baby Boom generation, is certain to produce an older Australian population.

A drop in the birthrate - a big risk for Australia - could actually trigger a decline in the population in the absence of immigration, according to McDonald.

Birrell also concedes that the impact of aging is an argument for immigration "in a decade or two", but argues that higher immigration now will only exacerbate the problem.

It's clear that immigration will be a significant part of Australia's future in the 21st century, whether we like it or not. Moreover, it appears that the impact on the economy would not be as bad as most Australians like to think.

Economic research is generally supportive of immigration, showing that economic growth is boosted while unemployment drops.

Dr Lynne Williams, formerly with the BIMPR and now with the Productivity Commission, describes immigration as an "investment". "It costs the Budget at first, but provides a greater return over time, although the benefit is only small in any one year," she says.

Migrants create as many jobs as they take, the research shows. Jobs on the demand-side - making and supplying food, clothes, homes and other services - outweigh the supply-side effects of migrants offering their skills and experience. Migrants also bring large amounts of cash and assets, especially those participating in the business migration schemes.

Migrant skills and expertise are the keys to improving the productivity of existing capital, says the former head of the BIMPR, John Nieuwenhuysen. "The argument lies in the diversity of people who come, bringing with them their business acumen, contacts in overseas networks, investment flows and knowledge of different methods."

Skilled migrants also provide quick relief to shortages of skilled labour which can not be filled domestically without years of training. "The big benefit to the economy is through the flexibility migration gives," he says. "For Australia to survive in the open market, it also has to be open to people movements," which includes temporary movements such as Asian university students and tourists, many of whom choose to stay on permanently.

Migration does entail building more infrastructure but, he says, "capital widening is not a swear word, it is economic activity, it adds to demand".

In the early days of their arrival, migrants face worse employment prospects than the rest of the community. But different types of migrants have widely different employment experiences.

Those arriving through business migrant programs have faster success in getting a job, while other migrants catch up over the longer run, suffering more normal levels of unemployment. The main inhibitor to job success for migrants lies in education, according to Andrew Jakubowicz, Professor of Sociology at the University of Technology, Sydney.

Refugees have more trouble finding work because of poor education, the disruption of war or other persecution. This explains findings from studies of employment history, based on country-of-origin, which show that Vietnamese and Lebanese migrants have the highest unemployment rates.

"Employers are neutral to ethnic background, but are more concerned with educational attainment," Professor Jakubowicz says. But he notes that geographic location also plays a part in job-search success.

"Many migrants settle near smoke-stack industries which are closing down. This coupled with a fractured education experience combine to produce higher rates of unemployment," he says. But migrants create jobs for those already living here, helping to cut the unemployment rate for those already residing in Australia.

Migrants can cause some short-term infrastructure bottlenecks. State governments tend to be responsible for their infrastructure needs but, in the long run, migrants pay sufficient taxes to cover the cost, especially where governments save on education costs because the migrants are already skilled.

Australia can pride itself on having managed a massive influx of migrants and, despite recent efforts to generate racial tension, it is without doubt the most successful melting pot in the world.

The overseas-born population is now 22 per cent, well ahead of the US with 9 per cent and Canada's 14 per cent. In Sydney, it's 37 per cent. And it's this experience that confirms Australia's ability to grow its population successfully.

Source: Sydney Morning Herald, 16 November 1996.