Saturday, September 19, 2009

Australia “explodes”

“THE Australian population will explode to 35 million people in a generation” went the headline. Bloody hell, I’m gripped with a sense of panic before I read any further.

But there is no need to panic. The figures reported with such explosive rhetoric in the mainstream media (see here) came from some revised population forecasts released by Treasurer Wayne Swann. The numbers referred to the 3rd Intergenerational Report which will be released soon.

The prediction now is for an upward revision of future population numbers. Our present population is 22 million people (a handy population clock can be found here). The new forecast is for a population of 35 million by the year 2049 – some forty years in the future.

That’s an increase of 13 million people or 325,000 people per annum. Hardly an explosion on global terms and not even an explosion in Australian terms.

In 1969 (forty years ago) our population was 12 million people. John Gorton was Prime Minister, the Rock musical Hair opened in Sydney and Apollo 11 was keeping us all enthralled with the moon landing. We weren’t gripped then with a sense of panic that Australia’s population would almost double in the next forty years to reach 22 million. In fact, the rate of growth in the forty years to 2009 was more than 80%, compared to the 59% predicted for the next forty years (not the 65% reported in the media).

So we’re actually slowing down! Maybe the headlines could equally have read “Australia’s population growth rate slows” but I suspect that’s unlikely to grab reader attention. Nor would it have inflamed Greens leader Bob Brown who was moved by the headlines to pronounce that “"This population boom is not economic wisdom, it is a recipe for planetary exhaustion and great human tragedy.” (Story here)

Calm down Bob, it’s not a boom. We haven’t run out of food, we haven’t run out of space, and we’re arguably more prosperous and more environmentally responsible than we were in 1969 or at any time since then.

The global population is, granted, growing to dizzying numbers but that growth is taking place largely in nations and continents where the term ‘sustainable practice’ is even more unheard of than it might have been in Australia in 1969. The point here is that growth in Australia can’t by any conceivable stretch of the imagination be compared with the sort of growth occurring elsewhere in the world. To call growth of 325,000 people per annum in Australia a “boom” is almost irresponsible in that context.

It might be handy also to calm the jittery nerves of the Malthusians and provide some global benchmarks. (Malthusians subscribe to a school of thought developed by Thomas Malthus in 1798, which predicted that food supply could only grow arithmetically while population grew exponentially, meaning a population disaster was inevitable. Much to the disappointment of the Malthusians, it hasn’t - after more than 200 years - happened yet).

Australia’s current population of 22 million compares with today’s estimated populations of the following countries: nations I have tended to think of a rather ‘small’ in geographic size and population:

Madagascar 20 million

Uzbekistan 27 million

Nepal 29 million

Morocco 31 million

Canada 34 million

Ukraine 46 million

Then there are the heavier hitters:

Italy 60 million

Turkey 71 million

Vietnam 86 million

And finally the A league:

Indonesia 230 million

United States 307 million

India 1,169 million

China 1,333 million

So here we are today with fewer people than Nepal and worried that we are about to “explode” to the size of Canada today or something less than the Ukraine today after another 40 years. At our current rate of growth, it will take 150 years before we reach the current size of Turkey.

This then begs the question: how do all these other places manage? They have water, food, energy. You would struggle to call Italy or Canada third world countries but they manage with larger populations than our own. Nor do places like this conjure up images of vast urban slums, as might be the unfortunate top of mind image of India. And the United States, with today some ten times what our forecast population will be in 40 years’ time, seems to bumble along in economic terms and even enjoy the occasional bouts of prosperity (recent performance notwithstanding).

Even the ‘lone star’ State of Texas in the United States holds more people than we do – at around 24 million. And Texas is predicted to reach 46 million by the year 2040. Yet here’s the incredible thing: they still manage to feed themselves and provide water. And when it comes to shelter – one of those other essentials of life – their housing costs are a fraction of ours. The median house price in Houston (second only to New York in Fortune 500 headquarters) is – wait for it - US$150,000. (Thanks to Wendell Cox for providing this information – you can find more at

Maybe I am missing something here. Australia, population 22 million and with vast areas of land and natural resources at its disposal, and with the sort of governance systems in place that guide progress along more sustainable tracks than might be the case elsewhere, is worried that a growth rate of 325,000 per annum is some sort of explosion. Bob Brown calls it a calamity. Others will worry we will exhaust supplies of food and water.

And others still must wonder at what it possibly the most critical problem facing us with this growth, mild as it might be. We are currently some 80,000 dwellings short of what’s needed in this country. Our rate of new dwelling supply is at record lows. Our planning systems restrict the supply of land and mandate a style of new housing supply at odds with market preference and which is both difficult and expensive to supply.

Not helped by this housing shortage, we endure (practically celebrate) some of the highest housing prices in the world relative to average incomes - and prices are still rising faster than incomes, even when unemployment is rising. The situation is so chronic that we are now starting to show occasional signs of ‘slum lord’ behaviour, where shelter is at such a premium that students are being charged by the mattress and into overcrowded homes (story here). (Deputy Brisbane Mayor Graham Quirk was prompted to comment: "Brisbane is one of Australia's most liveable cities, making it totally unacceptable for students to be crammed like sardines into their homes." But surely until his own planners start to address the root causes of the housing shortage, overcrowding is inevitable and the liveability of the city at risk?)

The extra 325,000 people per annum are going to need around 150,000 new dwellings per annum – well above our current delivery rate. And that’s without catching up with the existing shortage. Ironically, we seem to have coped reasonably well in the last 40 years. But now, the regulatory systems have changed, and we appear to struggle with lower rates of growth when it comes to the supply of suitable shelter.

So while there may be no reason to panic at the ‘explosion’ of numbers we face in the future, there could well be a reason to be worried – very worried – about where, and in what standard of housing these people are going to live.

Thursday, September 3, 2009

Not dead yet!

Despite what can read like attempts to will it to death, the family unit is proving resilient.

Let’s bust a myth. You’ll have read plenty of reports that the traditional family unit is in decline, and that single person households or group households are on the rise. This, we are told, is going to mean a fundamental change to the way we provide housing and lifestyle choices.

It’s true that there have been some marginal shifts in the rise of single person households. The proportion has grown from 21% of all households in 1991 to 24% in 2001. But this is a shift at the margin, the causes of which aren’t necessarily due to wholesale disgruntlement with the family unit but also to drivers like the ageing population (which invariably produces more widows living longer).

The biological urge to pair with a partner of the opposite sex and produce children is proving more stubborn than some forecasters and ‘trend spotters’ might like to believe.

Only this week came evidence from the ABS (‘Marriages and Divorces in Australia 2008’) that the number of marriages registered in Australia last year was at a 20 year high, while the overall divorce rate was at a 20 year low.

That sits at odds with what some commentators are saying, like this from KPMG’s Bernard Salt:

“There's gay couples, divorcees, married couples who don't have kids, singles, ex-pats, de facto couples and we can't forget that we have an ageing population”

“Those groups didn't exist 30 or 40 years ago, so there's different kinds of families now who have different housing requirements. There's less need for basic three-bedroom brick veneer homes in the suburbs.”

Really? Cause and effect are open to debate here. The shift away from the suburban detached house isn’t as much driven by changing family units or consumer choice but instead driven by deterministic planning policies which are restricting the supply of new suburban land in favour of high density living.

Salt again:

“We're talking density housing," he says. "There'll be less backyard cricket and more communal facilities like parklands. It's going to mean getting used to living close to people, which is a cultural shift for Aussies who are used to their own place in suburbia.”

The same Courier Mail article which quoted Salt also featured a lesbian couple, promoted as ‘the face of the future’:

SARA Birtwhistle and Wendy Ellis are the faces of the future. No longer will a typical Australian family comprise mum, dad and two children,” went the introduction.

What, never again? I know same sex couples should no longer fear the sort of social pariah status of recent history, but I didn’t know they were soon going to be made compulsory. (The stats also say otherwise – of all couples, heterosexual couples still comprise 99.5% of couples). Quoting one of the couple in the article:

"We've lived in an apartment in the Valley and New Farm since we've been together, which is 11 years," she says. "It's a nice lifestyle with good restaurants, cultural facilities and like-minded people who inhabit the area.

"Being stuck in the middle of suburbia with families gives me the heebie-jeebies."

How awful! But the reality is that family units are not in decline anywhere near the extent predicted. This has some implications not just for housing styles, but also for ownership.

The Australia Parliamentary Library earlier this year produced an interesting summary of home ownership trends by family types. It concluded that:

One of the main demographic influences on home ownership is age. Rates of home ownership increase progressively with age, reflecting the different life cycle stages. The relationship between age and home ownership has meant that Australia’s ageing population has put upward pressure on the home ownership rate.

On the other hand it says:

Another demographic influence on home ownership is household composition. Rates of home ownership above the average for all households have been experienced by couple families while rates below the average have been experienced by one parent families and lone person households. Changes in the composition of Australian households from couple families to other family types have therefore acted to put downward pressure on the home ownership rate.

The reason for the latter is that non traditional household types are more likely to rent than own (with or without mortgage). But then it concludes:

Given the wide variety of factors that influence home ownership, their net effect has been, surprisingly, to leave Australia’s home ownership rate largely unchanged for more than 40 years.

That tends to support a largely status quo situation in terms of household composition. What is true, however, is that households are getting smaller. In 1960, the average household was 3.5 persons. It’s now around 2.7 persons. Some commentators have seized on that fact to predict (or more frequently, proclaim) that housing should get smaller, not larger. (The derision of so called suburban McMansions often raises this as its justification).

(For a detailed analysis of family and household types, this report by the Australian Institute of Family Studies is worth a read).

But standards have changed somewhat in that time also. I can’t think of any developer who would bravely build a new house of a 1960s design with only one toilet, three smallish bedrooms, and a relatively cramped kitchen and dining room. (A movie worth watching is a recent Australian flick called ‘Subdivision’ which weaves into the plot the tension between old and new style housing).

So while households are getting smaller, the trend has been to demand more space per person. And given that the majority of household types remain couples (with children, or without – the latter predominantly in the pre-child phase or empty nesters) it is just too early to predict the demise of the family home.

Households like the lesbian couple featured as ‘the face of the future’ do tend to dominant social and market commentary. But if the real bread and butter demand for housing is going to continue to come from couples planning children, or with children at home, or with children who have left home but who may want to visit, then how comfortably does that sit with the current crop of planning schemes which are directed to provide housing choice which is the inverse of housing demand?

Will there be enough families buying the proposed volume of high density living units to sustain the market? Or will these become temporary abodes, rented for a period until the family can move out to join their own ‘like minded people’ in the burbs, with children who have room for some backyard cricket and the pet dog?

It’s fine for the commentators to predict the demise of the family unit household. But it’s not dead yet – far from it. The challenge for the market is to avoid the distraction of predictions and forecasts based on changes at the margin, and to supply the housing needs of the majority, notwithstanding the constraints of planning schemes that may not align with majority consumer preference or needs.