Learning to live with less

Population growth has been a mantra of our property industry for as long as I can remember. And once again there are predictions of a surge in growth, driven (this time) by people allegedly fleeing Victoria. However, there are good reasons to think this may not happen, and that we may need to prepare for an extended period of minimal growth. This may not be a bad thing.

One of the first things to understand about our recent rates of actual and predicted future population growth is that they have been extraordinary in terms of the actual numbers and also in terms of the rate (speed) of growth. On a global scale, our forecast rates of population growth in major cities exceeded many leading world cities and was on a par with places like Shanghai and Beijing. In just 15 years, Brisbane, Sydney and Melbourne were predicted to grow by around a third – roughly three times the rate of growth of cities we often like to compare ourselves with like Copenhagen (for some reason), Los Angeles, San Francisco, London or Paris.

Given we started this forecast period with widely acknowledged urban infrastructure deficits (failing to keep up with population growth in the past), how we were supposed to not make the problem worse with these rates of growth is something smarter people than me might like to explain. Let’s just say the Chinese do things very differently so we can’t use Shanghai or Beijing as comparisons.

These predicted rates of growth were driven by three components: international migration (net overseas migration or ‘NOM’); interstate growth (net interstate migration or ‘NIM’) and natural growth (more births over deaths). And all three now look severely compromised by the policy responses intended to manage Covid.

In Queensland’s case, NOM has grown in importance in recent years, now accounting for more than a third of our population growth. However, with the closure of international borders, there’s been a virtual halt to 457 work visas, along with foreign student visas. Net overseas migration to Australia – Queensland included – will slow from record numbers to a trickle. This is likely to recover but unlikely to recover to pre-covid levels for some years: rising unemployment in Australia would not be helped by importing more labour on work visas. I cannot see a Federal Government supporting NOM at the same levels as we have seen in recent years when so many Australians themselves are out of work – something sadly that’s unlikely to change for a few years yet.

The rate of natural population increase is also significant, and typically stable. It has sat at around 30,000 per annum since 2016. There are two schools of thought here: lockdowns and work-from-home will lead to a post Covid baby boom (for obvious reasons) or that the post Covid recession will see fewer people plan on starting families until their financial futures are more certain. I can see a bit of both – an initial baby bump possible at year end after the March-April lockdowns, followed by a slowdown in births as the full implications of the recession sink in. In short, less growth from natural increases is my punt, for the foreseeable future.

The final source of population growth has been net interstate migration and this is where some are seeing hope of significant growth. The numbers of net interstate migrants to Queensland has been increasing since the 40 year lows recorded from 2010 to 2014, but will this continue?

There are a few things to keep in mind here. First, when NIM reached levels of 1,000 a week (around 50,000 per annum) in the late 1980s and early 1990s, Queensland’s total population was around 2.4 million. Today it is around 5 million. To have the same proportional impact, we would need to see NIM rise to around 80,000 per annum – and we are a very long way from that.

Second, there has been a close correlation between periods of high net interstate migration and periods of economic prosperity in Queensland. People did not come just for the weather or the lifestyle (attractive as these were) but they came in numbers when Queensland’s full-time jobs growth was strong, even stronger than NSW or Victoria.

There have been recent media reports speculating about Victorians (in particular) seeking refuge from Covid impacts in their home state and moving to Queensland. I don’t believe the media reports will reflect significant real numbers for the reason that Queensland’s full-time jobs growth has actually been negative in the last five years and anaemic in the last ten.

It’s important to look at full time jobs because these are the things people need to secure mortgages and to provide family security. Much has been made of the Gig economy, but part time and casual jobs are particularly vulnerable in recessions and especially to downturns in Covid-sensitive industries like hospitality, travel and tourism. Which happen to be synonymous with Queensland.

Would Victorians (for example) logically leave a state that has produced more full-time jobs than any other in the last five years for a state that now has fewer full-time jobs than five years ago? I have heard some in the property industry argue that if you had to be unemployed, where better than in Queensland. Which is true, but is this what we want? Migrants arriving without jobs to go to or limited prospects of getting any in the near term isn’t helpful. This won’t stimulate our economy but will add to the drain on services in costly areas for governments (meaning taxpayers) like health and education. Fewer full time employed taxpayers and a rising population of dependent unemployed is not a recipe for economic growth. Property professionals spouting this line need to take a long, cold shower. All population growth is not alike.

So each of three sources of population growth looks challenged in a post Covid Queensland, for the next few years at least. Less NOM, fewer NIM and less breeding.

Is this such a bad thing though? Provided we continue with infrastructure projects, it could allow the State to begin to close the infrastructure gap which has widened significantly in recent decades. The pressure is everywhere to see – rising congestion, hospital waiting lists, rising school class numbers, and hostility to development generally. If Covid forces a breather on the rapid rates of population growth we’ve been used to, perhaps it will mean we can actually enhance our quality of life and standards of amenity in the process?

It’s also worth keeping in mind that there are many global examples of low growth cities and regions which remain highly attractive and economically prosperous. The surplus of demand by people wanting to live and work there, relative to supply (deliberate limits on housing supply and population caps) invariably makes these very expensive real estate markets, completely unaffordable for many. But from a selfish property market point of view, they are still viable markets for development and redevelopment. Locally, think Noosa. Being horrendously expensive for residential or commercial property hasn’t stopped some of our other property markets before?

 

Turn and face the strange ch-ch-changes.

For decades we’ve lived with a range of accepted truisms around city planning, urban development and infrastructure planning. Then along came a virus. Some suggest the long-term impacts of the current pandemic will turn fundamentals on their head. Others – myself included – are more sanguine. But changes there will be and, as Bowie sang, we need to face them.

This article tries to sum up some thoughts of my own and distil a good amount of reading over recent weeks. Nothing here is a given, but simply offered to encourage us to think carefully about what lies ahead. The first thing to keep in mind is what Indeed.com’s global Chief Economist Jed Kolko pointed out to me a few weeks ago: "Many of the post-pandemic predictions are really just statements of how the prediction-maker has always wanted the world to change. The virus doesn't kill cognitive biases!" I will try avoid that trap.

Population growth:

Australia’s population growth has been driven by direct overseas migration, and much of that has concentrated itself into three capitals, each of which was predicted to grow by close to a third in the 2016 to 2030 period. That rate of growth was ahead of many world cities. Would we have managed, without falling further behind on infrastructure? Growth has taken a short term hit thanks to closed borders. It remains to be seen if those growth rates will slow over the longer term. A slower rate of growth may not be a bad thing: it could allow us to catch up with infrastructure, hence improving quality of life, rather than being in constant lag mode. This in turn could support property values by making places more desirable – as opposed to just crowded. Remember,  some of the most highly prized property markets around the world are actually in low growth areas. It is their desirability, environment and placemaking qualities that makes them so.

If growth is to slow, would that change a wide range of urban policy settings, with the dial turning from volume to quality?

Housing:

Predictions that housing demand will change quickly from inner city apartments to suburban housing are I think wrong. For starters, inner city apartment demand for much of recent history was driven mostly by speculators who had no intention of actually living in the one-bedroom, low cost apartment they were buying off the plan. That frenetic level of speculator activity created a false impression about the extent of real demand for inner city apartments. There are now more two and three bedroom inner city units being designed which are more likely to meet with owner occupier needs. But being larger, they will also be more expensive.

Suburban housing has tended to dominate urban settlement in Australia and while the pandemic may remind us that the burbs may not be so bad a place for a lockdown, those who live there now do so by choice, and because 8 in 10 of us actually work in suburban locations. The same applies to inner city apartment dwellers who choose where to live for work or other reasons. There may be some changes in preference if more people seek out suburban work locations (as opposed to densely populated inner-city ones) but I can’t see wholesale change here.

Neither can I see prices collapsing in the long term. The cost of new supply – land plus building costs plus taxes – tends to be fixed. Unless there is a major change in those supply side drivers, any movements in house prices will reflect shorter term economic circumstances (more owners needing to sell than buyers able to buy).

Finally, the argument that housing design will change to better facilitate home offices for work from home needs to be kept in context. This may happen on some new product but as this only affects new supply (and renovations to existing supply) we aren’t likely to see a wholesale change of our housing stock to accommodate work from home (which only works for some occupations anyway). There is also speculation that home isolation will mean a move to larger balconies in townhouses and apartments, as we appreciate the importance of space more. You could counter that this was always the case, but larger balconies and home offices mean larger floorspaces and townhouses and apartments are expensive to begin with. This prediction, if it eventuates, will simply make new product significantly more expensive. Will there be a sufficiently large market to pay?

Work from home?

No doubt the future will see more people working from home, either on occasion or routinely, than in the past. Some companies may direct that this change happens in pursuit of cost savings, and some individuals will request it for lifestyle or other reasons. But for the vast majority, my thoughts are that once a return to the workplace is allowed, many will return with enthusiasm. Productivity, creative engagement and the social value of work are genuine positives for that proportion of the workforce who do work in offices (and for whom work from home is possible).  As this article in Bloomberg wryly observed, the whole work from home thing has soured quickly for many:

“Many mapped out plans to fill time they would’ve spent commuting to take up new hobbies, like learning a foreign language, baking or getting into the best shape of their lives. It looked like the beginnings of a telecommuting revolution… A month and a half later, people are overworked, stressed, and eager to get back to the office. “

Offices: 

The office market could be in for some changes but these may take time. Markets like this will tend to be quite ‘sticky’ because of things like long term leases and fixed fitouts, which make quick adaptation difficult. However, it does seem likely that things like an 8 square metre per person benchmark - which was becoming common - could reverse and the trend head in the direction of more space per person. 

Imagine a company of 100 staff ready to lease new premises. Where once they would have needed 800m2 they may soon be thinking more like 1500m2 (15 or even 20 square metres per person were more typical in the 1990s through to early 2000s). Will they actually lease that 1500m2 or instead reduce their workforce for those premises to around 53 people for the 800m2 tenancy and instead send staff for whom a CBD location is non-essential to suburban collaboration hubs, or have some of them work from home? 

Less density of workers in expensive CBD offices makes them more expensive, per worker. Suburban business centres may benefit from this. How this change plays out will have a long-term impact on office space demand.

Retail: 

Hard hit even in the lead up to the spread of the Coronavirus by flat wage growth and online competition, shopping centres and retailers have been frontline victims of the viral shutdown. As we emerge from our burrows into a post viral world, industry consensus is that there are big changes for this sector going forward. Tenants may have taught themselves that the value of paying to be close to centre-generated foot traffic can be traded off against more aggressive online strategies with a neighbourhood shop front presence. And a proportion of consumers may equally have adapted to sourcing their immediate retail needs more locally, rather than travelling to major centres. There are potential lasting changes too in the types of consumption habits of consumers.

Major mall owners have survived multiple predictions of the end of bricks and mortar retail in the past, and I have no doubt they will innovate and survive again – but as in the past, it will likely mean significant changes to tenancy profiles and to the nature of the centre itself. Typically very well located, with public and private transport connections, these assets will always find a market. My money is on more health, education and community service functions increasingly making their presence felt.

For the suburban strip or neighbourhood centre though, the changes in retail could be a positive – provided they can provide a high standard of amenity (placemaking appeal) and convenience (eg ample parking) and affordable rentals. Given that many have received little government investment in their improvement for decades (governments were too preoccupied with the inner cities) and given that many landowners have likewise invested little in some of their assets, many centres may miss their opportunity for renewal. How governments and private owners might work together to avoid that happening will be interesting.

Public transport:

What happens with public transport in the future will be fascinating. Having already faced flat or falling mode shares, will a post-viral world see more commuters recoil at the idea of joining fellow travellers in crowded trains or buses, coughing and sneezing in close proximity? 

How could this affect demand, and will public transport providers respond with less passenger density (as some airlines already seem to be proposing)? And will this in turn mean even higher costs for PT given lower passenger density? And will more people drive instead, leading to a spike in congestion? Or will the whole idea of commuting en-masse to centralised workplaces served by public transport start to pale in favour of local commutes – including by walking or cycling - to suburban business hubs for collaboration and the social aspects of work? This is city changing stuff. Watch with interest for the short term response once the economy opens up again, and for long term changes.

Health:

Health was already predicted to the fastest growing industry in Australia prior to the pandemic. I can only see this accelerating. Health services are typically not centralised so this growth is likely to benefit suburban and regional centres – not just in the capital value of the infrastructure but also the jobs that come with it. Australia’s investment in health is good by world standards but not (I was surprised to learn) world leading. The graph below shows the number of hospital beds per 1000 of population, as just one metric. Will we move to lift this level of provision? How will we fund it if we do? (And from the graph, you can see in part why the UK and USA have struggled, and why India is so worried).

Education:

Education – especially tertiary – became one of our leading export industries in recent years. It was also a ‘clean’ industry and ticked a lot of boxes in terms of international relationships. There is no question that education sectors heavily reliant on foreign fee-paying students have hit a virtual brick wall – the question really is to what extent this will recover and how long it might take if it does?

Failure to quickly recover could jeopardise billions of dollars in proposed capital expansion and improvement plans, plus put pressure on fees for domestic students. It would also mean we would need to find a replacement source of foreign income. More coal anyone?

Manufacturing and industry:

A possible beneficiary of changed international trade arrangements could be the local manufacturing and industrial sector. Employing 20% of Australian workers, this sector has been in slow decline over the long term but can rapidly retool to replace a wide range of imported products. Skilled and affordable labour isn’t the issue it once was – the issue now is the high cost of energy. Australia’s energy costs have hurtled ahead of inflation to become some of the most expensive in the world. Given we have a small domestic market and international markets are a long way away, lower prices for longer is what this sector needs from the energy market, and a subsidised and expensive renewables market just isn’t ready to provide that yet. Again, more coal anymore? Or nuclear? Hmmm.

Finally, to end with something from a mate who was once head of planning for Brisbane City Council, ran his own business, later becoming a key part of the ULI growth story into Europe and Asia and who now teaches planning and real estate development at Texas A&M University – Professor Geoffrey Booth. As Geoff said to me in a recent note, changes from this pandemic are inevitable because our patterns of human interaction will change:

“Never forget that all real estate is place and it is people that create the enduring value of real estate – take out the people and there is no market, no demand, and no one to buy it or pay in one way or another to use it, and as a consequence, you the real estate developer, left with no raison d'être, starves to death. There will be a world after Covid-19 but as our patterns of repeat visitation have been severely disrupted, as a consequence, the real estate market will be forever changed.”

If only we knew how, and where, and when this will happen.

How we lit the fuse on the population bomb

We’ve been here before – concerns about our capacity to house a large population are not new. But lately, hostility to rapid rates of population growth is gaining traction. There have been calls for a population enquiry and former PM Abbott has called for immigration (and hence population growth) to be slashed. He joins a chorus of other voices, from business to community groups. Voters are pushing back against growth and political leaders are feeling the pressure.

But these pressures are confined to mostly two cities: Melbourne and Sydney (and perhaps to a lesser extent Brisbane). There are other capitals and countless regional cities who covet growth but who find it eludes them. Instead, stupidly (it has to be said) we continue to cram accelerating population numbers – mostly driven by immigration – into a couple of urban centres. 

Melbourne was first settled by whites in 1835 and took 165 years to reach 2.5 million people (by the year 2000). Bernard Salt predicts the next 2.5 million will be added in just 21 years with the city reaching five million by 2021. He thinks it will sail past eight million by 2050. Sydney has a similar story.

According to the Productivity Commission’s 2016 Migrant Intake into Australia report, 86% of migrants settled in major capitals, compared with 65% of the Australian born population. More recent information suggests the trend has grown, with only 6% of recent migrants now settling in regions.

The Government has toyed with the idea of insisting that migrants settle regional areas where there are genuine labour shortages but there seems little determination to back the threats with action, which in itself could be difficult (and possibly illegal) to police.

Outsiders observing Australia’s handling of growth must be incredulous to learn that much of the concentration of growth has not occurred by accident, but is widely endorsed policy. Higher urban densities have since the late 1990s been at the core of urban development policy to handle population growth in the very cities now feeling the most resistance to growth. The benefits promised as a result of increased density were many and the public were assured that they would share in an improved quality of life as a result of these policies. Take this example from the 2013 Draft Metropolitan Strategy for Sydney to 2031:

“A home I can afford. Great transport connections. More jobs closer to where I live. Shorter commutes. The right type of home for my family. A park for the kids. Local schools, shops and hospitals. Livable neighbourhoods.”

And the result? For Sydney and Melbourne especially, housing affordability is as bad as the worst in the world with entire generations locked out of housing. Congestion is chronic. Private and public transport systems are under more pressure than ever. Commutes take longer and housing choice has been compromised. Is this livable? Talk about over promise and under deliver. If these promises had been borne out by the day to day experience of average Australians living in these cities, there wouldn’t be the push back politicians are feeling now.

Even more incredulous is that, confronted with the political challenge of an increasingly hostile public, some suggest (from the comfort of their high priced inner urban enclaves no doubt) that what’s needed is not change, but more of the same. The Planning Institute of Australia recently suggested as much, responding to a challenge from ABC interviewer Ellen Fanning on the 7.30 program that we are ill prepared to cope with “stuff(ing) another three and a half million people into Melbourne and Sydney both”.

The PIA responded that “We’ve got a great challenge to ensure that we don’t end with megacities like Lagos or Manila. We want Tokyos, Parises, and New Yorks – and we can do that by planning well.” (emphasis added).

Really? Tokyo, Paris and New York might be on our bucket list of cities to visit, but how many average Melbourne or Sydney residents would live in hope they’d one day see their own city turn into a version of Tokyo or New York? I can think of no public opinion poll where we Aussies have put up our hands to using Tokyo as a business model for urban development. Any politician suggesting as much would last a nano second before being turfed out.

It serves to illustrate how wide the disconnect has become between public policy makers and the wider community. The “we” word is used when the “I” pronoun is what’s really meant.

Maybe it’s time for a genuine reality check? I’ve always held the view Australia can readily support a larger population but in getting there, infrastructure standards need to keep up with growth, not continuously lag it. Housing and lifestyle choices don’t have to be further compromised to serve a model of urban development which is at odds with broader public opinion. The idea that much of this growth should continue to be concentrated in just a handful of cities already feeling considerable strain while other centres with infrastructure capacity and abundant, affordable housing find growth eluding them is plain crazy.

The answer I suspect is not in forcing people to settle cities and regions that are capable of absorbing growth but in making these cities and regions even more attractive as places to settle. Jobs, industry and economic growth lie at the centre of this. Positive economic attraction strategies, reduced tax or red tape burdens, abundant and low cost utilities (power, gas, water), ‘special economic zones’ – all are elements capable of attracting employers and industries, and with them jobs for workers and their families. And if regional employment was further supported by the type of place making and related infrastructure support more typically only on offer in the centres of major capital cities, there’s no reason at all that centres like Mackay, Armidale, Wagga Wagga, Orange, Casino, Bendigo and plenty of others can’t enjoy growth without the accompanying political pain.

Sadly, even this rather obvious policy option isn’t being explored. According to a recent report in the Sydney Morning Herald: “Inner-city centres on the east coast have amassed the greatest share of Australia's new public service jobs under the Coalition government as outer suburbs, bush towns and Canberra took cuts to their ranks of bureaucrats.” So we not only concentrate our population into a few centres but government jobs as well. This is hardly spreading the load or sharing the benefits.

Stopping growth by rapidly closing down immigration would be disastrous for industries which have come to rely on it but this is increasingly looking like it’s possible. But equally, persisting with our current approach will only further aggravate hostile electorates in the major cities, while electorates in centres with little growth could be equally cranky with governments for failing to produce growth where it’s wanted.  

The fuse on the population debate has been lit. And maybe we are the ones that lit it. 

Net interstate migration to Queensland is on the rise. Does this mean we are about to boom?

Positive net interstate migration to Queensland has in the past been a driver of growth for the Queensland economy. This is mainly because (contrary to popular opinion at the time) interstate migrants were not retirees but the average age was in fact around 35 – prime family stage of life, which is where household spending peaks. Many also arrived with ‘surplus’ capital (the arbitrage between higher house prices in places like Sydney and Melbourne compared with many Queensland locations) and they had well paid full time jobs to come to in Queensland. They were cashed up, fully employed and at peak spending stage of life. Happy days.

So is this about to happen again? Let’s hope so but before we get too carried away with some of the real estate marketing hype, here are some things to keep in mind...

The actual numbers are relative. 

Net interstate migration is now close to 20,000 per annum, almost double the prior year. That’s big growth in the short term. But it’s also a long way from the peak. In 1989 and again in 1993, that number nudged close to 50,000 per annum – or close to 1,000 people a week. Our population ticked over to 3 million in the early 1990s, so interstate migration back then was adding some 1.7% per annum to our population. 

But there are now 5 million Queenslanders. For net interstate migration to have a similar economic impact relative to the existing population, that 1.7% would today need to equate to 85,000 people per annum, or 1,600 people per week. So not only are we a long way from historic records, but to have the same impact, the growth bar has been lifted. The latest numbers that are being sold as good news are in fact less than a quarter of what they’d need to be to have a similar economic impact as it did in the early 1990s. 

The graph below shows the same thing but using the actual quarterly numbers from the ABS. This is what has people excited.

And the graph below shows those same quarterly numbers relative to the population at the time. Somewhat less exciting. 

Jobs. 

Growth in full time employment has a strong correlation with periods of high and growing net interstate migration, and periods of weakness in the full time jobs market has a similar relationship with periods of falling or weak net interstate migration to Queensland. 

The graph below selects periods of rising and high net interstate migration and periods of falling and weak interstate migration, and relates these to what was happening in the full time jobs market. I emphasise full time jobs as these are needed to fund things like mortgages or to have a substantial economic impact. Part time and casual jobs are counted in total employment data but for the purpose of this comparison, excluded. 

As the graph shows, in periods when Queensland’s full time jobs growth was stronger than or equal to rival states NSW and Victoria, net interstate migration was strong. It’s no coincidence that the strongest period of net interstate migration in both raw and relative terms was in that period of broadly 1983 to 1993, when Queensland was powering well ahead of NSW and Victoria on the full time jobs front. The next strongest period of net interstate migration (say 1998 to around 2003) also saw Queensland slightly outperform those states. Likewise, the weakest period of net interstate migration – say from roughly 2007 to now – also coincides with a period when NSW and Victoria have been outgunning Queensland on the full time jobs front. 

This seems to be convincing evidence that the relationship between full time jobs growth and net interstate migration is a strong one.   

What about house prices then?

My suggestion is simple: when you have a growing economy with growing full time jobs you are more likely to witness rising house prices due to demand side pressure (along with many other supply side factors having a bearing). Hence why prices have risen so much faster in places like Sydney and Melbourne in recent years, compared with Brisbane. 

The question is whether this gap in house prices will now become a trigger for large movements in interstate migration? Is the current increase in net interstate migration in response to this widening gap? The gap in median house prices has certainly widened to its widest point in some 15 years. 

It is tempting to think this is the case and for those who have bought into the Queensland property market it is hard to resist the idea that cashed up southerners will begin to flood north, underpinning Queensland markets and driving price growth even when southern markets are softening. 

However, the historic evidence seems to suggest that this is unlikely until Queensland’s relative strength in full time jobs is at least aligned with or ahead of full time jobs growth in NSW and Victoria. When that happens, and if the gap in house prices still remains, then it might be time to get excited. 

Why we need more Springfields

Australia’s worsening housing affordability problem is a largely self-inflicted: we first restrict and then tax the supply of new land needed to accommodate people, while at the same time accelerating population growth and then compounding the problem by applauding as most of that growth is focussed on just two or three cities. There are official policies in many States that encourage a concentration of both jobs and housing in finite inner city areas – which can only exacerbate an already chronic problem.

It’s not just housing affordability that is the problem, although this gets much of the attention. The entire point of inner urban renewal in the first place – dating back to the Better Cities program of the Hawke-Keating Government – was to harness spare capacity in inner urban areas through selective infrastructure upgrades.  We wanted to avoid the ‘donut effect’ common in US cities at the time, where inner urban areas were hollowed out leaving behind empty schools and other underutilized community assets. The opposite is now the reality: urban infrastructure is not keeping pace with population growth. We are in the throes of committing tens of billions more of taxpayer dollars to invest in inner urban infrastructure from schools to public transport in the Sisyphean belief that this can be fixed, while we continue to pump yet more people into limited spaces.

You wonder why we are so slow to identify problems and grasp solutions in this country. As Donald Horne wryly observed way back in 1964, “'Australia is a lucky country, run by second-rate people who share its luck." Those second rate people are still there driving public policy but our luck may be running out in terms of housing affordability and urban infrastructure unless there is some change of direction.

Part of the answer is, as always, under our noses even if we refuse to acknowledge it. The Springfield master planned community in South East Queensland this year celebrates a 25 year anniversary since its first humble housing lots were released. Occupying over 7,000 acres (2,860 hectares) it has clocked up some $13.6 billion in project investment to date, from housing for some 34,000 residents to education (including a University) to health (including a new hospital) to recreation, shops, aged care, industrial, offices, private and public transport connections.  That $13.6 billion investment to date is predicted to reach $85 billion on completion, by which stage there will be over 2 million square metres of mixed use space in its town centre and a population of 138,000 people.

Of critical importance is that the $13.6 billion investment to date is a multiple of many times the amount of Government support the project has received. In an era where ‘nation building’ or ‘city transforming’ infrastructure projects struggle to achieve much better than a 1:1 cost benefit ratio (and where massive leaps of faith in expert predictions are usually required to get them there) the Springfield example needs no such empirical gymnastics. The evidence in this project is that every dollar of government support spent there generates many multiples in private investment, and builds a complete community in the process. This is not just a dormitory development, but one which aims at generating its own employment from trades to highly skilled technical workers and everything in between.

Springfield is also a model of community development that has been quietly (and sometimes publicly) derided by advocates of increasing inner urban concentration.  It fits what some would pejoratively denounce as ‘sprawl’.  Everything here is new. Though obviously very popular with residents (otherwise they wouldn’t be living here) it doesn’t conform with the approved group-think which attaches great virtue to old world urban models reliant on foreign cities like Copenhagen or Paris for their inspiration – many of them first laid out in the medieval period.  Being new and suburban is heresy to much of the new urbanist and smart growth faiths that seek to recycle established communities into ever higher density communities.

Density for some has become the end in itself, not the means to an end. Despite the mounting evidence of worsening affordability, increasing congestion, a growing wealth divide between inner urban residents and the rest, the problems of lagging and prohibitively expensive infrastructure to support higher inner urban densities, mounting lists of projects which struggle to achieve even a marginally credible 1:1 cost benefit ratio – proponents continue to defy the evidence in pursuit of their faith.

Yet Springfield offers more than a solution to our emerging urban crisis: it also offers the business model. The experience gained in developing this community to this stage should, logically, be embraced by policy makers the country over. We should apply our minds to how this was achieved with only equivocal public policy support (at the time) and limited public funds, and imagine what could be achieved with just a little more of both. Interpreting, studying and then applying this model of urban development as part of a solution designed to alleviate excess pressure on just a few urban centres isn’t just an idea, it’s a hugely compelling one.

Much of what has been achieved in the name of “urban renewal” in Australia has been exemplary but increasingly the signs are that excessive concentrations of employment and housing in narrowly demarcated inner city areas are counterproductive. The opportunity to use the Springfield model of urban development to house an increasingly bigger Australia is one that deserves to be explored, and sites identified for many more Springfields to emerge in the future. The peripheries of those cities where worsening affordability and excessive congestion are just two painfully obvious signs of policy and market lag are the places to start looking. 

Does the world need a cure for living longer?

We are quick to celebrate advances in medical science which allow us as a species the opportunity to live longer. But the consequences of living longer are often glossed over. The economic consequence is that – worldwide – there are going to be more and more people in their old age relying on a smaller and smaller proportion of people of working (and taxpaying) age. It will affect different nations in different ways, so this is a quick wrap up based on the latest predictions from the United Nations population division.

The old age dependency ratio is a formula that expresses the population of people aged 65 and over as a proportion of those aged from 15 to 64. A rising ratio simply means that there are more people aged 65 plus relative to those aged 15 to 64. There is almost nowhere in the world this is falling. The world picture shows that we have gone from around 10% in the 1980s to one in four by 2050. Meaning that there was one person aged 65 plus for every 10 in 1980 but that this will change to one for every four in 2050. Those four will have to do the work that ten did in 1980, relative to supporting the 65 plus age group.

The rising dependency ratio is going to affect higher income nations with more developed economies to a much greater extent than lower income, less developed nations. The reason is pretty simple: wealthy nations can afford better health care and higher living standards. The difference is profound though – by 2050 high income nations will have a dependency ratio approaching 50%, compared with less than 10% for lower income nations. Will they be able to remain high income nations with this future burden? 

The continents that will be most affected broadly align with income status. The worst affected will be Europe, with a dependency ratio nudging 50% by 2050. North America is not far behind and Asia will be rapidly closing the gap.

Amongst the major European nations, Germany has a particularly nasty problem emerging on the forward radar – a dependency ratio of almost 60% by 2050. Little wonder German Chancellor Angela Merkel was so keen to attract such large numbers of refugee migrants (said to be more than 1 million in 2015 alone). France and the UK are following a similar pattern although with slightly lower dependency ratios and Russia only passes 30% in around 2045.

Closer to home, Japan is facing some serious problems. A forecast dependency ratio of 70% means there will be seven people aged 65+ for every ten aged 15 to 64. Japan’s dependency ratio is already problematic and this will get worse. China is also facing a rapid escalation in its dependency ratio which will rise quickly from around 2025, effectively almost doubling in the ensuing 25 years. I wrote about China’s people shortage (being a shortage of working age people) a couple of years back. You can click here to read it.

Australia itself shares a great deal in common with the USA and Canada in terms of our aged dependency ratio. We are currently in the midst of a significant increase which will see our dependency ratio rise from a fairly stable band of 15% to 20% from 1980 to 2010, to one in three by 2035. This will pose a range of budgetary challenges on both the income (tax) and expenditure (health and welfare) sides going forward.

The good news at least is that while we are increasingly better informed about the economic challenge of an ageing society, we are not ageing quite as fast as some places. Maybe we can observe closely how nations like Germany or Japan handle this escalating dependency challenge, and essentially copy the policies that seem to work best?

The bigger challenge is that further advances in medical science and disease prevention will mean these dependency ratios could in reality be much greater challenges in the future. Living to 100 might be commonplace for today’s millennials. Their children may expect to live to 120. But the question of how world economies – which were never designed for this demographic pattern – are going to afford to support societies where there will be nearly as many people aged 65 plus as there are of working age, is a big one and it’s unanswered.

Maybe in the future old age will no longer be an ambition but something for which we need a cure?

2016 is Census Year. But why do we bother?

Every five years Australia holds a census of its people and housing and next year it’s our turn again. The five yearly interval was introduced back in 1961 and it has over time become the essential reference point for demographers, economists, researchers, planners, governments and industry.  The last one in 2011 cost $440 million. It’s a small price to pay for such a high quality image of the reality of Australian society. So why are so many keen to ignore it?

Evidence geeks (myself included) love Census data because it’s almost impossible to refute. Myths and theories can whirl around in a drunken dance together with ideology and blind faith, but there’s nothing like a Census to bring them crashing to the floor with a sobering thud. It’s the indisputable authority on our people, housing and habits that make us Australian. On the evening of the 9th August 2016, wherever you are in Australia, as one of 24 million Australians and some 10 million dwellings, you will be counted and your demographic, economic, social, religious, education and transport profiles (to name just a few) will be taken.

And according to the Australian Bureau of Statistics “The 2016 Census will be Australia’s first Census where more than two thirds of Australia’s population (more than 15 million people) are expected to complete the Census online in August 2016. New delivery and collection procedures will make it easier to complete the Census online.” Which is going to be way more fun than an hour of Fruit Ninja, Subway Surfer or killing time on Snapchat.

Some more Census basics from the ABS Website: 

“In 2016, the ABS will:

• Mail 13.5 million letters to households and establishments across Australia
• Count all of Australia’s 10 million dwellings and 24 million people
• Employ around 39,000 temporary field staff across a variety of roles, including up to 500 people to process the data
• Scan paper forms as they arrive using industrial scanners operating 12 hours per day, 5 days per week, over 10 weeks, scanning close to 88 million pages
• Produce and publish over 3 trillion cells of data as a result of the information collected in the Census.”

The level of detail provided by the census findings allows almost microscopic analysis of populated areas – down to groups of around 400 people (called a Statistical Area 1, or SA1). Combined with powerful GIS data mapping, the results can be displayed in a graphical way that is both intuitive and highly informative. 

But despite the best quality of data and the most advanced tools for interpreting and communicating that data, you can almost guarantee that sections of industry, media, think tanks and various lobby groups will either turn blind eyes to the findings, or find ways to contort the findings to suit their various agendas. 

Frustratingly, urban myths will persist despite the abundance of fresh, resolute data provided by the Census. Which makes you wonder why we bother with the expense and effort of gathering hard evidence only to find ourselves confounded by public policy which owes more to perception and prejudice. 

What are some of the myths that might prevail despite evidence to the contrary? Here are some nominations but we’ll have to wait until 2017 to see for sure:

• The myth that all the jobs growth, and all the jobs, are in the inner city. The past several Census’ have stubbornly revealed that CBD and inner city shares of metro wide jobs are stuck at around 10% to 15% of the total, depending on the city. City centre jobs are growing, but so are suburban ones – and generally at least as fast if not faster. Some will ignore the relative balance between city centre and suburban market, and by only focussing on changes in the smaller city centre market, make distorted claims that appeal to kindred booster interests. Those claims get repeated without query, and the myths get a new lease of life.
• The myth that millennials and Gen Y overwhelmingly favour apartment living in the inner city. There has been a very significant increase in the supply of new housing in the form of inner city apartments in the inter census period and there will be even more completed by August 9, 2016. The Census will reveal how much of that stock is occupied and by what types of households, and will prove an interesting reference point in the debate about the type of housing we are building, and for whom. 
• The myth that families have turned away from the traditional suburban home. There have been numerous reports in recent years suggesting that young families have abandoned the ‘dream’ of a detached home with a backyard for the kids. I doubt this is true and suspect the Census might reveal how untrue this is. Sure, if you’re a young single or young couple with few ties and big city careers, the downtown loft is a lifestyle solution. But once children come along, or certainly by the stage they are ready for pre-school, my suspicion is that Census data will show young families still overwhelmingly choose the detached housing form in a suburban location. This is not to suggest there won’t be an increase in families being raised in apartment style living but I can’t see the scale of social change being predicted by some commentators being borne out by the evidence.
• The myth that the traditional family model is dying. I know it’s de rigueur to talk about the growth of single person households, gay and lesbian couples (“not that there’s anything wrong with that”) increasing divorce rates and so on, but the Census is a reality check on what can become a runaway debate.  Unless I’m terribly mistaken, the idea of mating and producing children hasn’t suddenly gone out of fashion for the overwhelming majority of Australians. Much to the frustration of some social campaigners, I suspect the Census will reveal a stubbornly conservative majority still prevails. 
• The myth that retirees are generally all wealthy boomers with money to burn. I know it’s an appealing thought, but I suspect the income data sets for seniors and retirees will paint a sobering picture of household incomes for this cohort. Assets are another thing of course and the Census doesn’t ask about assets like the value of the family home. But still, it’s cash flow that pays the grocery and other bills and most seniors, I suspect, will be shown to be on lower incomes than we’d like to think.

Why bother with the Census? Some will ignore it and others will twist its findings into all manner of statistical contortions to prove a theory they’ve decided to believe in, no matter what. But that doesn’t detract from the fact that it’s a terrific investment in the truth of what makes us tick. Bring on August 2016!