A plan to better manage our population growth

Thank you for the invitation to speak at your Population Summit. You have an impressive agenda and I look forward to hearing from some of your other panelists.

Scott Morrison created the Population portfolio when he first became Prime Minister a little over a year ago. It was recognition that our population settings have a fundamental impact on our economic growth as well as the liveability of our cities and regions.

It literally impacts us all, both directly and indirectly.

Our Government has been busy since this time, and today I want to launch our updated Population Plan and in doing so, outline its key elements as well as the rationale for it.

The challenge

Australia has done tremendously well from our population settings over the decades. It has underpinned our GDP growth and it has made our cities vibrant and cosmopolitan, while enabling some of our regional centres to thrive.

On the other hand, we have been challenged by the pace and distribution of our population growth in recent years, putting enormous pressure on our big capitals.

We also have many places that want to grow, but simply can't get the workforce they need.

Our challenge now, and the reason we need a Population Plan, is to maximise our economic potential through our population settings while maintaining the liveability of our cities.

In order to unpack this challenge, we need to go to the numbers.

Australia has a fast growing population—presently at about 1.6 per cent per annum.  The primary driver of this growth is international migration which accounts for 60 per cent.

To put this into perspective, our population growth rate is more than double that of the United States and over two and a half times the OECD average.

Our population growth, and the migration settings that support it, have been key drivers of our economic growth overall. As you would no doubt know, Population is one of the 3Ps of economic growth with the other two being Participation and Productivity.  

However, our settings have impacted all three “Ps”, not just the one. Our migration settings are deliberately geared toward younger, skilled people, which means it has supported increased labour force participation and improved productivity.

This means that, over the decades, our population settings haven't just contributed to GDP growth, but have contributed to GDP per capita growth. That is, we have each, on average, become wealthier because of our population settings. Treasury estimated that a sixth of our per capita wealth over the last 40 years is due to population factors.

But this growth has put pressure on the liveability of our cities, especially when infrastructure, housing approvals and services have not kept pace.

This has been the case over the last decade or two in Sydney and Melbourne, and to a lesser extent in South East Queensland.

In Sydney's case, the infrastructure is partially catching up due to the huge expenditure by the State Government over the last few years (supported by the federal Coalition), with many projects now opening, or due to open, in the next year or two. In Melbourne, however, we are a decade behind.

Our big city freeways have slowed in pace, the trains are frequently at crush capacity, and housing construction has not always kept up, putting upward pressure on prices.

People in the outer suburbs are particularly feeling the congestion pressure as their commutes have become longer. For example, in my home town of Melbourne, a 30km inner freeway journey in peak morning traffic took 39 minutes ten years ago. Now it takes an hour. The HILDA survey stated commuters now spend 60 per cent more time in traffic per day than they did 15 years ago.

Infrastructure Australia says, based on data and policy settings from 12 months ago, that this situation will only get worse in the next decade.

More infrastructure is necessary and our Government has doubled the infrastructure investment to $100 billion since coming to office. I will come back to this later. But our challenges are exacerbated by population distribution factors, and there are two in particular.

First, while we have had rapid population growth nationally, the growth is not evenly distributed geographically. To the contrary, 75 percent of the nation's entire population growth has been into three areas: Melbourne, Sydney and South East Queensland.

Those cities have been growing very quickly by any benchmark of large wealthy cities. Melbourne, for example, grew the fastest with 2.5 per cent growth last year, Sydney at 1.8 per cent and South East Queensland 2.2 per cent.

On the other hand, there are parts of Australia that are crying out for more people. In fact there are currently around 60,000 job vacancies in the regions alone. And there are smaller cities like Adelaide, where the leaders are publicly calling for faster growth.

The second distribution issue is that most people and most of the population growth is in the outer suburbs of our big cities, yet most of the jobs growth has been in the city centres. This puts extra pressure on city infrastructure as more people commute significant distances each day.

For example, between 2011 and 2016, Sydney's inner suburbs added more jobs than people—90,000 jobs for 75,000 more working-age people. But in the outer suburbs, we saw the opposite—160,000 people added but only 75,000 jobs.

The Grattan Institute finds that half of all jobs growth in Sydney and Melbourne is within a 2km radius of their city centres.

Our Population Plan is designed to support economic growth, but also in part to have an impact on these two main distribution issues. 

While we don't want, and nor would it be feasible, to have some grand master planned Australia, we do need to take a stronger position on our settlement patterns using the policy levers at our disposal.

The risk otherwise is that in 30 or 40 years' time, Australia will end up with two or three megacities, but relatively sparse development elsewhere. I don't think this is the desired outcome of most Australians, nor in our strategic interest.

Our big cities will continue to grow and we need to plan better for this growth, but other wealthy countries show that focused government policy can assist in getting a broader distribution of population growth.

Canada, for example, has used migration as an effective policy lever (which I will come back to), while countries like Germany, France and others have used fast rail to better manage settlement patterns.

Our plan to better manage population growth

So let me take you through some of the key elements of our Population Plan to deal with some of these issues I have raised.

A. Reduced migration rate. The first step has been to reduce the migration rate. As I mentioned earlier, international migration comprises 60 per cent of our population growth. However, it is an ever larger proportion of the growth of our big cities—65 per cent of Melbourne's growth and 83 per cent of Sydney's.

Given the enormous pressure on our big cities, our Government has brought the permanent migration rate down from 190,000 to 160,300 this year, and we will cap it at 160,000 over the next four years. Importantly, however, we have preserved the skilled migration numbers within this cap.

Permanent migration is the smaller component of the Net Overseas Migration (NOM) figure—with temporary migration being the larger—but it is the primary determinant of population growth over the medium term.

B. Regional migration. The second step has been to put in place incentives for new arrivals to our nation to go to regional centres and to the smaller cities. These incentives include:

  • Within the 160,000 permanent migration cap, 23,000 places have been allocated for two new regional skilled visas, requiring people to live and work outside the big cities for three years before being eligible for full permanent residency.
  • The creation of incentives for international students to consider going to universities in regional areas and smaller cities. International students account for 43 per cent of the Net Overseas Migration rate, but 80 per cent presently go to Melbourne, Sydney or Brisbane. 

    As of July of this year, students who study in areas outside the big capitals will receive an extra additional year of post-study work rights. This will then provide those students with the full three years of work rights required to be eligible for permanent residency. Based on my conversations with Vice Chancellors across the country, this will be a powerful incentive. The Government has also initiated 4,720 scholarships for both domestic and international students to study in the regions.

  • Changes to the Working Holiday Maker program (another significant component of the temporary migration scheme) to encourage young people to work in regional areas, particularly in agriculture.
  • Tailored migration lists for particular geographical areas, known as “Designated Area Migration Agreements” or DAMAs.
  • Further incentives and support for humanitarian entrants to go to regional areas.

The Government is continuing to look at this avenue of supporting regional growth through migration including through the work of a new Parliamentary Inquiry chaired by Julian Leeser.

Canada provides an interesting case study in how migration policy can achieve a better distribution of population growth. They are a country remarkably similar to ours: geographically, economically, and in political structure.

Beginning in the 90s, Canada gave the Provinces a much greater role in nominating and selecting migrants into the country. According to UTS's Professor Jock Collins, this has helped to “dramatically shift the settlement of immigrants beyond Canada's biggest cities.”

Before the changes, only 10% of economic migrants settled outside of Canada's big three Provinces. As of 2017, this figure had risen to 34%.

While there is no requirement for new immigrants to stay in the Province that has nominated them, the evidence is that the vast majority settle in that Province. According to Collins, a big part of this retention success was the strong emphasis placed on ensuring that the migrants received a strong welcome, support programs, a community network and assistance in finding work for those who were not employer sponsored.

This program is one example of a ‘bottom up’ approach to migration. As is outlined above, we have started this process in Australia.

C. Fast rail connecting orbital regional centres. A further step in our plan is to build fast rail connections between the big capitals and their respective regional centres surrounding them. Our ambition is that within 20 years, most of the satellite cities of Melbourne, Sydney and Brisbane are connected.

The opportunity from this is that it would enable people to live in a regional centre and have the lifestyle and cheaper housing associated with that, yet still be able to access the larger city employment market on a daily basis.

This would have a profound impact on our settlement pattern—turbo-charging the regional centres while taking pressure off the big capitals.

Research undertaken for Geelong Council, for example, estimates that if Melbourne's satellite centres were connected by fast rail, a million extra people would base themselves in regional Victoria rather than in Melbourne by 2050.

While this is a medium to long term plan, we have started the process. We have established a Fast Rail Agency to provide expertise and oversee this process; put money towards several business cases, with the first three completed within months; and allocated $2 billion to get the first fast rail connection built as quickly as possible: Melbourne to Geelong.

D. Economic development of regions and smaller cities. For sustained growth in smaller cities and regions, you need jobs. Connectivity, university campuses and other parts mentioned above help in this effort, but so can direct government economic development policy. This is the next element of the plan.

Decentralising the public service can be part of this, which Minister Coulton oversees. About fourteen per cent of public service jobs are already based in the regions with more to come. This provides a stable basis of employment in regional areas. A quarter of Defence Force jobs are located in the regions, with an extensive network of bases providing employment and community growth.

Private sector investment in the regions and smaller cities provides the most important role, so we're investing heavily in the infrastructure necessary to attract more businesses to our regions. The Government also has dedicated programs to support growth.

The $841 million Building Better Regions Fund and $272 million Regional Growth Fund are key initiatives which are creating jobs and driving economic growth. As is the $500 million in additional funding to improve regional education. This investment strengthens regional higher education through greater access to university places, study hubs and scholarships.

E. More congestion busting infrastructure. The challenge in our big cities comes from the supply of infrastructure, housing, and services not keeping pace with the demand created by population growth. I have outlined some of our plans to take population pressure off the big cities and support growth elsewhere.

The supply side of the equation—transport infrastructure, housing and services—are primarily the responsibility of the states and territories, but our Government is strongly supporting the states in this area.

Since coming to office, our Government has more than doubled the investment in transport infrastructure to over $100 billion over the next ten years. A third of the 900 major projects that we have announced since coming to office have been announced in the last 6 months alone. 

Our $100 billion infrastructure pipeline includes major projects such as WestConnex and NorthConnex here in Sydney, the Monash Freeway upgrades, M80 upgrades and the Melbourne Airport Rail Link in Melbourne and the Gateway and M1 Pacific motorways in Brisbane.

These are the major spines of our big cities and our investments are already having an impact. The new M4 tunnel for example, which opened a couple of months ago, is saving commuters travelling between Parramatta and the CBD 20 minutes in the morning peak and 45 minutes in the evening peak—each day.

On top of this, we have committed funding to support 166 smaller scale projects in our suburbs. They are targeted at local pinch points and include 46 commuter car parks designed to take up to 25,000 cars off the roads. We have work underway on each one of these 166 projects and expect the first to be under construction before Christmas.

F. Better population planning with the states. The final element of our plan that I would like to mention today is the instituting of better population planning mechanisms with the states and territories.

One of the challenges of our federation is that the primary population lever—immigration—is set at the federal level, while states, territories and local governments have the primary responsibility for the transport infrastructure, housing approvals and service provision to cater for the growth.

We need to ensure that these are better aligned so that one does not get in front of the other as occurred in Sydney when Premier Carr said that Sydney was full and stopped building for the future, while Prime Minister Rudd turbo-charged the migration rate a few years later, accelerating the growth into Sydney.

There are two mechanisms we are putting in place to get better alignment across government and to better plan for the inevitable growth that will continue in our big cities.

The first is “City Deals”. The City Deal model, which our Government pioneered several years ago, is a good mechanism for better planning across the three levels of government. They typically set out long term plans for infrastructure, employment and housing. We are presently working on four new City Deals in each of South East Queensland, Perth, South East Melbourne and North West Melbourne.

They complement the other “City Deals” already in place including the largest to date—the Western Sydney City Deal. This agreement outlines a 20 year plan for Western Sydney's development with the aim that people can live, work and play in the area. The centrepiece, of course, is the huge federally funded $5.3 billion Western Sydney Airport.   

The Western Sydney City Deal, which has been widely lauded, directly supports the NSW Government's vision to effectively have three centres in Sydney, not one: the CBD, Parramatta and Western Sydney.

The second mechanism is the instituting of a more formal National Population and Planning Framework with States and Territories and the Australian Local Government Association.

This framework, negotiated at COAG, aims to link up the policy responsibilities that each level of government has so that we can collectively better manage our growth into the future. It will result in tangible and specific outcomes, including better population projections and data sharing, and a focus on skills requirements at a regional level.

Work is well advanced on the Framework and we expect it to be agreed at the next COAG meeting in December.

Conclusion

Today, I have outlined some of the opportunities and challenges we face from our population growth as well as the key elements of our plan to better manage our growth into the future.

There are further details in the updated Population Plan that I am launching today.

The Plan is aimed at ensuring that population settings continue to support national economic growth, while maintaining the liveability of our big cities and growth of our smaller cities and regions.

Our starting point is an enviable one: an economy in its 28th year of uninterrupted economic growth, some of the most liveable cities in the world, and regions which are prosperous and welcoming.

But there is more to do and we are not complacent.

Our Population Plan will serve Australia's future well.

Thank you for the opportunity to speak here today.