Ministers for the Department of Infrastructure, Regional Development and Cities The Hon Michael McCormack MP Deputy Prime MinisterMinister for Infrastructure, Transport and Regional Development Senator the Hon Bridget McKenzie Minister for Regional ServicesMinister for SportMinister for Local Government and Decentralisation The Hon Alan Tudge MP Minister for Cities, Urban Infrastructure and Population The Hon Sussan Ley MP Assistant Minister for Regional Development and Territories The Hon Andrew Broad MP Assistant Minister to the Deputy Prime Minister The Hon Scott Buchholz MP Assistant Minister for Roads and Transport The Hon Barnaby Joyce MPFormer Deputy Prime MinisterFormer Minister for Infrastructure and Transport The Hon Dr John McVeigh MPFormer Minister for Regional Development, Territories and Local Government The Hon Keith Pitt MPFormer Assistant Minister to the Deputy Prime Minister The Hon Damian Drum MPFormer Assistant Minister to the Deputy Prime Minister Senator the Hon Fiona Nash Former Minister for Regional DevelopmentFormer Minister for Local Government and Territories The Hon Darren Chester MP Former Minister for Infrastructure and TransportFormer A/g Minister for Regional DevelopmentFormer A/g Minister for Local Government and Territories The Hon Warren Truss MP Former Deputy Prime Minister Former Minister for Infrastructure and Regional Development The Hon Paul Fletcher MP Former Minister for Urban Infrastructure and Cities The Hon Jamie Briggs MP Former Assistant Minister for Infrastructure and Regional Development

Property Council of Australia Conference

Speech

ATS004/2018

23 November 2018

Sydney

Acknowledgements

Thank you Adina Carson and thank you Ken Morrison for your invitation to speak at the PCA’s annual lunch today.

I do not need to tell this audience how important the property sector is to Australia’s economy, with more than half of Australia’s wealth held in residential real estate— $7.6 trillion worth — and a further $1 trillion in commercial real estate.

The property industry is Australia’s largest, generating 13 per cent of GDP or over 200 billion dollars, and supporting 1,400,000 employees.

Our government understands this deeply.  We understand that business growth is the backbone of our economy.  This is why we have cut company and small business taxes.

It is one reason why we have a record $75 billion investment in infrastructure because the roads and rail are what enables businesses to get around our cities and the nation.

It is also why we so strongly believe in stable housing policy.

If nothing else, I want you to leave this lunch today, knowing one thing: the Coalition Government will not be getting rid of negative gearing.

And nor will we be massively increasing capital gains taxes. 

This would cause untold damage to the economy and hurt millions of Australians. 

As the Treasurer repeatedly says, under such policies, “If you own a house, it will be worth less; if you rent a house, you will pay more”.

Yet this is precisely what Labor is promising for the property sector and for everyday home owners and renters. 

It is important that I express this up front, because there is an enormous amount at stake here: for your industry, for the economy and for everyday Australians.

Our population plan

I would like to focus most of my remarks today, however, on population policy. It has been an issue that we have been discussing all week and continues today with new ABS projections on the front pages of the papers this morning. 

Of course, it is very important for your industry as a major driver of your growth.

I would like to explain why we are discussing population policy, and the key elements to our plan.  We are carefully aiming to strike the right balance between maximising our economic potential while maintaining our liveability.

To start, we know that population growth is an important contributor to economic growth, both in absolute terms and on a per-capita basis. Treasury estimated in 2015 that population factors contributed about a fifth of our increase in wealth per person over the previous four decades, mainly by growing the working age share of the population.

But, we are also aware of the challenges that unbalanced and unplanned population growth presents, particularly in the form of congestion.  This is being felt acutely in Melbourne and Sydney in particular, and is why it has been a central issue in the Victorian election.

Let me first take you through some of the numbers which put this in context.

Australia’s population is growing fast presently at about 1.6 per cent per annum.  This is more than double the rate of the growth of the United States and almost 2½ times the OECD average.

It is also fast by historical standards.  There have only been two other times since 1900 when we have grown as quickly: briefly in the 1920s and during the “populate or perish” policy post World War II.

Sixty per cent of this growth has been due to international migration (with the rest coming from natural increase).

This kind of rapid growth would present enough of a challenge for governments and town planners, even with all other factors remaining equal.

But two factors have made it particularly challenging. 

First, the distribution of that growth has not been uniform. If it was, we wouldn’t be having this conversation.  

Rather, Melbourne, Sydney and South East Queensland have been growing exceptionally fast - accounting for 75 per cent of our entire population growth - while other parts of the country have minimal population growth and many are crying out for more people.

Melbourne grew by an incredible 2.7 per cent last year, with Sydney and SEQ not far behind.  Only two other cities in the English speaking world added more people than Melbourne last year: Atlanta and Houston.  Not New York, not LA, not Chicago, not London nor any of the other great international cities.

Sixty five per cent of that growth was driven by migration, and in Sydney the figure was even higher, at 83 per cent.  Of Australia’s new arrivals, only about 25 per cent of permanent visas were employer sponsored where people came because of a job to go to.

But while we have had exceptional population growth in Melbourne and Sydney, there are many smaller cities and territories that are growing more modestly but want to grow faster, and in some cases cannot find people for the work available. In the regions today, there are an estimated 47,000 vacant positions - 18 per cent more than two years ago.  I have mayors and businesses screaming for more people in those areas.

The second factor that has made our growth challenging is that it was well above expectations.  In 2002, for example, the Intergenerational Report suggested that Australia would grow by 2.5 million by 2017.  We in fact grew by 5 million people.

In 2004, the ABS projected that my home town, Melbourne, would grow by 500,000 by 2017. It grew by 1.2 million.

So we have had fast growth; we have had concentrated growth; and we have had growth well above projections without the infrastructure and services keeping up.  And this has contributed to the immense congestion we are currently facing in our two big capitals and to a lesser extent in South East Queensland and elsewhere.

How were the projections so wrong? In large part, because in 2007, Prime Minister Rudd almost doubled the migration intake overnight. No warning, no consultation. There was not even a clear public announcement of the changes. But it lead to an extra 100,000 people annually for the next few years, most of whom went to Melbourne and Sydney.

So while a city or state may have been planning for a certain degree of growth, it all of a sudden had nearly twice that figure. 

It was a breakdown in planning and it reveals one of the core structural problems with our federation and how we manage population and plan better. 

That is, that we at the federal level largely control the population growth lever - through migration - while the states, territories and local councils have primary responsibility for delivering the infrastructure, housing approvals, schools, hospitals and other services.

Here in Sydney, you actually had the two levels of governments working in opposite directions in the early to mid-2000s.  You had Premier Bob Carr who famously said that “Sydney was full” and was consequently not building the infrastructure for the future, while just a few years later, Kevin Rudd became PM and turbo-charged the population growth into Sydney. 

The infrastructure couldn’t keep up; the housing approvals couldn’t keep up.

Much of the congestion in Sydney over the last decade has been the result of this. It has been the result of poor planning and state and federal governments in the past working in opposite directions.

The NSW government is doing incredible work in catching up on the required infrastructure - with a massive $87 billion in expenditure over the next four years alone. This is aided by record federal funding supporting key projects such as the NorthConnex and WestConnex.

But it should have occurred a decade ago, preferably before the massive population growth, not after it.

In Melbourne, the infrastructure similarly hasn’t kept up.

Melbourne still doesn’t have an effective ring road because Daniel Andrews cancelled the East West Link (and wasted more than $1.3 billion in doing so); there is still no rail to Australia’s largest university campus in Clayton; and a rail link to the airport will only occur because we have forced the state government into it by putting $5 billion on the table.

Our plan will avoid this situation happening again by strongly linking population growth to infrastructure, service and housing approval capacity. By doing this, we can grow sustainably, maintain our liveability and bring the Australian public with us.

How will this occur?

As Prime Minister Morrison has outlined, we are going to take a bottom-up approach to migration settings, rather than the top-down approach that has typically characterised the annual migration settings that the federal government determines.

Each state and territory government is being asked to inform us about their population plans, guided by what their population carrying capacity is for their existing and planned infrastructure and services.

This may include a region-by-region analysis of population forecasts and carrying capacities, acknowledging that places like Dubbo are struggling to find workers while other places struggle to grow.

Every region and city is different and we have to be mindful of this. South Australia, for example, wants to grow faster by at least 10 to 15,000 per annum.  As does the Northern Territory, Tasmania, and large regional areas like the Goldfields or Western Victoria.  In many cases, there are already considered population plans in place.

These state plans will inform the overall migration levels.  

We can use visa incentives and conditions to encourage people to the smaller cities and regions that are looking for more people, while easing the pressure on Melbourne and Sydney while the infrastructure catches up.  

This is not a radical idea, or somehow unconstitutional, as some suggest.  To the contrary, we already have geographically specific visas and people adhere to their requirements.  If they do not, they put in jeopardy their future stay in Australia which is a very powerful motivator!  Consequently, only 0.2 per cent of those on geographic specific visas breach them.

Further, when newly arrived migrants go to the smaller cities or regions, they tend to stay there, even after any visa condition has expired. 

It is important to point out that our approach will recognise the significance of employer-sponsored migration.  Our government has already tightened these requirements, and we maintain a high vigilance on compliance. But businesses that cannot legitimately find an Australian to fill a position, are able to sponsor a person into the country to complete that role.

This is vital to ensure that businesses that can’t find the workers they need here in Australia can continue to grow and secure our prosperity.  I know that this point is particularly important for the property sector.

Equally, without such employer-sponsored migration, some essential services such as nursing and aged care would struggle to operate. We don’t want to compromise this.

However, this does not undermine our fundamental approach, as employer sponsored migration is the minority of our migration intake.  Indeed, only about 25 per cent of all permanent migration visas issued are employer sponsored. 

This approach of “bottom-up” analysis will place much more responsibility on the state and territories to properly plan and forecast.  It means that they can be rewarded if they speed up their infrastructure delivery and housing approval processes.  Because then they will be able to accommodate faster growth.

We are always going to grow, particularly to our big cities, but it must be planned growth where the infrastructure keeps up.

Our approach will also require more sophisticated forecasting and monitoring against the forecasts.  The Planning Institute of Australia notes that there is no consistency across states, between councils and sometimes even between state departments in their population forecasts.

In Tasmania, they point out that the four economic regions have population forecasts which, when aggregated, are 12 percentage points different to the statewide forecasts.

Planning for population growth must be a partnership involving all levels of government and close consultation with the private sector.

The result of this approach will likely see a reduction in annual national migration levels.  But it will also almost certainly see an increase in migration levels for South Australia, Northern Territory, perhaps Western Australia and those regional areas which are struggling to find workers.

Other elements of our government’s policy may also see faster growth in different parts of our big cities. Congestion in part occurs because jobs and housing are not always in the same place.

The Western Sydney Deal, for example, centred around our $5 billion commitment to build a new Western Sydney Airport, will see the construction of 200,000 houses catering for 500,000 people. The aim is to create a new city where people can live, work and play all in that area.

Other challenges

I have focused here on the challenges to population growth and our plan to deal with this.  But we are also mindful when establishing population policy of two other challenges.

First, ensuring that we maintain a balance in our demographics so that we can maximise economic growth and opportunity.

The key issue here is ageing.  Our current fertility rate (1.8 births per woman) is below the replacement level and we are living longer. If we had no migration, we would start to see a decline in population from about 2040. More urgently, our workforce would start to shrink from 2020.

We have already seen an increase in the aged-dependency ratio over the decades. In 1974, there were 7.4 people of working age to those above 65.  Today, it is about 4.3. This needs to be carefully monitored. As you would be aware, a great deal of the public expenditure on individuals occurs in their older age.  Maintaining healthy dependency ratios are critical.  

Second, ensuring that we maintain social cohesion while growing our population.  I have been discussing the challenges we are facing is this area for much of this year, largely in my previous portfolio.  We have been tremendously successful in integrating people into our nation, but there are indicators that we are not doing quite as well as we have done in the past. 

Most of you will recall the tragic incident we saw in Melbourne just two weeks ago, when a radicalised Islamist extremist murdered the much-loved Melbourne restauranteur, Sisto Malaspina, himself an immigrant.

This act of terrorism is a stark real-world reminder of the consequences Australia will most certainly suffer if, as a nation, we fail to achieve the kind of social cohesion most of us, and indeed, most within the Islamic community, are working so hard to maintain.

Conclusion

Australia is in the midst of a period quite unlike any other in recent decades.

Our population is growing at a rapid rate.  With that growth comes an extraordinary number of opportunities for our nation.

Some things we know for sure: Australia will continue to grow; that will be through both natural growth and through international migration; and our big cities will continue to attract a large proportion of that growth. 

But like most opportunities, they come with some serious challenges. Challenges that the Morrison Government is addressing as I have outlined.

We will be working with you closely in the weeks and the months ahead as we develop our policy further.  To ensure that, finally, population growth is more closely tied to infrastructure and services carrying capacity.

We want controlled growth to maximise economic gains without compromising our liveability.

We want to ensure that businesses like yours can continue to employ, grow and invest.

Planned, controlled population growth helps achieve this.

Lower company, small business and income taxes helps achieve this.

Record investment in road and rail infrastructure help achieve this.

This is our Government’s agenda.  And the future is bright for the economy, for your industry and for every day Australians.

Thank you.