Just how big should Australia be?

Just how big should Australia be?

Just how big should Australia be?

Updated 15 May 2017, 17:35 AEST

The population of Australia is expected to reach 40 million by the middle of the century.

The population of Australia is currently close to 24.5 million, and will reach 40 million by the middle of the century if population growth continues at the current rate.

Immigration accounts for half of our population growth, according to Ken Henry, chairman of the National Australia Bank and former treasury secretary.

"We think maybe seven million more will fit somehow into Sydney or Melbourne and by that time they'll be cities of eight million each," says Mr Henry.

"By mid-century they'll be very large cities by international standards."

That still leaves another nine to 10 million people who will need to live outside those cities.

There's good evidence to suggest that increased immigration stimulates economic growth, from simple quantities like an increased labour force, which improves GDP, to more abstract concepts like increased human capital (the capacity of a population to innovate and create).

But there are many who maintain the downsides to increased immigration, increased ethnic and racial tensions, decreased social cohesion, et cetera, are not worth the extra dollars in the bank.

Is there a magic number of immigrants?

In short, no, argues Ian Goldin, professor of globalisation and development at Oxford University.

"There's no sort of maximum threshold of people in your society which becomes too much in any absolute sense."

He points to the United Arab Emirates, where immigrants make up 95 per cent of the population. Many other places with lots of immigrants are doing well.

"For example, Canada, Toronto, which is 55 per cent immigrant, is consistently voted as one of the happiest cities in the world to live in.

"And London, which has something like 30 per cent immigrants, is a place where everyone wants to be at, and of course has much higher wages and lower unemployment, and the same is true I think of dynamic cities like Melbourne and Sydney."

In the UK, the people most opposed to immigration and in favour of Brexit are those who live where there are few immigrants.

For author and journalist George Megalogenis, Australia's "ideal number" of immigrants depends on other factors.

"I actually don't know what a good number is, because a 28.5 per cent overseas born population when your economy is growing is a really good number. Thirty per cent when your economy's in recession is not a good number; you're going to get a political backlash."

But is immigration really as good for the economy as it's cracked up to be?

Jane O'Sullivan, an honorary senior research associate at the School of Land and Food Sciences at the University of Queensland, is unequivocal: Australia's population should be kept as low as possible.

"Ideally it would be under 27 million, but that might be too ambitious a change in current policy to expect," she said.

"Every problem that we have with the environment and with natural resource availability is made harder by more people. There's really nothing to gain by having more people."

Dr O'Sullivan even disputes the immigration equals wealth mantra. She believes immigration might increase the GDP, but individuals might not benefit.

"If you have settled on a definition of economic growth being aggregate GDP then obviously having more people is going to increase it. But it's not necessarily increasing the GDP per capita.

"GDP is adding goods and bads together, and there are a lot of bads that come with high rates of population growth and high population density."

Infrastructure investment key to immigration success

Mr Henry says infrastructure investment is essential for a successful immigration program.

"Population growth, if it's not supported by the right sort of infrastructure, will stress human amenity. And we see that in the cities at the moment, through congestion: very long commute times for people in Sydney and Melbourne in particular.

"Typically our infrastructure investment has lagged population growth.

"Affordable housing and energy — the ability of governments to be able to say to their citizens that we can ensure that you're going to have continued reliable access to those things depends critically upon the quality of the infrastructure."

Running on the spot

But Jane O'Sullivan says the emphasis on infrastructure can be self-defeating. "The problem is that people assume that all infrastructure is investment, and that's not true.

"An investment is something that if you didn't do it, you wouldn't be any worse off. A recurrent cost is something you have to do in order to not to go backwards.

"If we're just building more infrastructure rather than better infrastructure, and then we're filling it up with more people: we're not actually advancing.

"If we're adding 350,000 people to Australia every year, clearly if we don't provide any more infrastructure, we're going to be worse off over time.

"So all of the infrastructure that we have to put in place just so that hospital waiting lists don't get longer than they already are, and that trains don't get more crowded, and that sewage treatment plants don't get overwhelmed, that's recurrent cost. That's running in order to stand still."

On the other hand, Professor Goldin points out that immigration brings down construction costs by providing more skilled artisans, construction workers, engineers and others.

"They do add to the demand side, they do add to costs, but they also add to the supply side and bring down costs, and I think one needs to look at both of those dimensions to this."

How else might immigrants benefit the economy?

Through innovation and enterprise. You only need to look at Silicon Valley, says Professor Goldin.

"It's very difficult to think of an iconic Silicon Valley firm that is not immigrant founded … something like 40 per cent of the start-ups are immigrant founded.

"If you look at patent data, for example, where it's available both in Europe and in the US, you see that immigrants are disproportionately represented in innovation."

It's the self-selection phenomenon. Leaving your homeland is hard. People who make that leap are often ambitious risk takers and innovators.

This, Professor Goldin argues, is a strong reason for supporting Australia's skilled migration program. But we have to make sure we manage it well.

"There's a lot of evidence that if immigrants are more effectively integrated, if they are integrated in workplaces and paying taxes, they are more effective. But also if their children have access to school, if they have language training, those sorts of dimensions become very, very significant.

And now, he says, is the time to urge people through the door.

"The real optimal time to be attracting the world's best skills is now, while the doors of Europe and the US are being closed to them.

"I think that there's never been a better time in a sense for Australia — and I think Canada will be doing the same thing — to really go for it and say, 'All right. We want to really reinvent ourselves. We want the best and most skilled people in the world to come here, and to see how that can be made possible.'"