A ‘Sustainable’ Population? — Key Policy Issues Roundtable Proceedings Canberra, 21-22 March 2011 © Commonwealth of Australia 2011 ISBN 978-1-74037-358-6 This work is copyright. Apart from any use as permitted under the Copyright Act 1968, the work may be reproduced in whole or in part for study or training purposes, subject to the inclusion of an acknowledgment of the source. Reproduction for commercial use or sale requires prior written permission from the Productivity Commission. Requests and inquiries concerning reproduction and rights should be addressed to Media and Publications (see below). This publication is available from the Productivity Commission website at www.pc.gov.au. If you require part or all of this publication in a different format, please contact Media and Publications. Publications Inquiries: Media and Publications Productivity Commission Locked Bag 2 Collins Street East Melbourne VIC 8003 Tel: (03) 9653 2244 Fax: (03) 9653 2303 Email: [email protected] General Inquiries: Tel: (03) 9653 2100 or (02) 6240 3200 An appropriate citation for this paper is: Productivity Commission 2011, A ‘Sustainable’ Population? — Key Policy Issues, Roundtable Proceedings, Productivity Commission, Canberra. JEL code: J11 The Productivity Commission The Productivity Commission is the Australian Government’s independent research and advisory body on a range of economic, social and environmental issues affecting the welfare of Australians. Its role, expressed most simply, is to help governments make better policies, in the long term interest of the Australian community. The Commission’s independence is underpinned by an Act of Parliament. Its processes and outputs are open to public scrutiny and are driven by concern for the wellbeing of the community as a whole. Further information on the Productivity Commission can be obtained from the Commission’s website (www.pc.gov.au) or by contacting Media and Publications on (03) 9653 2244 or email: [email protected] Foreword The Productivity Commission’s 2011 policy roundtable, held at Old Parliament House in Canberra on 21-22 March, examined the topic A ‘Sustainable’ Population? — Key Policy Issues. Participants included government officials, academics, consultants and representatives of non-government organisations. Population growth has been the subject of much public discussion in recent times. However, widespread misconceptions about the pace, characteristics and implications of population growth means that much of this debate has not been as well informed by the facts as the topic deserves. To enhance public understanding, in December 2010 the Commission released a Research Paper Population and Migration: Understanding the Numbers, which describes Australia’s main demographic trends and what lies behind them. The Commission’s 2011 policy roundtable aimed to shed light on the potential tensions between the various dimensions of ‘sustainability’ and projected population growth, and assess the implications for economic growth and community wellbeing. The proceedings are being published to enable access by a wider audience to the information and insights that emerged. The volume includes the papers presented by the speakers, responses by discussants, and summaries of the key points emerging from the roundtable discussions. The Commission is grateful to all the speakers and other participants for their valuable contributions to the roundtable, reflected in these proceedings. Thanks are also due to Patrick Jomini, Alex Maevsky and other Commission staff who arranged the event and assisted in the preparation of the background paper. Gary Banks AO Chairman July 2011 FOREWORD III Contents Foreword III 1 Introduction 1 Gary Banks 2 The determinants of Australia’s future demography 9 Peter McDonald General discussion 23 Session 1 Population, productivity and participation 3 Immigration: high-skilled versus low-skilled labour? 27 Barry R. Chiswick 4 Economic effects of population growth and ageing in Australia 41 George Kudrna and Alan Woodland 5 Population growth and the resources boom 57 Chris Richardson, David Rumbens and James Allnutt General discussion 71 Session 2 Limits to population growth? 6 Planning sustainable cities in the 21st century 77 Richard Arnott Discussant John Daley 101 Discussant Kevin O'Connor 105 7 Dealing with congestion efficiently 109 Steve Meyrick Discussant Henry Ergas 125 IV CONTENTS 8 Is decentralisation the answer? 133 Graeme Hugo Discussant Larry Cook 171 9 Environmental and resource constraints: myth or reality? 175 Don Henry Discussant Harry Clarke 179 General discussion 187 Session 3 Social impacts of migration 10 Immigration and public opinion 193 Andrew Markus 11 Selection, migration and integration: why multiculturalism works in Australia (and fails in Europe) 211 Oliver Mark Hartwich Discussant Max Corden 223 General discussion 227 Session 4 Panel discussion – implications for policy directions Panel discussion 231 Dinner adress 12 The value of migration to Australia 235 Andrew Metcalfe 13 Background paper 241 Appendices A Roundtable program 295 B Roundtable participants 299 CONTENTS V 1 Introduction Gary Banks Chairman, Productivity Commission The Productivity Commission’s Roundtables, held once a year at Old Parliament House, are an annual series devoted to discussion of important contemporary policy issues among key figures in the ‘policy space’. The reasons for choosing this year’s topic — on population policy issues ― will be evident, I’m sure, to anyone who witnessed the lead-up to the Federal Election last year. The nature of the public ‘debate’ at that time has left a legacy for policy development today that can be likened to the old Irish joke about the traveller in the wilds of County Cork asking a local how to get to Dublin. Answer: ‘I wouldn’t start from here!’ Confusion and contention have reigned supreme. We have experienced a popular backlash triggered by the confluence of the escalation in boat arrivals, IGR(3)’s 36 million population projection, and Prime Minister Rudd’s declaration about the desirability of a ‘Big Australia’ – all seemingly out of the blue. These drivers were further compounded by claim and counter claim about the merits or otherwise of immigration, and of different population scenarios. The public has heard various eminent Australians, including former political leaders and ‘Australians of the Year’, advocating quite divergent positions (for example, proposing population targets ranging from 15 to 100 million!). A ‘sustainable’ Australia? Coinciding with the election, this led all sides of politics to repudiate the Big Australia notion in favour of a ‘sustainable’ Australia. This has been welcomed by many in the community, but it has also been criticised for the vagueness of the concept, with some concerns that it might be synonymous with a small Australia. Depending on how the sustainability objective is operationalised, however, this shift can be seen as a positive development, given the context just described. It keeps the ‘wolves from the door’ politically, while potentially also keeping a range of policy options and outcomes in play. Handled right, it could presage a more coordinated, INTRODUCTION 1 transparent and informed approach to policy development, rather than ad hoc, opaque decision-making that is more easily prey to the influence of pressure groups and that can yield erratic outcomes. But this leaves us with the $64 question. ‘Sustainability’, post-Brundtland, has become a broad church, with different interpretations of its principles or strictures (from ‘weak’ to ‘strong’) and, therefore, different implications for public policy. However, at bottom, most would agree that it is about following a policy path that promotes ongoing improvements in societal wellbeing, with a destination that no future generation would regret, and for which, along the way, the policy benefits (broadly conceived) exceed the costs. Another positive in using a ‘sustainability’ framework for policy is explicit recognition that the advancement of society involves more than economic considerations — that there are also social and environmental dimensions. Moreover, it suggests that there are interconnections between these and, at least in more benign interpretations of the concept, that tradeoffs among them will sometimes be called for. Pursuit of a ‘sustainable’ Australia, therefore, need not rule out a ‘big’ (or at least substantially bigger) Australia, provided the appropriate tests are satisfied. There are two further important implications of this shift to a sustainability paradigm in relation to population. • First, it arguably requires us to give more attention to the rate of change than to some distant target level. That is, it puts the focus on what might best be called ‘absorption capacity’ (a dynamic concept) rather than static notions of ‘carrying capacity’. It seems virtually impossible, in any case, to predict outcomes two or three decades into the future (as the 8 million disparity between the population projections in the last two Intergenerational Reports, just three years’ apart, clearly illustrates). • Second, a sustainability perspective requires that attention be paid not only to population pressures (the demand side), but also to the factors that determine how well these can be accommodated within our country (the supply side) — recognising that these supply-side factors (institutions, regulations, public administration) are amenable to policy action too, and possibly more so. A final implication, related