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Populate and Perish? Modelling Australia’s Demographic Future

Published by the Centre for Independent Studies (Sydney), 7 October 2010 (PDF

http://cis.org.au/publications/policy-monographs/article/2201-populate-and-perish-modelling-australias-demographic-future

By Jessica Brown and Oliver Marc Hartwich

Although population growth has been one of the most hotly debated topics in recent months, public discussions have been driven by populism, not by evidence-based analysis. In the recent federal election, both Labor and the Coalition seemed to suggest that they could—and would—limit population growth, particularly by restricting migration. The Greens went a step further by endorsing a population cap.

But these platitudes overlook a fundamental fact. Under every realistic scenario, Australia’s population is going to keep growing. Australians will also keep getting older—a fact often neglected in the current debate—which will have huge implications for our future policy environment.

Under all but one of the 36 scenarios modelled in this report, Australia’s population will grow. Only with zero net migration and falling fertility—which is practically unachievable and widely regarded as undesirable—would Australia’s population shrink or stabilise. Some degree of population growth is an inevitable reality.

By focussing on cutting migration as a way to limiting population growth, the current public debate has also ignored the role of fertility—which matters as much if not more—in determining population size and age distribution. Anti-growth campaigners suggest that if migration were reduced, we could somehow stabilise population growth. But this is not true. Even if migration were more than halved to 70,000 a year (which we do not advocate), we would still have a population of more than 29 million by 2050 if fertility remained constant.

It is extremely difficult to predict the future of Australian demographics. Changes in the birth rate are hard to predict and even harder control, yet they will potentially have a bigger impact on population size than migration.

Under every scenario, Australia’s population will get older. However, it is fertility—not migration—that has the biggest impact on population ageing. Increased migration is not the solution to population ageing. If fertility rate drops from its current level of 1.97 to 1.5, the current European Union average, median age will rise from 37 today to nearly 46 in 2050—higher if migration levels are cut. Under all the most realistic scenarios, more than 20% of Australians will be over 65 by 2050. And regardless of changes in migration and fertility, the number of Australians aged 80 or over will more than double to about 2 million by 2050. There will be far fewer taxpayers under every scenario. We need to plan for population ageing.

There is a trade-off. A faster growing population will require investment in housing and infrastructure; it will also be younger and better able to meet these costs. A more slowly growing population will require fewer investments in housing, roads and schools but will be significantly older, which means the cost of health care and pensions will rise while the tax base falls.

Both population growth and population ageing will happen no matter what, but the degree to which we have to deal with the challenges will depend on the policy choices we make now about migration as well as future changes in the birth rate and life expectancy.

No one can know exactly how these variables will change in the future, which means no government can accurately predict what Australia’s population will look like. Population targets are unrealistic. We cannot plan our demographic future.

However, we can be fairly confident in predicting that Australia’s population will both grow and get older—we just don’t know by how much.

The best that policymakers can do is make existing institutions more flexible so they can better cope with whichever population scenario emerges. Politicians should stop pretending that they can control what Australia’s future population will look like. Instead, they should turn their attention to the real policy issues that will be affected by population growth and ageing: housing, roads, pensions and our natural environment. The debate should not be about whether we will have a ‘big Australia’ or a ‘small Australia’ but about how we can make a growing Australia work and how we can make it a prosperous and liveable place for us all.

Jessica Brown is a Policy Analyst with the Social Foundations program at The Centre for Independent Studies. Jessica’s research at the CIS focuses on family policy and government payments to families, welfare payments and welfare reform, and population. She has published research on paid parental leave, jobless families, and ‘welfare-to-work,’ and comments regularly in the media on family, welfare and social policy issues.

Oliver Marc Hartwich is a Research Fellow with Economics Program at The Centre for Independent Studies. Oliver’s area of expertise is local government and federalism, urban economics, European affairs and Industry policy. He was previously, the Chief Economist at the British think tank, Policy Exchange, London. His publications with Policy Exchange mainly dealt with housing and planning, urban regeneration and transport policy. Before that he worked as an adviser to Lord Oakeshott of Seagrove Bay in the UK House of Lords.

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