ANALYSIS-Australia struggles with booming population
01 Oct 2008 04:48:26 GMT Source: Reuters
By Michael Perry SYDNEY, Oct 1 (Reuters) - Australia's population is booming, fuelled in large part by migration, and it may leave policy-makers struggling to ensure adequate infrastructure such as housing, transport and healthcare within a few decades. Demographers say Australian cities must radically change their urban plans, in scale and form, promoting high-density housing and decentralisation. Residents must also abandon the culture of urban sprawl to be more like the citizens of Paris and Los Angeles, who live and work in self-contained communities. "It's time to drop the pretence that the current strategic plans will manage our cities in the first half of the 21st century and develop new models for housing, infrastructure and funding," says Bernard Salt, Australia's top demographer. "Its already at breaking point. This is a train wreck waiting to happen," says Salt, who works for KPMG. Australia is experiencing the biggest migration boom in history, with 200,000 migrants arriving in the year to March 2008. The population grew by 1.6 percent over the year to 21.2 million, the fastest rate of expansion in almost 19 years. It is projected to rise further to between 30 and 42 million by 2056, and up to 62 million by 2101, according to a new Australian Bureau of Statistics report. But while cities will struggle to cope with the increased population, there will be winners as well as losers. A report on the impact of changing demographics on business found the healthcare, housing and personal finance sectors would benefit from an ageing population and growing migration. The PKF Business & Population Monitor report said the changes "will be the largest structural shifts in the Australian economy since World War Two" and will pose risks and opportunities to businesses and governments as spending and tax patterns change. Australia's biggest private hospital operator, Ramsay Health Care Ltd <RHC.AX>, which owns more than 60 hospitals, says that an ageing population, increased life expectancy and demand for higher quality care will underpin growth in 2009. Property firms like Lend Lease <LLC.AX> and Stockland <SGP.AX> are positioning themselves for growth in retirement villages. Building materials groups such as Boral <BLD.AX> and CSR <CSR.AX> expect a big building boom, particularly in the most populous state, New South Wales, which has a major housing shortage, and developers/contractors like Leighton <LEI.AX> see no end to infrastructure demand. However in the next 30 years the working population, which drives the economy, will dramatically fall due to retirements, leaving a smaller tax base from which to fund infrastructure. By 2047, a quarter of the population is projected to be aged 65 or older, slowing economic growth, particularly in the 2020s when the bulk of baby boomers retire, says a government report. There will be only three people of working age for every one aged 65 or older, compared with the current ratio of five-to-one. The current budget surplus of A$19.7 billion, or two percent of GDP, could swing to a deficit of 3.5 percent of GDP by 2046-47, and government debt could rise to 30 percent of GDP by 2046-47, due to the rising cost of an ageing population, it said. CITIES STRUGGLE Major cities, especially the largest, Sydney, which has four million residents, are already struggling with growing populations. A housing shortage in Sydney has created a rental crisis and seen home ownership affordability plummet due to the boom in house prices of recent years. Over-crowded trains and buses groan with commuters and traffic gridlock is a daily occurence. City hospitals routinely close wards due to a lack of funds. The Australian Medical Association (AMA), which represents doctors, wants an immediate A$3 billion injection into hospitals across the country and says this should be indexed annually to meet rising costs in coming years. "Emergency departments around Australia are struggling to care for patients who need to be admitted to hospital. We know that there are 1,500 unnecessary deaths in Australia due to access block (over-crowding and admission logjams)," says AMA president Rosanna Capolingua . Sydney's urban plan envisaged a city capable of accommodating an extra 980,000 residents between 2006 and 2031, but the latest projections mean an extra 1.4 million people will call it home by then, and by 2056 it could have 7 million residents. Australia's second-largest city, Melbourne, is not much better off. Its population was expected to grow by 830,000 by 2031, but is now forecast to increase by 1.6 million by 2051. "We now need to rethink the structure, form and operation of our cities," said Salt. "We need to start thinking boldly, bravely, in a long-term vision." Salt believes a national plan like that taken against climate change is needed to tackle the looming population crisis, warning that without action cities would "grind to halt", reducing the quality of life of residents and causing social dislocation. "On the climate issue, people are near hysterical about rising sea levels in 100 years time. Within our lifetime we will be confronted by factors that more seriously diminish our quality of life than rising sea levels. We have our priorities wrong here." AGEING CITIES The PKF report on the impact of Australia's changing demographics on business found healthcare, housing and personal finance sectors would benefit from an ageing, growing population. In 2007, A$1.4 billion was spent on aged care construction in Australia, a rise of 38 percent on 2006, with most going to the two fastest-ageing states, Tasmania and South Australia. The report said the global credit crunch may currently lessen the attraction of such investment, but the sheer wave of retirees and their wealth in coming years will see demand rise. The country's second biggest bank, Commonwealth Bank of Australia <CBA.AX>, says a booming population will see strong housing construction in coming years, benefiting building material firms, developers, retailers and banks. "The building block of retail spending is population, so the increase in births and migrant numbers is likely to help keep retailers such as Woolworths <WOW.AX>, Harvey Norman <HVN.AX> and David Jones <DJS.AX> seeing continued growth," says CommSec chief economist Craig James. While each Australian's overall spending will decline when they retire, especially in the retail areas of clothing, cars and restaurants, spending on health insurance and gambling will rise. "Australians are retiring with more wealth than ever before and with that comes a desire and a need for health services and quality of life," said the PKF report. "Travel and leisure sectors will also flourish as cashed up retirees head for airports. The property development and housing construction sector should prosper with increased development of cluster homes and retirement style living." (Reporting by Michael Perry; Editing by John Chalmers)
