Northern Australia makes up 40 per cent of our land mass but has no city that can be called a “middle city” – a city of between 500,000 and one million people. Indeed, throughout the whole country, we only have one middle city - the Gold Coast.
Australia has an unusual population distribution. In other countries, the population of cities follows a ranking order that is remarkably predictable. The top city is usually around double the size of the second-biggest city, triple the third-biggest city and so on.
Take the United States: New York, at 8.5 million people, is around double the population of Los Angeles at 4 million and about triple the population of Chicago at 2.7 million. It is not a perfect relationship but it is one that is repeated across enough countries to have earned its own name: Zipf’s Law.
Australia is an outlier when it comes to following Zipf’s Law. Our biggest city, Sydney, at 4.6 million people, is only just bigger than our second biggest city at 4.4 million people in Melbourne. A recent economics paper looked at the Australian situation and concluded that we had the most concentrated population on this measure among a range of comparable countries.
If our population was spread more in line with that of the United States, we would have 44 cities with populations of more than 100,000 rather than only 16.
The consequences of this concentration in population includes greater competition for land. Because there are fewer cities of a sizeable population, Australians seeking a job do not have as many options for where they can live. This increases pressure on land values, leading to higher house prices and the difficulties we see young people having in affording their first home.
Fifteen years ago, a Reserve Bank paper estimated the impact of our distinct population spread on house prices. Its conclusion: our urban structure could explain perhaps a third of the difference between Australia’s house price to gross income ratio compared with that in the United States.
There is nothing inefficient about investing in housing per se, but the capital that is used to save for and buy a house could be used elsewhere. For example, a family could use that money for the husband or wife to start a business, or buy a farm, rather than pay off the bank. These higher housing costs are a real cost to our economy.
This suggests that the economic gains that could arise from developing the north are massive and on the scale of those that came from other economic reforms, like tariff reduction, financial deregulation and the floating of the dollar.
The Coalition’s Northern Development agenda is about creating bigger cities and more opportunities for all Australians.
So, for example, we are building the Rookwood Weir on the Fitzroy River. The Fitzroy is the second biggest catchment in our country after the Murray-Darling but it has only one major dam on it at the moment. The Rookwood Weir could double agricultural production in the region and create 2100 jobs.
The Pilbara region produces more economic wealth than 119 countries yet just 60,000 Australians live there. We can do more to build regions like the Pilbara so that we do not just keep stacking people up in our major cities. We can relieve the pressure of congestion, high house prices and declining support for immigration.
- Senator the Hon Matt Canavan,
Minister for Resources and Northern Australia