Tony Abbott has a plan – to make the north of Australia more economically vibrant.
It says, “A growing northern economy benefits the whole nation through jobs, investment, infrastructure and services.” But is that true? Let’s have a look
Darwin has just 136,000 residents. It’s the smallest capital in Australia.
Darwin certainly seems to be a lovely spot with room to grow. So why not? It doesn’t make sense that most of the population is in the southern half of the country, far from our populated neighbours in Asia.
A highly developed north could be Australia’s California.
California grew late in America’s development – in 1900 LA had 100,000 population while New York had 3.4 million. Comparable figures to Darwin and Melbourne today.
But if expansion of population is the plan, we need to be clear why we’re doing it.
Having more population made sense back when Australia feared being invaded. Populate or perish was the cry. These days our big risks are different. So the idea needs to stand up economically to make sense. Let’s have a look at what the economics of this tropical metropolis might be.
BENEFITS:
1. The Northern Territory would have a higher population, so the fixed costs of operating the jurisdiction – such as parliament – would be spread over more people. This is efficient. It would have a minor upside for the rest of Australia as smaller GST transfers would be necessary to the NT, and the remainder of the country would keep more.
2. With more people living in the tropical north, the area would have bigger markets, and greater economies of scale. Prices should drop for consumer goods, and the range of goods and services would increase. Good news for Darwinians tired of the same few pubs and restaurants!
3. Australia would get a higher GDP. This might give us more clout in global affairs, but wouldn’t mean much for most of us. It wouldn’t necessarily solve our unemployment problem. Per capita GDP is what matters – lifting the total output of Australia is irrelevant for most of us.
4. The NT is 30 per cent indigenous. By creating more employment opportunities in the north of Australia, development could help reduce indigenous disadvantage.
5. If successful, a booming northern frontier could reduce the population growth rates in the southern capitals. This might reduce the rise in house prices and diminish pressure to build expensive infrastructure through crowded areas.
6. A more happening north might attract more tourism. Darwin is already a big tourist town and with Australia on the brink of a tourism boom a bigger, better offering could help the whole nation attract more tourists. The risk would be actually diminishing its charm. The key is good urban planning so the inevitable ugly parts of development are invisible from the tourist hotspots.
COSTS
1. Economic development always uses land. Changing the use of land always comes with an opportunity cost. In this case, the change would turn natural environment into suburbs and industrial parks. National parks are already close to the centre of Darwin. The location of development would need to be very carefully managed to make those opportunity costs worthwhile.
2. Putting another big city absolutely miles from the rest of Australia’s cities is only going to increase travel costs and times for the rest of us. Perth is bad enough!
3. Government effort could be expensive and futile. The plan to deregulate domestic routes in the north is already in tatters. Here’s the thing – forcing economic activity to happen in a certain place is next to impossible. Economic activity happens where it wants to. The venn diagram of development policies and failed development policies looks like a circle with only the faintest shadow. Having worked in both domestic regional development agencies and international aid efforts, I think I can say this with some confidence. We could be investing in a tropical white elephant.
Is this plan more likely to create Australia’s California or Australia’s Alaska? Please share your views below!
Thomas the Think Engine 