A tropical metropolis on top of this antipodes?

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

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!

What country flies most?

I was wandering up to the entrance at Melbourne airport late last year when three members of the Rebels motorcycle gang arrived at the terminal.

Approaching the sliding doors at the exact same time as these three large, black-clad, sunburned men, I realised I would either have to slow down or speed up to avoid bumping shoulders.

I went to speed up, then, remembering the news about bikies killing someone at an airport a couple of years ago, I suddenly reversed my decision. I might just keep my eye on this lot, I thought, and let them through first.

What happened next?

They passed through security and I later saw them sitting near the gate. Like any other Australian, a bikie sometimes needs to travel by air.

Flying is a regular part of life for most of us. I doubt there is anyone reading this blog who hasn’t held a boarding pass in their hand in the last year. It’s a convenience, but it’s also a pain. All that waiting, the tiny seats, the way food tray is so crowded with things and hard to manage. It’s easy to forget that most people in the world have still never flown in a plane.

That fact made me wondered if I could quantify Australia’s tendency to fly.

It turns out Australia is in the top 10 countries globally for passenger movement, according to World Bank data. (The World Bank uses domestic and international aircraft passengers of air carriers registered in the country, which is a fair proxy in the case of some nations, and not for some others).

When you look at the data, you could easily conclude that Australians fly more than the citizens of any other country.

This chart uses that World Bank data to show domestic and international flights for the most flying-oriented countries, plus a few others for comparison. Nine countries score higher than Australia on this metric

Screen Shot 2015-02-04 at 2.09.39 pmWhen you look at the chart, it makes sense. The countries with the most flights per capita are islands. They are also often small countries where there’s nowhere else to go except to fly out. Several of them are tourist destinations or aviation hubs. (nb. Ireland and Antigua probably top the list because of their tax status (and RyanAir), not their proclivity for flying. The Irish statistical office claims only 22 million international flights) .

The countries above may also top the flights per capita listing because they are small. Australia is more than double the size of any country above it on the list (UAE, home to Emirates airlines, has 9 million inhabitants.)Screen Shot 2015-02-04 at 2.08.55 pm

Given all this, I am prepared to say Australians probably fly more than citizens of any other nation.

(The data from our own statistical agencies show the World Bank figures may underestimate the amount of flying. According to BITRE, Australia has 57 million domestic passengers a year and 23 million people, making 2.5 domestic flights per capita per year. Add in 33 million international passenger movements and the data suggest more than three flights per person per year – closer to 3.5. New Zealand may also be a contender for the flying-est nation, but its numbers are swollen by high inbound tourism, while Australia sees more departures than arrivals and a higher share of domestic travel.)

So Australians probably fly the most! We head to the airport as often as every three months. Woo-hoo?

I didn’t think so.

Meanwhile, at the other end of the scale, Indian nationals rack up on average one flight every 20 years. That’s less than Kenyans, but slightly more than the Cambodians.

What would happen if Indians started flying more? Such a densely populated country will probably never fly as much as Aussies do, but what if they flew at the same rate as the Americans, 2.35 trips a year?

That would mean another 3 billion people taking to the sky every year. That’s a doubling of current global passenger numbers, which, according to ICAO, topped 3 billion for the first time in 2012.

It’s safe to say this would be bad for carbon emissions. The contribution of aviation would jump from 2 per cent of the global total to more like 4 per cent. Sorry, penguins. Sorry polar bears.

Furthermore, I estimate the world would need an extra 8,000 planes. (Based on a generous 370,000 passengers per plane per year). For context, Airbus currently makes around 50 planes a month.

The conseuquences for the aviation fuel market could be significant. There are already problems with supply leading to rationing.

Those extra planes are going to need somewhere to land as well. What cities in the world have space for more runways?

China has already increased its appetite for flying tenfold. From 35 million flights a year in 1994, it has increased to 350 million by 2014. The lesson is this – economic growth sends people to the airports, for business and for leisure.

India’s economy grew at 5 per cent per year. At that rate it won’t be a “rich” nation for perhaps a century. But in 2010 it grew at 10 per cent, and if –  like China –  its growth rate can be held high, then it can become very rich very fast.

If everybody in India can afford to fly – even the bikies – its worth asking the question of whether the world is ready for the consequences.