MENZIES RESEARCH CENTRE
MELBOURNE, 9 OCTOBER 2018
A little over a month ago, Prime Minister Morrison created a new portfolio which merged population policy with urban infrastructure and cities policy. It made a lot of sense to combine these three areas as they are so interconnected. Population growth, for example, is the major reason for building more infrastructure, while our big capitals are where most of the growth is occurring. If we get these three levers right, then our cities will be even better places to live.
This is my first major speech since taking on the responsibility for this new portfolio. My intent today is not to cover every aspect of the portfolio, but to focus on one of the most pressing challenges for residents in our big cities: congestion. Particularly on our roads and transportation systems, but also more generally.
As the “Minister for Congestion Busting”, to use the Prime Minister’s descriptor, I want to take you through how we are thinking about the congestion challenges. I will describe the nature of the challenge, its underlying causes and some of the ways we are thinking about addressing it. This is an infrastructure challenge, but also an employment and population challenge.
The costs of congestion
Let me start by examining the problem. The issue of congestion is felt in large population centres across Australia, but is particularly felt in Melbourne, Sydney and South East Queensland, which, as I outline later, has accounted for three quarters of Australia’s total population growth over the last five years.
There are families every day that are stuck in traffic, spending hours on the road each week which they could be spending at home. Many of the trains have reached crush capacity, if there is a train line at all.
The data backs up what residents, particularly those in the outer suburbs, know from daily experience.
In Sydney, for example, travelling in peak times takes 65 per cent longer than the same journey in off-peak. In Melbourne, it is 55 per cent longer and in Brisbane 45 per cent longer. These peak delays have got longer and peak hours start earlier and finish later.
To illustrate, let’s take my home town of Melbourne and consider an average 30 kilometre trip to work on a freeway. Ten years ago, an off-peak journey of this kind would have taken, on average, about 21 minutes. Today, that same journey would take about 27 minutes.
If we now look at the morning peak, when most people travel to work or school, a decade ago the same journey would have taken around 31 minutes. Today, that journey would take 43 minutes.
But that’s not the end of the story because urban congestion also makes trip times less predictable and reliable. And as we all know, there are many things where you just have to be on time, such as medical appointments, job interviews or picking up the kids from netball training. So now you have to leave even earlier to be sure you will be on time, even if this means waiting at the other end.
Ten years ago, to ensure you made it on time 90 per cent of the time, you had to leave 8 minutes earlier. Today, you would need to leave 15 minutes earlier for every trip. Putting this all together, our standard 30 kilometre journey in Melbourne’s morning peak is starting to push an hour. Remember that trip took about 20 minutes off-peak and about 39 minutes at peak in 2007.
And keep in mind this is average congestion, not the worst.
Of course, the longer the commute, the longer the delay. This means residents in the outer suburbs of our cities, where jobs are often further away from homes, are typically the worst affected by urban congestion.
I see this in my own electorate in the outer east, here in Melbourne which is over 30 kilometres out from the city centre. Like many suburban areas, the congestion related issues frequently rank in the top issues of local surveys. And for good reason – an extra 10 minutes travel time each way equates to a loss of over three full days extra spent on the road each year.
It is not just our road network that is facing congestion challenges, our rail networks are also feeling the pressure. In Sydney, there has been a 30% increase in rail patronage over the past 5 years.
In Melbourne, the public transport network is also tightening, with many lines already at capacity during peak hour and continuing to see strong demand. Similarly, Brisbane will face increasing pressure into the future.
Over time, people adapt to congestion but it is not costless. Some drop out of work or take less productive jobs as the traffic gets worse. If families move, they have the expense of high stamp duty among other things.
For businesses, it is sometimes impossible to avoid the added costs. Some business leaders have told me that they are now trying to do a lot of their distribution during the night, but this has its own challenges if receiving businesses are not open. More often, they simply absorb the costs.
Overall the costs of congestion to the economy are already great and rising steeply. The Bureau of Infrastructure, Transport and Regional Economics estimates the costs of congestion in Australia’s capital cities to be $25 billion a year in 2017/18 rising to $40 billion a year by 2030. This is a serious challenge for families and a serious economic challenge for the nation.
Causes of congestion
To address these challenges, we need to understand the drivers of congestion. It is a fact of life that as cities become larger they get more congested. But there are particular factors driving the increases in urban congestion in Australia.
First, our population is growing rapidly. In absolute terms, we grew by 3.75 million people which is nearly twice as many as in the previous decade.
As an immigration nation, we have had periods of rapid growth since European settlement, but our current growth rate has only been surpassed by a brief period in the 1920s (when our population was around 5.5 million) and during the “populate or perish” period immediately following World War II. Of course, in absolute numbers, our growth has never been higher. Our nation is adding a city the size of Canberra every year and the size of Adelaide every 3.5 years.
Moreover, the multicultural composition of our population is also changing rapidly. Today, over a million Australians have Chinese heritage. Our biggest immigration sources are now from China and India overtaking the United Kingdom and New Zealand. So not only are we growing fast, but our diversity has also rapidly increased in the last two decades.
The main factor driving our growth has been net overseas migration, accounting for sixty per cent of population growth over the last decade, while the remaining growth has been due to natural increases. That is, more children being born and people living longer.
Most notably, there was a step change increase in population growth from 2007 under the Rudd Government, almost entirely driven by lifting the immigration rate. Our growth rate in the previous two decades largely sat at about 220,000 per year, consisting of about 120,000 increase from natural growth and 100,000 from net overseas migration. In the last decade, it has been sitting at about 375,000 with only a minor increase in natural growth (to about 150,000) with the rest in migration. Permanent migration was around 200,000 per year over the past decade.
Last year, we granted 162,000 permanent visas which was the lowest level since before the Rudd increase.
Temporary migration has also increased in the last decade, increasing by about 70,000 per year, whereas previously it was increasing by about 20,000 per year. This was largely due to New Zealanders, international students and those on bridging visas. We have brought those on 457s down considerably since the record peak of 130,000 visas when Bill Shorten was Employment Minister.
There are benefits of a larger, more diverse population. A larger population means a larger economy. With this comes greater opportunities for Australians as larger companies are more likely to be present and headquartered in larger countries. We can more easily achieve economies of scale in public and private services. Further, there is more scope for investment in public goods, including national defence. It is much easier to pay for new submarines with a $1.5 trillion-dollar economy than one half the size.
However, there are also challenges. I have been discussing the integration challenges throughout the year in my previous role as Citizenship minister. This includes having almost a million people that struggle to speak the national language, a higher than ever concentration of the overseas born in particular areas, and a small minority that is challenging our values and sometimes using violence to do so.
But the greatest challenge is the pressure it puts on our big cities in the form of congestion. This is a serious problem in Melbourne, Sydney and South East Queensland particularly, which the Coalition Government is rapidly addressing (which I will come to shortly).
This challenge is exacerbated by the fact that 75 per cent of the population growth has been to our three largest population areas: Melbourne, Sydney and South East Queensland.
While the overall population of Australia has been growing at the rapid rate of 1.6 per cent per annum, our three large population centres have been some of the fastest growing cities in the world. Melbourne last year grew by 2.7 per cent, Sydney by 2.1 per cent and South East Queensland by 2.3 per cent.
Only Canada has experienced comparable growth of its large cities amongst the OECD countries.
As with the overall population growth, the main contributor to the growth in Melbourne and Sydney has been net overseas migration. In Melbourne, it has contributed 64 per cent of the growth in the past year, while in Sydney it has been 84 per cent. In South East Queensland, the growth is an almost equal combination of natural growth, internal migration and overseas migration.
The fact is that 87 per cent of all skilled migrants are going to Sydney and Melbourne, and nearly all of the humanitarian intake. We want to have a more even distribution, as I will explain later.
The challenge in keeping up with such population growth would be hard enough, but two things have occurred which have exacerbated our congestion problems today.
First, the growth rate for our nation (and particularly our big cities) was well above projections. For example, the 2002 Intergenerational Report predicted Australia would grow by about 2.5 million over the last 15 years. We actually grew by 5 million. Again, this was largely due to the step change increase in migration around 2007 (and a slight improvement in life expectancy and a higher birthrate compared to forecast). Between 2004 and 2017, Melbourne was projected by the ABS to grow by 500,000. It grew by 1.2 million.
This mismatch between projections and actual population growth has made it more challenging for governments at all levels to appropriately plan for, and invest early, in the essential infrastructure needed. This is particularly the case given the long lead times to plan and construct major urban infrastructure projects.
Second, there was insufficient infrastructure built in the early 2000s, particularly in Melbourne and Sydney, to cater for forecast growth, let alone the actual growth. Former NSW Premier, Bob Carr, for example, famously said that “Sydney is full” and used it as a reason not to build for the future. In Melbourne, we have had the fastest growth, but major brakes put on projects such as cancelling the desperately needed East West Link.
We have been in catch-up phase since. All government expenditure on infrastructure has increased markedly – greatly assisted by the federal Coalition in the last five years – but as the chart below shows, it has typically lagged population growth by a few years. When the population has already grown before the infrastructure is put in place, the cost of building the roads and rail escalates. Consequently, we get fewer miles built from our infrastructure buck.
Moreover, while large projects are being built, as is occurring in every major city across Australia, and particularly in Sydney, the congestion sometimes gets worse before it gets better. In a couple of years’ time, though, Sydney will be transformed.
The final factor driving the congestion we are experiencing today is that there has been a mismatch between the distribution of jobs and housing across some regions. For example, in Sydney around 80 per cent of residents in the Eastern Sydney CBD region live and work in that same region. However, for the growing Western, Southern and Central districts, only around 50 per cent of residents’ work in the same district that they live in, with many undertaking long daily commutes into the CBD or to other districts.
A better future
Big cities will always face some congestion. Australians understand this, but our big cities today are suffering more than they should, as I have outlined.
We need to learn from this and take leadership to ensure that there is a better future ahead. This is exactly what the Coalition Government has been doing, and particularly Prime Minister Morrison through his bringing together of population, infrastructure and cities policy.
Our plan consists of four parts.
First, a massive boost in infrastructure expenditure to build the major intra-city road and rail networks. The Government lifted expenditure as soon as we came to office and in the last budget, allocated a record $75 billion with forward 10-year plans.
A significant proportion of this investment is allocated to building the intra-city transport spines, such as the Monash Freeway, Tullamarine rail, Westconnex or Ipswich Motorway.
The intra-city transport spines shape how cities look and the opportunities they provide residents. We have major investments underway in every major city and several in the three large cities, including both major road and rail upgrades. We are targeting these upgrades to alleviate the congestion already being faced in these cities, but also to help design more efficient transport networks for future growth.
For example, Westconnex will move traffic off the congested and overutilised Parramatta Road, helping commuters bypass 52 traffic lights, cut travel commuter travel times from Parramatta and the Kingsford Smith Airport by up to 40 minutes, and halve the bus travel time between the Inner West and the City. In the long run, it will also support greater urban amenity across the corridor by taking around 4,000 trucks a day off Parramatta Road.
State Governments are ultimately responsible for building these city road and rail networks, but we are taking a stronger leadership role through our 10-year Infrastructure Pipeline announced in the 2018-19 Budget. These critical projects need to be well planned and backed by a quality business case and we will continue to be guided by Infrastructure Australia on these. But what we most need to do now is get on and build them.
Ideally, some of the major intra-city road and rail networks need to be built in advance of the demand, not well behind it. This avoids the higher expense and disruption which occurs when major infrastructure is retrofitted.
Second, addressing rapidly the very local congestion pinch-points. The focus of infrastructure expenditure is frequently on the major national or city corridors, but sometimes it is local pinch-points that causes the greatest delays for commuters.
For example, in my own electorate, a simple bridge has been missing between the north and south side of Henderson Road. This $6.5 million bridge will cater for thousands of residents within the Knox municipality, knock minutes off their commute, and take pressure off the busy Stud Road.
We are already investing in local congestion busting packages, but in the last Budget, we set aside a further billion dollars to address urban congestion. The entire fund will be used for these localised pinch-points, mainly in Melbourne, Sydney and South East Queensland. Three quarters of the population growth has been to these areas and so we will be focusing much of our investment there. We will have a robust, data-driven process and begin to make decisions early next year.
Third, we aim to ease the population pressure off the three big cities and more rapidly grow the smaller states and regions.
The challenge for Australia is that our population growth is not evenly distributed. As I outlined earlier, we have very fast population growth in Melbourne, Sydney and South East Queensland. But at the same time, we have the smaller states and many regional areas that have barely grown and crying out for more people.
South Australia, for example, grew by just over 10,000 people last year. Melbourne grew by 10,000 every 28 days! South Australian Premier, Stephen Marshall, however wants to grow South Australia by another 15,000 people each year.
The same pattern is mirrored in many of the smaller states and territories. For example, the Northern Territory Chief Minister wants to grow Darwin faster. The Tasmanian Premier has indicated his desire to more rapidly grow his state.
Further, there are regional areas across Australia that simply cannot get people to do the work available. Three hours from here, in the beautiful seaside town of Warrnambool, they have unemployment of 3.8 per cent and businesses struggling to get workers. The recent headline of their local paper was “Wanted: 1,000 workers!”. Other regional parts of the country are the same.
The opportunity is to get a more even distribution of growth across the country to support the smaller states and regions, while taking pressure off Melbourne, Sydney and South East Queensland.
One of the ways we can do this is through directing new migrants to smaller states or regions. Matching the skills of new migrants with the skill shortages in rural and regional Australia will be key to the success of this approach. As I indicated earlier, net overseas migration accounts for 60 per cent of our overall population growth and around 75 per cent of the growth of the big two cities.
Hence, settling even a slightly larger number of new migrants to the smaller states and regions can take significant pressure off our big cities. There are some constraints on this, of course. For example, 25 per cent of our annual migration intake is directly related to an employer sponsoring a person for a job where they cannot get an Australian. We do not want to jeopardise the growth of those sponsoring businesses, and hence the wealth of our nation.
A further 30 per cent concerns family reunion; typically, an Aussie marrying a foreigner. We cannot send a person’s spouse to a different state!
But apart from these two categories, there is no geographical requirement for a newly arrived migrant. We are working on measures to have more new arrivals go to the smaller states and regions and require them to be there for at least a few years. In that time, the evidence suggests that many will make it their home for the long term. This will require close cooperation across different agencies, including with Regional Development Minister Bridget Mckenzie, to ensure we get the settings right so that those smaller states and regions can benefit economically from population growth.
A further method for supporting regional growth (and taking pressure off our big capitals) is to better connect and integrate our orbital cities. Fast rail is an effective means of doing this, as has been noted by the federal Parliament’s Joint Standing Committee on Infrastructure, Transport and Cities, led by John Alexander MP. If a person in Ballarat, for example, can commute to Melbourne in 45 minutes rather than the present 75, then the opportunities for Ballarat’s growth would accelerate markedly.
We are presently investigating the potential for faster rail links between our big capitals and surrounding regional centres. Three detailed business cases are already underway and will be finalised early next year — Newcastle to Sydney; Sunshine Coast to Brisbane; and Shepparton to Melbourne.
Victorian Opposition Leader, Mathew Guy’s $19 billion commitment to fast rail from Melbourne to Geelong (32 minutes), to Ballarat (<45 minutes), to Bendigo (70 minutes), and to Traralgon (62 minutes), is consistent with our agenda. We would be pleased to work with him on his decentralisation plans should he be elected.
We can also more generally develop and support the growth of our regional centres and smaller capitals. We are doing this through several initiatives:
· – Our public service decentralisation agenda led by Minister McKenzie. In May 2018, the Government announced positions from five Commonwealth entities are to be moved with more to come.
· – Our City Deals to support growth of key regional centres and smaller capitals.
· – The $272 million Regional Growth Fund and $641m Building Better Regions Fund.
· – The funding of large scale road, rail and defence projects outside of the big capitals.
The final element of our plan is to have a better population planning framework. One of the challenges of our federation is that the primary population levers are set at the federal level, while the states have the primary responsibility for implementing the transport infrastructure and government services (such as schools and hospitals) to cater for the growth.
We need a better planning framework that can better join the two together.
This will involve engagement with the states on a more regular and systemic basis to determine population objectives for each region and better aligning federal and state infrastructure expenditure to support these objectives.
Australia has some of the greatest cities in the world. In the most recent Economist magazine survey, three of our capitals were in the top ten world’s most liveable.
Our cities are vibrant, cosmopolitan and economic powerhouses. We want to maintain this vibrancy and economic growth. We want to continue to invest in their supporting infrastructure, including: sporting, cultural and environmental assets.
But we also have to be serious about the challenges of very rapid growth, particularly the congestion challenges. We have to do the short-term fixes, but also invest for the future and have better plans that match our population growth with infrastructure development.