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Population growth is bad for business

By William Bourke - posted Tuesday, 26 October 2010

We are often told that we need population growth for the economy. We are also told that the small business sector is the engine room of Australian business.

But like many small business owners, I find that Australia's high population growth hurts my business by increasing my costs.

It is not just working families and first home buyers who are suffering in our cities from unaffordable house prices and rents. The small business sector is also a victim of the rising rents that flow from a growing population's ever-increasing demand for land.


High population growth also places enormous pressure on other critical resources like water and energy. Major price hikes are the direct result.

According to the New South Wales Government, a key factor in the recent massive rises in the price of energy is the need to "keep up with a growing population and increased electricity use". Starting from July 1 this year, bills for those on standard tariffs rise by a total of up to 64 per cent to 2013.

It's a similar story with water. We used to have enough water for the population, even in times of drought. But a bigger population needs more water, so we built a desalination plant in NSW. Its $2 billion cost is a big factor behind the predicted 30 per cent increase in water rates by mid-2012.

To add to the population-driven cost pressures, rising property prices have been recognised as a key factor in recent interest rate rises. Urban Taskforce Australia stated that "the Reserve Bank has been using increased interest rates as a weapon against home price inflation". Don’t forget the impact of higher interest rates on the business sector. Many businesses run on bank credit, and bank interest is a significant part of their overheads.

The red-hot debate over banks moving to increase interest rates outside of the Reserve Bank's rate movements also has its roots in population growth.

Population growth is creating increased demand for mortgages, which banks have been at pains to state cannot be sourced from inside Australia. They need to source much of the extra credit from offshore, including wholesale credit markets. This offshore lending, which is not only driving our skyrocketing foreign debt towards $1 trillion, is also increasing the cost of borrowing for banks and therefore putting upward pressure on interest rates.


Then there are the costs to business of increasing traffic congestion. They include time costs and higher vehicle running costs. Federal Treasury has estimated these costs to be around $12.9 billion in 2010. This could nearly double by 2020 if we keep up this reckless growth. It is simply not possible to widen Parramatta Road or the Pacific Highway to make way for an ever-increasing number of cars. It's a similar story across Australia.

All these increasing costs make it hard for businesses to stay afloat. Australian Bureau of Statistics data shows in the two years from June 2007 more than 638,000 Australian businesses shut up shop. This, like our population growth, is at record levels.

Increasing costs also make Australian businesses less internationally competitive and threaten exports. If they manage to survive, businesses must pass on these costs to the customer. We all pay more.

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About the Author

William Bourke is a businessman and the national convenor of the Stable Population Party of Australia. It is the first party to focus on population and was registered by the Australian Electoral Commission on 23 September 2010.

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