Australia struggles with booming population

By Michael Perry - Analysis

SYDNEY (Reuters) - Australia's population is booming, fueled in large part by migration, and it may leave policy-makers struggling to ensure adequate infrastructure such as housing, transport and healthcare within a few decades.

Demographers say Australian cities must radically change their urban plans, in scale and form, promoting high-density housing and decentralization. Residents must also abandon the culture of urban sprawl to be more like the citizens of Paris and Los Angeles, who live and work in self-contained communities.

"It's time to drop the pretence that the current strategic plans will manage our cities in the first half of the 21st century and develop new models for housing, infrastructure and funding," says Bernard Salt, Australia's top demographer.

"Its already at breaking point. This is a train wreck waiting to happen," says Salt, who works for KPMG.

Australia is experiencing the biggest migration boom in history, with 200,000 migrants arriving in the year to March 2008. The population grew by 1.6 percent over the year to 21.2 million, the fastest rate of expansion in almost 19 years.

It is projected to rise further to between 30 and 42 million by 2056, and up to 62 million by 2101, according to a new Australian Bureau of Statistics report.

But while cities will struggle to cope with the increased population, there will be winners as well as losers.

A report on the impact of changing demographics on business found the healthcare, housing and personal finance sectors would benefit from an aging population and growing migration.

The PKF Business & Population Monitor report said the changes "will be the largest structural shifts in the Australian economy since World War Two" and will pose risks and opportunities to businesses and governments as spending and tax patterns change.

Australia's biggest private hospital operator, Ramsay Health Care Ltd (RHC.AX), which owns more than 60 hospitals, says that an aging population, increased life expectancy and demand for higher quality care will underpin growth in 2009.

Property firms like Lend Lease (LLC.AX) and Stockland (SGP.AX) are positioning themselves for growth in retirement villages. Building materials groups such as Boral (BLD.AX) and CSR (CSR.AX) expect a big building boom, particularly in the most populous state, New South Wales, which has a major housing shortage, and developers/contractors like Leighton (LEI.AX) see no end to infrastructure demand.

However in the next 30 years the working population, which drives the economy, will dramatically fall due to retirements, leaving a smaller tax base from which to fund infrastructure.

By 2047, a quarter of the population is projected to be aged 65 or older, slowing economic growth, particularly in the 2020s when the bulk of baby boomers retire, says a government report.

There will be only three people of working age for every one aged 65 or older, compared with the current ratio of five-to-one. The current budget surplus of A$19.7 billion, or two percent of GDP, could swing to a deficit of 3.5 percent of GDP by 2046-47, and government debt could rise to 30 percent of GDP by 2046-47, due to the rising cost of an aging population, it said.

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