The changing face of Australia, Melbourne

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Interest rates, housing affordability, Wesfarmers’ bid for Coles – Interview with David Speers, Sky News
July 4, 2007
Iraq – Doorstop Interview, MECWA Aged Care Centre, Malvern
July 6, 2007
Interest rates, housing affordability, Wesfarmers’ bid for Coles – Interview with David Speers, Sky News
July 4, 2007
Iraq – Doorstop Interview, MECWA Aged Care Centre, Malvern
July 6, 2007

The changing face of Australia, Melbourne








Every five years, on Census night, we take a snapshot of our nation.  If you looked at pictures of yourself taken at five year intervals you would notice the changes — growing stronger and taller through childhood — maturing then ageing through adulthood. 

These five year snapshots tell us a little about how our nation is changing.  We are becoming more prosperous, living longer, our society is ageing and our family units are smaller.  We are ethnically diverse — 22 per cent of Australians were born overseas, 40 per cent of Australians had either a parent or were themselves born overseas.

Outside of English the most commonly spoken language in Australia is Chinese.  In Melbourne it is Italian.  In Sydney it is Arabic.

The countries that have contributed the highest number of immigrants to Australia in the last decade are China (96,000), India (70,000) and the highest, New Zealand (98,000).


Using data from the 2006 Census, the Australian Bureau Statistic’s preliminary population estimate at 30 June 2006 was 20.7 million people — an increase of over the last five years of around 1.3 million.  Natural increase (births less deaths) was a little over 600,000 and immigration (less emigration) a little under 600,000.

All states and territories recorded a positive population increase over the last five years.

Queensland experienced the largest percentage gain, increasing 13 per cent in the five‑year period.

Western Australia grew by 7 per cent. 

The smallest percentage gains were experienced by New South Wales and South Australia, increasing by 4 per cent each.

Australians are living longer.  Life expectancy at birth for men has risen by two years between 2001 and 2007 to over 79.  For women, over the same period, life expectancy has risen over one year to nearly 84.  At 50.6 per cent of the population, women outnumber men in Australia.

Economic performance

As a result of strong, sustained economic growth, over 2.1 million jobs have been created since March 1996.  The unemployment rate has fallen over this period from 8.2 per cent to 4.2 per cent, the lowest rate in 32 years. The proportion of the working age population in employment is at an all-time high.

All of this has been achieved despite a number of shocks affecting the global economy, including the Asian Financial Crisis in 1997, the global downturn at the beginning of this decade, once in a century drought and the uncertainties of terrorism and war. 

It has been underpinned by sound fiscal and monetary policies and tax and structural reforms that have created a stronger economy.  These reforms have been critical in helping to avoid the inflationary pressures that have resulted from past episodes when the terms of trade have lifted.

Recent data have confirmed that inflation remains well-contained.  CPI inflation was 2.4 per cent through the year to the March quarter. 

Wealth and equality of opportunity

The 2006 Census confirms that real incomes are higher than ever before.  Real income is income adjusted for the effect of inflation.

The median household income range in 2006 was $1000 to $1199 per week.  Ten years ago the equivalent median in 2006 dollars was $778 to $906 per week.  Real household incomes have increased by around 30 per cent.

Government benefits and taxes are effective at redistributing income from high to low-income households in Australia.  The bottom third of households receive around $300 per week more in government benefits and services, including education and health, than they pay in taxes.  Sixty per cent of Australian households pay no tax in net terms.

The number of Australians aged 15 years and over who have completed Year 12 or equivalent has increased from 38 per cent in 2001 to 42 per cent in 2006. 

Economic growth, the increasing level of educational attainment, and record high employment are improving opportunities for all Australians.

Household and housing trends

The 2006 Census shows that our population has grown by 5.8 per cent since the 2001 Census.  There are about 5 million families living together.  The balance of the population live in group accommodation or as singles.  A little over 4 million of these families are couple families. 

Between 1996 and 2006, the proportion of couple family households without children increased from 40 to 45 per cent.  This trend reflects both the increasing number of empty‑nesters and couples delaying the time before they have children.

Household formation is also being affected by a rise in singles. For the first time since 1911 the majority of the population is not married. Over the last five years, the number of people divorced increased from 10.8 per cent to 11.3 per cent.  The number of people never married increased from 31.6 per cent to 33.2 per cent. 

These trends mean that the number of people per house is falling.  The average number of residents per household fell from 2.61 to 2.57 persons per household between censuses. This doesn’t sound like much, but in a population of around 21 million people, this translates to around 135,000 extra households due to this social change. And each of these households needs a place to live.

While the number of people per house is falling, the size and quality of houses are increasing. 

Nine out of ten two‑parent families with young children live in a separate house with an average of four bedrooms. The average number of children in those households is 2.16. 

Traditional families are demanding more living room than before.

The quality of the average Australian house has improved considerably over the last two decades.  We are not buying and building the same houses as we used to.  For example, we now take for granted a much wider range of facilities and higher quality inclusions in our homes.  Improvements such as more and larger bathrooms, home entertainment areas, a study or den or guest room. 

The average floor area of new houses has increased by around 50 per cent, from 162.2 square metres in 1984-85 to 247.4 square metres in 2005-06. 

And this is whilst the number of people in the house has been declining.

While the proportion of people owning or paying off a mortgage on a house has increased since the 1996 Census, the proportion of households that own a home outright has declined from 41.6 per cent to 34 per cent.

Some commentators have suggested this means fewer people could afford to pay off their mortgage.  But this conclusion is not borne out when you look at the full picture.

More people have taken on debt to purchase investment properties and holiday houses.  The RBA recently pointed out that around 3 per cent of household income is now spent on interest payments on investor housing loans, compared to 1 per cent in the mid-1990s.  The interest payments‑to‑household income ratio has grown with the growing number of investment properties.

Around 15 per cent more households in the 45-64 age brackets had mortgages in 2003-04 compared to 1993-94.  This indicates that people at a later stage of life are prepared to carry debt against the equity in their home.  This is not just for investor housing but in order to invest in other financial assets as well.

Household financial assets have increased by substantially more than household debt. There has been only one year during the past decade when that did not occur. As the Deputy Governor of the Reserve bank has observed, ‘the net financial position of households has improved noticeably’.

The point is that Australians are spreading their investments beyond housing to equities, unit trusts and in particular superannuation. The recent returns have made these investments very attractive.

It is clear that demand for housing will grow as a result of population growth, increased life expectancy where people stay in their homes longer, the growth of single households and a decline in the average number of people per dwelling.  This means increasing supply to meet the demand. We need to address delays and blockage on the supply side of the housing market.

A recent report from the Property Council of Australia suggested that over the last 6 years there have been 7 million days worth of delays in obtaining council approval for building housing.  Many of us who have tried to renovate homes, extend them, or build new homes have experienced the lengthy and complex local government approval processes.  In 1995 the predecessor to the Productivity Commission found that these delays cost the economy more than $1 billion per year.  More than 10 years on, the situation has gotten worse, and it is likely that the cost has only grown. 

Recent research by the Royal Australian Institute of Architects shows that it takes more than 20 weeks to get a renovation or a new home approved in New South Wales and Victoria, and more than 30 weeks for medium density – the type of dwellings more Australians are choosing.  These delays incur large costs, and hamper our ability to meet our future housing needs.  Indeed, record low vacancy rates show that we’re struggling to even meet our current needs.

Population ageing

The ongoing ageing of the population will continue to affect the housing market into the future.

The average age of Australians is 37 years old, compared with 34 in 1996.

The age group of under 15 year olds decreased as a proportion of all people from 20.8 per cent to 19.8 per cent over the last five years.

The ageing of the population will see the population aged 65 and over grow from 1.1 million people in 1971 to 5.1 million in 2026 and 7.1 million in 2046.  As a percentage of the population the age group 65 and over will grow from 8.3 per cent in 1971 to 20.2 per cent in 2026 and to 25.1 per cent in 2046.  And the proportion over 85 will grow even faster.

At present there are around 5 people of working age for each person of retirement age. By 2046 it will be around two and a half.

Five years ago, I released Australia’s first Inter-Generational Report

The report proved remarkably influential. It re-framed public debate on economic policy in Australia, focusing attention as never before on the intergenerational consequences of current policies and practices.

It provided an over‑arching framework for the Government’s detailed reforms on Welfare to Work and health and pharmaceutical reform.

Earlier this year, I released the Government’s 2nd Intergenerational Report – IGR2. This Report reveals that we have made progress.

The IGR2 has projected a ‘fiscal gap’- spending over revenue – of around 3½ per cent of GDP by 2046‑47. This is an improvement against the first IGR’s fiscal gap of 5 per cent by 2041-42. The improvement is due to both projected lower spending per person, mainly in health, and higher projected nominal GDP per person, primarily attributable to the recent strong rise in the terms of trade.

Higher labour force participation and skilled migration also have increased nominal GDP per person. And the progress we have made in the last five years has given us a stronger starting position.

Australia has placed itself in a strong position by eliminating Commonwealth net debt. We are one of only a handful of OECD countries to achieve this.

In addition, the Australian Government has established the Future Fund to address fiscal pressures arising from the Government’s liability for its employees’ superannuation. This liability is currently around $103 billion and is projected to grow to around $148 billion by 2019-20. Our Future Fund already has around $52 billion under management to make provision for this liability.

In addition, measures to lift economic growth rates play an important role in meeting future fiscal pressures.

Higher economic growth per person increases the capacity of both the government (and individuals) to meet increasing demands for public services, not only arising from the ageing of the population, but also for better quality health care and other services.

Nonetheless, Australia continues to face significant long-term economic and fiscal challenges, and the government will need to continue to embrace policy change to deal with this issue.


Australia has a population of 21 million people.  This is 0.3 of 1.0 per cent of global population.  Yet our economy is the 15th largest in the world measured by market exchange rates, and the 17th largest in the world measured by purchasing power parity.

Our funds management industry is the fourth largest in the world.  We have the highest share ownership rates in the world.

Glenn Stevens, Governor of the RBA, observed last year, profits in the Australian corporate sector have ‘increased by over 200 per cent over the past 15 years’, significantly more than in other countries.

Through their ownership of shares, households have directly benefited from the strong profitability of the business sector.

People are aware of the importance of interest rates to households.  I want to suggest to you that with the structural change of the economy the profitability of the business sector has a very direct effect on household wealth and income as well.

Allowing for capital gains on their investments, the saving rate of Australian households is high.  Over the past decade, the value of household savings has grown faster in Australia than in many comparable countries.

Australians still have the aspiration of home ownership. But following close behind is the aspiration for share ownership. We are becoming a much more entrepreneurial society. And that is good.

Recently a student at Melbourne High School asked me whether the recent superannuation changes I announced could be undone by a future government. Why would it bother you? I asked him. ‘Because I want to put as much money into superannuation as I can this year’ he said. Age 16. That is the changing face of Australia.