License article

Big isn't better, it's just the way we've always done it

Stand by for a Melbourne of 8 million, a Sydney of 8 million. And that's just the moderate projection. The high projection is for a Melbourne of 9.1 million and a Sydney of 8.3 million by the middle of the century. The lowest Bureau of Statistics projection is for 7.4 million and 7.7 million, still nearly double what we've got now.

Here's why. It isn't just that more of us are being born, dying later and moving here from overseas. It's also because we are incredibly reluctant to live anywhere but in our big cities.

So important is the phenomenon the Reserve Bank has identified it as one of the key drivers of house prices, and a key identifier of who we are becoming. The head of the bank's financial stability department, Luci Ellis, sums it up using a Winston Churchill quote: ''We shape our buildings, and afterwards our buildings shape us.''

She says Australians are unusual because we like big blocks. Only New Zealand comes close. This phenomenon has made our suburban areas vast, forcing us to traverse them with cars. We have replaced the tyranny of distance with the ''tyranny of congestion'', she told a Sydney conference.

The past two censuses have asked about where our jobs are as well as where our houses are. The jobs are massively concentrated at the centre and becoming more so.

And this push towards the centre pertains not only to jobs.


''Even social infrastructure,'' Ellis said. ''Sydney's newest university, Notre Dame, could have chosen an outer-ring location where land was cheaper and it had more room to grow. But instead it put one campus right next to two other universities on Broadway and another in Darlinghurst. And as an old Melbourne girl, I can't help noticing that the new inner-city Docklands district includes a football stadium. Meanwhile VFL Park, the suburban ground that was once one of the code's premier grounds, is no longer used for public matches, its oceans of car parking now turned over to housing.''

It makes our suburbs less attractive than they used to be and our smaller cities even less so.

''With the possible exceptions of Newcastle, Geelong and maybe Bendigo and Ballarat, few centres outside the state capitals have many corporate headquarters or other job magnets,'' Ellis said.

''These self-sustaining job magnets seem to be necessary to create the variety of job opportunities that would attract large numbers of former city dwellers.

''That means that if big-city housing prices should rise too high for some residents, smaller cities cannot provide alternative locations that are any more viable than they are today.''

We are locked into Sydney and Melbourne and to a lesser extent other capitals and unlikely to leave no matter how big they become.

Already expensive, inner-city prices are soaring relative to outer prices as people begin to realise the jobs won't come to them, they'll have to move closer to the jobs. Or face ever more horrific commutes.

Investors are snapping up inner properties, forcing up prices and elbowing out owner-occupiers.

It's as if many of us are realising our love of big outer suburban blocks was a mistake. But our cities are stuck with them. Houses last years, Ellis says. They are not like other financial assets.

Getting around is going to get less and less pleasant as we move towards 8 million. We'll try to escape to the centre rather than the periphery, pushing prices in the centre ever higher.

Peter Martin is economics editor of The Age.

Twitter: @1petermartin