Population growth and the tram: If you don’t build it, they’re still coming regardless

As one of the richest cities in the world, a much bigger question than "can Canberra afford a tram?" is "how can anyone in the world afford a tram?" Put simply, if Canberrans can't, who could?

The average income in Canberra is about $63,000 per year, compared to an Australian average of about $52,000. Tasmania, with an average income of just $43,000 is currently considering building light rail through Hobart's northern suburbs. Perhaps someone should just tell them that they are too poor to have convenient transport.

According to the new head of the Reserve Bank, Australian governments should be borrowing more money to invest in long-lived infrastructure assets. And according to Malcolm Turnbull, the productivity of our cities goes hand in hand with the productivity of our country. But according to the Canberra Liberals, borrowing money to invest in less congestion and more convenience will bankrupt the ACT. Someone is completely wrong.

I know, I know – it's not just that Canberra is too poor to afford a tram, it's that Canberra is "too small". The problem with that argument is that the world is full of smaller cities than ours that have light rail. German cities like Potsdam and Norwegian cities like Bergen have far smaller populations than Canberra and still, somehow, manage to rely heavily on trams to move their citizens around.

But of course, European cities aren't like Australian cities. They have medium-density housing built on and around their transport routes and, as Canberra's population grows by as much as 410,000 people between 2016-2056, the last thing we want is our cities to resemble European cities. Canberrans, we are told, want to emulate Sydney and LA, right?

It is hard to understand the intensity of the political fight over the construction of a tram line in Canberra. Indeed, one explanation may be the recent observation of a Sydney friend that residents of the nation's capital have nothing else to worry about.


So what then, does explain all of the fear and hostility?

One explanation is that few Canberrans understand just how rapidly Canberra's (and Australia's) population has grown in recent years, and just how much more growth is on its way. In the 16 years I have lived in Canberra the town of Gungahlin has grown from 23,000 to around 60,000 today. By 2021 it's expected to house more than 72,000 people.

Perhaps one of the reasons that so many people are so angry about building a tram is that they don't really like the idea that Canberra's population, like that of Gungahlin's, is set to double. But given bipartisan support for such population growth it seems ironic that Canberrans who don't want to see the character of Canberra change would direct their anger at a tram rather than the population growth itself.

As Canberra's population doubles we will need to either double our stock of infrastructure or accept much lower levels of community amenity. I know which one I would prefer; I know which one will make our city more productive, and I know which one will create the most jobs. But, somehow, many citizens seem to have become convinced that the temporary congestion that accompanies the building of a tram is a bigger problem than the permanent congestion that comes from doubling our population without a tram.

Another possible explanation for the heat in the debate about a tram is that it is the media and Opposition's interests to whip people up rather than calm them down. Nothing drives radio talk-back calls like hostility to neighbourhood development, north-south rivalry and changes in traffic conditions, so perhaps we shouldn't be surprised that building a tram line would seem like the biggest problem that Canberra has ever faced.

While the Liberals' making political hay out of opposing a government decision shouldn't come as a major surprise, the hostility of sections of the media and business community is harder to interpret. In addition to delivering a lot of investment spending in the short term, light rail will add to the liveability and convenience of our city. In the global competition for private sector investment, the amenity of cities plays an increasingly important role as the best staff insist on basing themselves and their families in the best cities.

Building a tram won't destroy Canberra's economy and it won't wreck the territory's budget. And blocking the construction of a tram won't make housing more affordable, improve our schools or help tackle climate change. Quite simply, as a city and as a country we face much bigger decisions than whether to build a tram or not.

It is true the 20-year cost of building and operating a tram looks high when compared to one year's worth of government revenue, but the 20-year cost of building and maintaining roads looks pretty big as well. As does 20 years' worth of the cost of running buses, schools or hospitals.

The idea that if we borrow money to invest in a tram we can't borrow money to build a hospital makes as much sense as saying that anyone with a mortgage on their house should never borrow money to buy an investment property.

Borrowing money to make good investments is a good idea, and borrowing money to make bad investments is a bad idea. If it is a good idea to borrow money to build a hospital then it remains a good idea whether you build a tram or not. Such an argument isn't just orthodox economic and financial advice – it is exactly what the head of the RBA is telling all government leaders.

Building public transport infrastructure might be the cheapest way to transport people around a city, or it might not. The answer depends on the way that you value "externalities" like convenience, pollution and safety. It is hard to put a value on reduced road congestion, reduced air pollution, reductions in car crashes and the benefits of more vibrant communities, but while they are hard to measure, we do know that few people outside the Canberra tram debate value these things at zero. History and international experience tell us that people are willing to pay a premium to live in walking distance of a tram or train station and that no such price premium is apparent for bus stops.

But even if building a tram isn't the "cheapest", in a purely financial sense, way to move people around, do the citizens of the richest city in Australia only ever eat the cheapest food available? Do they always send their kids to the cheapest schools? Do they drive the cheapest car on the market? Is our public vision now so debased that we can longer invest in making our city nicer, more convenient and more liveable?

Canberra doesn't have to have a tram, and we don't have to double our population. But given that both major parties are committed to the latter then sign me up for the former. I'll take a Canberra tram over Sydney traffic any day.

Richard Denniss is the chief economist for The Australia Institute.

Twitter: @RDNS_TAI