Australia could one day have a city larger than New York or London, but it needs improve its infrastructure planning or it could go terribly wrong, Treasury secretary Ken Henry suggests.
Dr Henry, in a speech published by Treasury yesterday, also warned that the Australian economy needed a significant structural adjustment as it emerged from the global financial crisis and hit the capacity constraints last evident in 2008.
This could result in job losses in some sectors, ''with a stronger need for some industries to shrink or at least not grow as quickly so that others can expand''.
''I have been suggesting that the re-emergence of China and India could lead to a sustained rise in Australia's terms of trade, and that these changes would necessitate a structural adjustment characterised by a significant shift in our factors of production toward capital-intensive production and away from labour-intensive production with important consequences for labour productivity growth,'' he said.
''These issues are neither trivial nor academic. They will present Australian policymakers with complex challenges for years to come. How policymakers respond to these challenges will play an important role in determining how well the Australian economy handles the reallocation of resources across different sectors of the economy.''
He also noted that Australia would face challenges dealing with a population expected to reach 36million people by 2050, up from 22 million now.
Sydney and Melbourne were projected to grow from about 4.5 million to seven million people by then, and he raised the question of whether they could accommodate even more people.
He said Australia was one of the most urban cities in the world, but its cities had relatively low population densities. ''For example, Sydney is the world's 56th largest city but ranks 113th by measures of density,'' he said.
This was evident in the fact Australia had a relatively large average home size, of 215sqm compared with the United States at 202sqm or Denmark at 137sqm.
''If we get the institutional arrangements surrounding the provision of infrastructure to cities right, is it possible that we could have a city of 10 million, as observed elsewhere in the world?'' he said.
Official figures put the population of New York City at about 8.4million and London at about 7.5million.
Dr Henry said there could be benefits from having an Australian city that large.
''If we are able more intelligently to plan our cities with supporting infrastructure in the form of utilities and transport networks that were designed carefully and priced accurately, could it be that the per capita consumption of natural resources would actually be significantly decreased?'' he said.
For more on this story, see the print edition of today's Canberra Times.
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