Market Watch

  • Date:01 Sep 2007
  • Type:CompanyDirectorMagazine
Australia’s population of 21 million puts us 53rd in the world with 0.32 per cent of its population, and our largest city ranks 77th. Phil Ruthven questions whether we are too small.

When size matters

It is sobering to know that Australia has almost as much land (5.2 per cent of the world) as China (6.4 per cent), but our population of 21 million is just 0.32 per cent of the world’s 6.6 billion population, compared with China’s 20 per cent. Our land mass ranks us sixth in the world behind Russia, Canada, China, the US and Brazil, but our population is only in the same order of magnitude as Canada.

China’s population is 63 times bigger than ours. Of course we do not have the equivalent of their Yangtse River or China’s water run off each year, but we do have enough water to accommodate a much, much larger population than we have now, especially in the top one-third of our island continent where 60 per cent of our water run off takes place and where just three per cent of our population has chosen to live so far.

It is also useful to remind ourselves that there are currently six cities in the world with bigger populations than our entire nation and that number could exceed ten in the near future. See table to the right.

Our largest city, Sydney, ranks 77th in 2007. The 100 largest cities now have 844 million residents, 12.8 per cent of the world’s population. There are also 468 cities with a population over 1 million and they house over 1.5 billion or close to a quarter of Earth’s inhabitants.


Turning to whole nations rather than cities, we again look small. Indeed, being only the world’s 53rd most populous nation we are not on the radar in figure 1.

Yet, Australia does rate among the largest economies in the world as figure 2 shows.

Australia has occupied the 15th position for quite some time, with the prospect over the next decade or so of giving way to Turkey and Indonesia – both with much larger populations – and now growing their economies more quickly (from a lower standard of living base).

This begs the question of whether a nation needs a lot of people to have a high standard of living? The short, and easy, answer is no. If one considers the countries with the highest standard of living, the top seven nations have populations of less than 10 million. Indeed, ten of the top twenty have under 10 million inhabitants. Australia is in the list, as it has been for most of the last century or more.

The challenge for small nations is focus – do not attempt to be self-sufficient in everything, where economies of scale would be impossible, but rely on producing and exporting a narrower range of goods and services in exchange for importing a wide range.

It took Australia most of the 20th Century to re-learn this lesson. Having embraced protectionism and isolation early in the 1900s –?trying to produce everything internally –? our standard of living fell from the world’s highest at the end of the 19th Century to 25th in the 1980s, before recovering to 15th now that we have embraced free trade and removed most of the fiscal morphine from most of the overly-protected industries.

So, population size does not matter when it comes to having a high standard of living.

But population size has two other tests – one, a moral issue, and the other a defence matter. They are not mutually exclusive as politicians are well aware.

Australia has a proud history of taking in migrants from many oppressed, poor or devastated nations. Over the past 100 years, our immigration has averaged 0.5 per cent of population and currently is around 0.6 to 0.7 per cent of population, or slightly higher than natural increase (births less deaths). This is generous by international standards. Over half our migrants are from our own Asian region of the Asia Pacific and the Indian Sub-continent.

But is this enough in the 21st century when our population density is 2.7 persons per square kilometre compared with the world’s average of 44 persons per square kilometre of land (and Indonesia’s 122/sq km)? Will the world judge our continent so dry and so fragile compared with other nations as to justify a density around one twentieth of the world average? Doubtful as this century unfolds.

Our coastline is so long that theoretically all Australians could only just touch hand-to-hand around the perimeter. In China, they would be 150 deep along their coastline. But of course defence is not just a matter of numbers. Arguably much more important are military technology and equipment, alliances and diplomacy.

That said, Australia is occupying more of the coastal areas. This growth in coastal numbers is taking place at the same time as our northern and western geography is growing: our fastest growth is in Queensland, the Northern Territory and Western Australia. Further, Australia is one of the most urbanised countries in the world – three quarters of the population live in cities of over 75,000 people. This does create critical mass for the production of over 60 per cent of the nation’s goods and services

Yes, population size does matter. It matters in justification of continued sovereignty, of consideration of one’s neighbours and one’s defence. Fortunately, it doesn’t matter for a high standard of living, which Australia enjoys.

Phil Ruthven is the founder and non-executive chairman of leading strategic business information provider, IBISWorld.