A major reason for the decline in Australia’s productivity and living standards is that Australia has grown its population rapidly via mass immigration (i.e., 8.7 million population increase this century, the fastest in the advanced world) but has failed to provide the extra workers with extra tools, machinery, and technology; extra homes for the millions of extra families; and extra infrastructure (roads, rail, schools, hospitals, water supplies, energy, etc).
As a result, everyone’s standard of living has gone down, not up.
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Australia’s productivity has been harmed by ‘capital shallowing’ as the amount of capital investment per person has shrunk.
Australians have effectively had the worst of both worlds—recessionary levels of investment, and then we have diluted that investment by rapidly growing the population, making us less productive and worse off.
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Canada has experienced a similar outcome amid unprecedented immigration overrunning private investment:
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Australia has also diluted its enormous mineral endowment and exports (which we don’t tax properly) among more people, making us worse off per capita.
The obvious solution is to end the population-driven growth model and aim for a substantially smaller but higher-skilled migration system. Doing so would necessarily boost productivity and living standards, especially in the major cities where living standards are being crush-loaded.
A smaller and higher-skilled migration program would also safeguard Australia’s natural environment and make it easier to meet climate targets (Note: the federal government’s State of the Environment Report ranked “population growth” as a bigger threat than “climate change”—food for thought).
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Australia is also committing energy policy suicide, which is adding cost across the supply chain, forcing deindustrialisation and harming the nation’s productivity and growth potential.
The enormous costs of transmission and storage, and the intermittent nature of weather-dependent renewables, will ensure that Australia’s energy costs continue to rise, resulting in higher bills, inflation, and further manufacturing industry closures.
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Australia’s failure to reserve adequate gas for domestic use adds to the problem, as gas is key to industrial processes and for electricity generation (firming). Higher gas prices mean more manufacturing closures and higher wholesale electricity prices.
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South Australia, which shut down its last coal-fired power plant in 2016 and now generates roughly 75% of its electricity from wind and solar but has the most expensive power costs in the nation, serves as a warning.
Shutting down baseload coal-fired generation in favour of weather-dependent and intermittent renewables has made South Australia heavily reliant on expensive gas, batteries, and diesel. The high costs of building renewable transmission have also been capitalised into retail power bills.
The reality is that Australia exports seven times more coal than it uses and four times more gas. We have an abundance of energy resources and should have some of the most affordable energy (gas and electricity) in the world.
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However, we deny ourselves cheap hydrocarbon energy while we continue to sell it to other nations to burn instead (including China, which has driven 67% of the rise in the world’s carbon emissions and continues to add masses of coal mines and coal generation).
So long as we continue down the road to a heavily renewable future, energy costs will rise.
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Finally, policy in Australia also continues to incentivise non-productive housing investment, which has driven mortgage debt and housing values into the stratosphere and starved the nation of productive capital investment.
I explained these issues at the 2025 ADC Australian Leaders Retreat held on the Gold Coast over the weekend.