Population changes and implications for economic growth and the environment in Australia

Population changes and implications for economic growth and the environment in Australia

In recent decades, Australia has experienced rapid population growth and changes. These changes in population have varied significantly in a spatial sense and in age structure. However, while the size of the population has been gradually increasing, the proportion of people in the older age groups has increased more than the younger age groups. This transition has resulted in noticeable changes in demography through the ageing of the profile of the Australian population. It is hypothesised that this variation of the age structure has had a significant impact on both the economy and environment. The purpose of the thesis is to examine the impact of population changes on economic growth and the environment over the past 40 years in Australia.

The conceptual framework of this study links the issue of the population–economy–environment relationship with various theoretical and methodological forms. Firstly, population driven economic growth is analysed based on neoclassical and Malthusian theories. Neoclassical theory holds that capital, labour and technology influence the growth of an economy, while Malthusian theory suggests that population can outgrow their resources, if left unchecked. Secondly, a population-led environmental impact assessment is framed by neo-Malthusian theory whereby over-population is treated as a major source of environmental degradation. This also explores the effects of social systems on the environment, and vice versa, with the use of structural human ecology (SHE) theory. Lastly, the economy–environment relationship is analysed on the basis of ecological modernisation theory (EMT), which posits that economic growth benefits the environment, leading to the Environmental Kuznets Curve (EKC) hypothesis.

Utilising the concept of neoclassical growth theory, this study initially examines the impact of changes in the age structure of the population on economic growth. Estimates are obtained from the dynamic ordinary least squares (DOLS), fully modified ordinary least squares (FMOLS) and auto-regressive distributed lag (ARDL) models simultaneously. The overall result implies a significant negative impact of an increased dependency ratio on real gross domestic product (GDP) per capita in Australia. A lower dependency ratio indicates a higher ratio of workers per capita and thereby a greater supply of labour to the economy.

Secondly, the population-based stochastic impacts on population, affluence, and technology (STIRPAT) models are estimated using ridge regression, in the context of neo-Malthusian theory. In the analysis, the ecological footprint (EF) per capita is applied as the dependent variable, which measures the degree of environmental impact caused by human activities. The result shows that population size has the most significant effect, followed by GDP per capita, on EF.

Thirdly, the relationship between economic growth and environmental quality is examined using both panel and time series data, based on the theoretical perspective of EMT. Carbon dioxide (CO2) emissions are used as the explanatory variable for estimation purposes. The EKC hypothesis is tested using a Cobb–Douglas production function formulation, with ARDL bound and Johansen–Juselius co-integration tests for confirmation. Both tests confirm the long-run dynamic relationship amongst the variables. The study also found that both economic growth and energy consumption are emissions-intensive and that the EKC hypothesis is valid for Australia.

Finally, the dynamics of population changes and their implications for regional economies and the environment are discussed, based on a comprehensive review of the literature. The review findings illustrate that the dynamics of population changes enhance economic opportunities and simultaneously put pressure on the regional environment.

Overall, the study finds evidence of the impact of population size and age structure on the environment, which is consistent with neo-Malthusian and structural human ecological theories. On the other hand, the impact of real GDP per capita increases has a negative impact on environmental quality, which does not meet the expectations of neo–classical theories and refutes the EKC hypothesis. Considering the findings, Australia should work towards sustainable population management that can be accommodated without damaging the environment. It also needs population policies that target increases in skilled working age groups in order to counteract the problems associated with an aging population, especially in regional Australia.

An efficient trade-off between environmental protection and economic benefits could be established. To this end, both CO2 and EF should be reduced through changing consumption patterns, improving the efficiency of resource use, and cleaner technology choices. In addition, more emphasis needs to be placed on utilising renewable resources, such as biomass, biogas, biofuels, hydro, solar, and wind power, which would be more environmentally and economically sustainable options for Australia.