ON THE DECLINE IN STATE POPULATION DISTRIBUTION: A COASEAN ROLE FOR SECTION 111 OF THE AUSTRALIAN CONSTITUTION?

Since Federation,² the ratio of people living outside capital cities to those living within these cities have been declining in all six States. Historically, Australia opted for a regulatory approach that favoured in favouring satellite towns around state capitals, such as Newcastle and the Gold Coast, over the alternative of decentralised regional urban centres, such as Wagga Wagga or Townsville. The latest phase of this planning paradigm envisages integrating these satellites and their capital cities into mega-metropolises. Notwithstanding the benefits from agglomeration, rectifying the observed imbalance assumes an urgency not only through a national security imperative but also through social equity. To analyse the cause of this population decline, I use a theoretical model to explain how sub-national state political accountability distorts incentives when it comes to the provision of public goods. The equilibrium provision is not Pareto optimal given the observed population distribution externality. The inefficient provision of public goods is causing more people to choose to live in the capital city, which in turn creates a vicious circle of worsening population distribution. The model suggests that breaking this circle requires Coasean bargaining so that eliminating the externality is assigned to the Australian jurisdiction that can do so at the lowest cost. Surrender and acceptance agreements under section 111 of the Australian Constitution furnish a modality for the envisaged bargaining to the end of transforming regional Australia into a national jurisdiction. Whether this efficiency can be realised remains a question of transaction costs and income effects flowing from such jurisdictional reassignment.