Epping couple Sunil and Nishtha Goel are paying for Melbourne's traffic problems. Credit:Justin McManus As it lurches from provincial to global, Melbourne's celebrated liveability is under challenge, daily experienced in housing stress, traffic gridlock and overflowing trains, trams, hospital wards, classrooms, courts and youth detention centres. And we've seen nothing yet. When Nishtha Goel and her husband Sunil moved to Epping six years ago, the family had great hopes. But so profound were the transport problems in Melbourne's outer north that Nishtha paid for it with her job. A lack of public transport – a planned rail line was cancelled – and constant traffic jams beset their suburb. Two years ago Nishtha was an accountant at Deloitte. She loved the work – but getting to it was the problem.

Staying on became a choice: a good job or caring for the couple's children the way she wanted. Having both seemed impossible. "When I resigned it was a tough time for the family," she says. It took us 174 years to grow to 4 million. It'll take just 33 years from now to double that. Think about the city at twice its current size, and that's only mid-century. Then what? One thing is certain, no-one who should be, appears to be thinking seriously about Melbourne in 2100.

Given the magnitude of the growth the lack of public debate is curious. In part that's because politicians, Labor or Coalition, only disagree at the margins about where to direct it. Beyond Spring Street a consensus is developing that we need something transformative in planning and transport to cope. The alternative is to ease the pressure, and that means slowing immigration. It's a no go subject for many in the political class. But not for many Melburnians who are beginning to ask: how real are the benefits of this level of growth and how sustainable is it? Are we sacrificing the very things that made Melbourne a destination for so many in the first place? Eye of the storm

Melbourne's frontline: Property development in Cranbourne. Credit:Eddie Jim We're in the eye of a perfect demographic storm, growing faster than Mexico City, Paris, London, New York, Berlin or Vancouver. Among OECD countries, only a handful of cities with populations of more than 2 million in 2014 grew more quickly. Babies account for some of our growth (a third) with net births over deaths rising steadily. We're also an economic sink, drawing jobs and young people out of regional Victoria and from interstate. Twenty-five years ago Victoria was bleeding citizens – those escaping the state's economic doldrums for warmth and wealth to the north. "What's the capital of Victoria? Answer: about $1," was a favourite Queenslander taunt to new arrivals from "Mexico" (Victoria).

That was then; Melbourne take note, demographic trends tend to be cyclical. But the biggest factor in our growth, more than half of it, is international immigrants; census figures released this week show more than 74,000 arrived in Victoria in 2016. Most are skilled migrants. The number also includes international students who've worked their way through the visa system to residency, others on an array of work visas. Newcomers are drawn to our relatively safe streets, stable democracy, universities, potential for work and business opportunities, housing affordability – relative to Sydney – and freehold property. So too they are lured by official propaganda. The pitch? Recent Victorian government ads have been seeking to entice Sydneysiders and investors spruik our population catching up on Sydney's, a big increase in construction activity in 2016 and, notably, that we'll soon have more skyscrapers than any other city.

One century ago we were a colonial outpost dedicated to bales of wool and hay and being built around a remarkable and forward-looking rail network. Fifty years later we were all about factories in new suburbs, and cars. Ten years ago Labor premier John Brumby had a clear focus on science and biotechnology. And now? It's hard to say. Services and knowledge, or something? "If you asked someone in the state government what was driving the Victorian economy, they would mostly struggle to answer that question," says Marcus Spiller, an economist and planning consultant highly respected in government circles.

Tim Pallas' claim that Victoria is the "engine room" of the national economy comes from growth as high as 4.5 per cent in recent figures, and state coffers flush with large surpluses. His figures mask a troubling truth. Per capita, the Victorian economy has gone backwards in four of the past eight years. It's the worst-performing state in Australia, lagging behind even battler states, South Australia and Tasmania. Had Victoria the much slower population growth of Germany, our economy would have suffered a string of recessions since the global financial crisis (GFC). The per capita figures have led prominent economist Saul Eslake to declare Victoria a "poor state".

"Economic growth driven only by population growth is not really worth having as it is not improving people's living conditions," he tells The Age. In reality, population growth and the servicing of it with houses, apartments, and supermarkets, has become Victoria's economic strategy. Once the Australian home of manufacturing, Melbourne now manufactures homes. It's what Bob Carr calls "force-fed growth" and a "lazy reliance on population growth". Seventeen years ago, as a frustrated NSW premier, Carr decided his government could not keep up with the infrastructure needed to service the surge of humanity into his home town. He called for a slowing of population growth, a call famously translated into headlines of Sydney being "full".

In the years since, Australia has gone through a resources boom and decline. The country's economic action is in the cities of the eastern seaboard, Sydney and Melbourne in particular. No comparable country in the world is so dominated by two such centres. Carr is now scathing about what has become of both. "Australia digs up and sells raw materials. In the cities the economy is based on building apartment blocks and shopping malls," he says. "The idea of Australia as a clever country is a myth, it's an illusion."

Population and property also explain the current government budget surplus. Land tax and stamp duty have risen more than 80 per cent in just five years. Historically property taxes contributed about a third of revenue raised by state taxes. That figure is now 44 per cent and rising fast toward 50. Ours is a property economy. But like a Ponzi scheme, an economy built on population growth runs the risk of people no longer buying in. Politicians' big boasts are one thing. Most Melburnians, if asked, would probably say they don't feel better off than in years past, especially those daily struggling to squeeze into a heated housing market. In a recent survey of 406 cities in nine countries, international researchers Demographia ranked Sydney second most expensive (housing costs against income) only behind Hong Kong. Melbourne came in sixth, more expensive than London, Tokyo and New York.

New Census figures show home-ownership falling significantly to levels not seen since the 1950s. The slump is attributable in part to the impact of tax breaks such as negative gearing and capital gains exemptions and the retreat of government from land development and social housing investment. Population growth is also to blame, along with a surge in foreign investment in residential property since the GFC. Like Sydney, Vancouver, London and New York, we're what's known among some economists and geographers as a "hedge city", a place where cashed up foreign investors (Chinese in Australia's case but Americans, Russians and others elsewhere) park excess wealth in real estate, secure from unpredictable markets and political regimes at home.

In March, analysts Credit Suisse reported that foreign investment, especially from China, accounted for 16 per cent of the value of new property in Victoria. Lack of reliable data makes it difficult to be definitive. However, given that the bulk of Chinese property investment in Melbourne has been in apartments, it's likely to have had a substantial impact in that market at least. Jobs on your doorstep We used to make stuff here. In the post-WW2 years, manufacturing was our economic driver and jobs were spread across the suburbs and beyond.

Australia no longer makes many things. Increasingly, the new knowledge and service jobs are concentrated in the city centre. While the metropolitan-wide job market has grown 51 per cent since 1996 the figure is 92 per cent within a 10 km radius of the centre. The inner city's well-paid workers who walk, cycle or tram to work, are locked in a giddying twirl with inner Melbourne real estate, driving prices further beyond the reach of all but the most cashed-up or mortgaged-to-the-hilt. Spiralling inner city property values widen an equity gap with those who choose, or have no choice but, to buy or rent in new growth suburbs.

So at least half the city's growth continues to be on the city's fringe, precisely where the lucrative jobs in corporate headquarters, government departments, universities and hospitals, are not. Melbourne is a city divided by geography, an increasingly wealthy cosmopolitan inner city and a much larger poorly serviced outer ring. It's an inversion of the class divide of 50 to 100 years ago, when the burghers of the-then middle suburbs prayed for the "poor" of the inner city slums of Fitzroy. Where's the liveability?

The centrality of population to the Andrews government's economic strategy is evident in the little-perused fine print of this year's state budget papers. Population growth is referred to 102 times, almost twice the mentions in 2016 (64) and six times that of 2012 (17). The budget is like an alcoholic trying to give up. It can't help talk about the thing to which it's hooked. The only fiscal risk the budget authors see in population is a "positive" one – more people might come than expected, as they have done for the past three years. Others see that positive risk very differently. Eslake, who was the chief economist at ANZ from 1995 to 2009, poses a rare challenge to the orthodoxy of Melbourne the boom town. He warns Melbourne's liveability is going downhill fast and has been since the mid-2000s.

He likens Melbourne to Queensland in the 1990s when governments dined out on interstate and international immigration, opening up sprawling new estates in its south east with nary a thought for the jobs and infrastructure needed to service them. "All of a sudden it started to dawn on people: housing isn't cheap, traffic isn't better," says Eslake. Immigration to Queensland fell away and never recovered. "Somewhere else becomes flavour of the month … You could imagine, as the quality of life in Melbourne deteriorates there could come such a point." It is possible, maybe probable, that in any such downturn, the apartment market, at least, will be cushioned by continued foreign investment. But if Eslake is right, and the people do stop coming, Melbourne will be in trouble.

The local economies to suffer most will be the those remote from the knowledge jobs in the city, those highly exposed to the property economy. Unemployment (6.6 per cent) is already higher in growth area municipalities than established suburbs (5.5 per cent). Across Melbourne 8.7 per cent of all jobs are in building. In Cardinia in Melbourne's far south east the figure is 16.8 per cent (in 2016), in Melton, 16 per cent. Such a slump would be a disaster for the Victorian budget.

Deduct the windfall property taxes generated by population growth and rising prices since the GFC and the state budget would be in deficit, not surplus, by billions of dollars. Who's got the vision? Melbourne's trains are finding it hard to cope. Credit:Ken Irwin Both major parties have long supported big population growth unquestioningly, arguing it just needs to be managed well. The idea of urban consolidation was that many of us would live more densely in established suburbs. In return for the slight discomfort and loss of space, public amenity and, in particular public transport, would ensure supposed livability.

But a growing consensus says that consecutive Victorian governments from Kennett to Andrews have failed to honour their side of the bargain. There's no doubt our streets are buzzing with activity unimaginable in the economic darkness 25 years ago or the grey days of wowserism in the 1950s that drove bohemians such as Barry Humphries to Europe. Yet there is real anxiety around the looming infrastructure gap, not helped by Victoria doing extremely badly from the Turnbull government's carve up of federal funding. Victoria is receiving as little as 8 per cent of federal infrastructure funding, despite having a quarter of the national population. "We are now just so far behind that there's almost no way to catch up with the growth," warns economist and planner Marcus Spiller, a consultant to governments described by Planning Minister Richard Wynne as a "star".

"No-one is thinking 50 years out," says Spiller. Prominent business leader Elizabeth Proust, says Melbourne's roads, trams and trains have not kept pace with population growth. "It's both timely and overdue to invest in infrastructure … the city is barely moving ... train and the tram network have barely had new tracks added in years," she tells The Age. "Successive governments have not been bold enough in thinking beyond electoral cycles to plan for the city's future," says Proust, who is also a former City of Melbourne chief executive. Eslake, says a city of 8 million needs a comprehensive and efficient public transport system, something transformative.

"Big cities around the world are much more reliant on public transport, not just 20 per cent of the population using it (like Melbourne) but close to half." It's a view now shared by former premier Jeff Kennett who in 2013 called on the state to borrow big while debt was cheap to build a build a new underground rail network, Berlin-style, under our suburbs. "There's not a major world city that doesn't have one." The Andrews government has made much of its big infrastructure spend in Melbourne and points to its level crossing removal program and its proposed $11 billion Metro Tunnel projects in particular. Both projects, however, will increase capacity in the existing network, not transform it. The Metro is a lot of money,"says Eslake, "for not a lot of track". Even now, a decade after itwas first proposed, the tunnel is still not scheduled to open until 2026.

The Andrews government has no funding plans for major extensions of the current rail and tram network. The closest to that is the $600 million revival of an old line to Mernda, including three stations. Carr says governments will continue to approve new housing estates and apartment towers but not spend the billions on rail and bus services to avoid "grotesque congestion". "We need metro networks like those of Berlin and Paris," he says. "Governments won't do that." "There's a disconnect between the cheerful population growth figures and the infrastructure needed to cater for it."

Short of a radical rethink of planning and infrastructure in Melbourne and Sydney, says Carr, a slowing of immigration at the federal level is wise. "A slowing of population growth would force politicians, business and wider community to be more creative. The urban economy is now based on building apartment blocks and shopping malls. That's not good enough." In response to such proposals, state politicians will always throw up their hands and protest that that they have no power over immigration. It's true, it's a federal responsibility. True also, we have no plan without it. When was the last time a Victorian or NSW leader lobbied a prime minister about using the immigration levers at their disposal? Probably not since Bob Carr, if ever. Daniel Andrews? Never. After all, Melbourne at 8 million, 10, 20, will not be his problem.

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