A tale of two cities John Daley, CEO, Grattan Institute Work and life in cities: City strategy in Australia Melbourne Economic Forum 27 October 2016
A tale of two cities Shifts in consumption are driving jobs towards higher end services in the centre of cities These services tend to be produced towards the centre of large cities City geography reflects these trends, with more jobs, and higher value added towards the centre These trends may have intensified after 2008 Big cities are dividing geographically Residential, planning and transport policies had not adjusted until recently Additional housing has primarily been built on the periphery Up to 2011, density in the middle ring barely moved Transport spending has been excessively focused on regional areas Wishful thinking may be part of the problem Governments consistently adopt policies of creating non CBD clusters Over 116 years of Federation they have largely failed However, services (health, education, cultural institutions) do need to follow residential populations 2
People are consuming more services Share of total nominal household expenditure 80 60 Goods 40 Services 20 0 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 Source: ABS5206 table 8 Notes: Excludes rents and dwelling costs and other goods and services. Based on seasonally adjusted current prices data 3
Consequently, more people are working in services Per cent of workforce, Australia 90 80 Services 70 60 50 40 30 Agriculture 20 10 0 Construction Mining Manufacturing 1890 1921 1934 1947 1960 1973 1986 1999 2012 Sources: 1. 1890-1980 Australian Historical Statistics: Labour Statistics, by G.Withers, T.Endes, L.Perry 2. 1984-2012: ABS6291.0.44.003, table 4 Note: 1981-1983 are interpolated using 1980 and 1984 data 4
Services growth accelerated in the last 5 years Cumulative employment growth since 2010 000 people, trend 500 400 300 200 100 Construction Mining W sale, retail, logistics Business & other services Education & health 0 Ag, utilities Accomm, Admin, -100 Manufacturing food, public recreation admin -200 2010 2012 2014 2016 2010 2012 2014 2016 Source: ABS 6291 5
Total economic activity is most intense in inner cities Economic activity by location, 2011-12, Melbourne CBD: $39.1b Height of bar indicates total economic activity Bar not shown for economic activity less than $1 billion Docklands: $8.2b Dandenong: $5.9b 0 10 kilometres Southbank: $6.5b Grattan Institute, Mapping Australia s Economy 6
The Melbourne economy is highly centralised except Caulfield and the airport Economic activity per working hour, 2011-12, Melbourne Airport: $63 >$90 $80-90 $70-80 $60-70 $50-60 $40-50 <$40 Insufficient data Docklands: $103 CBD: $86 0 10 kilometres Southbank: $76 Dandenong: $44 Grattan Institute, Mapping Australia s Economy 7
Sydney has more economic centres Economic activity per working hour, 2011-12, Sydney Macquarie Park: $81 >$90 $80-90 $70-80 $60-70 $50-60 $40-50 <$40 Insufficient data 0 10 kilometres Parramatta: $68 North Sydney: $91 CBD: $100 Grattan Institute, Mapping Australia s Economy Airport: $65 8
Melbourne has grown more housing at its edge but not more jobs Employment and population growth, Sydney, 2006-11 000 250 200 Net employment growth Net population growth Employment and population growth, Melbourne, 2006-11 000 250 200 150 150 100 100 50 50 0 0-50 0-10km 10-20km 20+km Distance from CBD Grattan Institute, City Limits -50 0-10km 10-20km 20+km Distance from CBD 9
The geography of job growth changed about 2008 Employment growth, Sydney and Melbourne 000 Sydney 70 60 50 40 30 20 Melbourne 2001-06 2006-11 Employment growth, United States 000 3000 2500 2000 1500 1000 10 0 500 0 2002-07 2007-11 -10 BITRE Inner (~0-2km) Middle (~2-15km) Outer (>15km) -500 City centre Metro ex centre City Observatory, Surging city centre job growth 10
A tale of two cities Shifts in consumption are driving jobs towards higher end services in the centre of cities These services tend to be produced towards the centre of large cities City geography reflects these trends, with more jobs, and higher value added towards the centre These trends may have intensified after 2008 Big cities are dividing geographically Residential, planning and transport policies had not adjusted until recently Additional housing has primarily been built on the periphery Up to 2011, density in the middle ring barely moved Transport spending has been excessively focused on regional areas Wishful thinking may be part of the problem Governments consistently adopt policies of creating non CBD clusters Over 116 years of Federation they have largely failed However, services (health, education, cultural institutions) do need to follow residential populations 11
Population density has increased, but not much in the middle ring Population density, 1981 and 2011 6000 5000 4000 3000 Sydney Melbourne Brisbane Perth Adelaide 2011 1981 2000 1000 0 Source: 5 10 15 20 25 30 Distance to GPO, km Coffee et al, Visualising 30 Years of Population Density Change 12
Government transport spending did not reflect growth in economy or population Size and transport infrastructure spending % of Australian total 20% 10% 0% Size % of national economy (2014-15) % of population growth (2004-14) 30% 20% 10% % of road & rail investment (2006-15) State Commonwealth 0% Rest of NSW Rest of VIC Rest of QLD Rest of SA Rest of WA Source: Grattan Institute, Roads to Riches 13
A tale of two cities Shifts in consumption are driving jobs towards higher end services in the centre of cities These services tend to be produced towards the centre of large cities City geography reflects these trends, with more jobs, and higher value added towards the centre These trends may have intensified after 2008 Big cities are dividing geographically Residential, planning and transport policies had not adjusted until recently Additional housing has primarily been built on the periphery Up to 2011, density in the middle ring barely moved Transport spending has been excessively focused on regional areas Wishful thinking may be part of the problem Governments consistently adopt policies of creating non CBD clusters Over 116 years of Federation they have largely failed However, services (health, education, cultural institutions) do need to follow residential populations 14
Government efforts to encourage clusters have a mixed record Factors explaining performance of clusters 100% 80% 60% 40% Other factors including chance and government efforts Open competition among local rivals; local context encourages investment Availability of capable suppliers and firms in related fields Demand conditions e.g. sophisticated local customers 20% Factor (input) conditions e.g. human, capital and natural resources; infrastructure 0% Van der Linde (2003) Cluster weak or uncompetitive Cluster among world s most competitive 15
A tale of two cities Shifts in consumption are driving jobs towards higher end services in the centre of cities These services tend to be produced towards the centre of large cities City geography reflects these trends, with more jobs, and higher value added towards the centre These trends may have intensified after 2008 Big cities are dividing geographically Residential, planning and transport policies had not adjusted until recently Additional housing has primarily been built on the periphery Up to 2011, density in the middle ring barely moved Transport spending has been excessively focused on regional areas Wishful thinking may be part of the problem Governments consistently adopt policies of creating non CBD clusters Over 116 years of Federation they have largely failed However, services (health, education, cultural institutions) do need to follow residential populations 16