Mapping Australia’s economy: cities as engines of prosperity

by Jane-Frances Kelly and Paul Donegan

Eighty per cent of the dollar value of all goods and services in Australia is produced on just 0.2 per cent of the nation’s land mass, nearly all of it in cities.

The combined central business districts of Sydney and Melbourne alone – 7.1 square kilometres – generate nearly 10% of the value of goods and services produced in all of Australia, three times that produced by the agricultural sector.

A great reshaping of Australia’s economic geography is underway. The nation has moved from prosperity coming from regional jobs in primary industry a century ago, to suburban jobs in manufacturing after World War Two, to city centre jobs in knowledge-intensive businesses today.

But while city centres are vital to Australia’s prosperity, the concentration of highly productive activity in them presents big challenges for policymakers, because too many workers live too far from these centres to fulfil our cities’ economic potential.

The report finds that CBDs contribute so strongly to economic activity both because jobs are concentrated there and because CBD businesses are more productive on average than are others. In 2011-12 the Sydney CBD produced $100 in value for every hour worked there, for example. Parramatta, by contrast, produced $68 for every hour worked there.

Areas close to CBDs that produce high levels of economic value include North Sydney ($10.2 billion), Richmond in Melbourne ($4.4 billion), Perth’s Subiaco ($4.2 billion) and Paddington in Brisbane ($3.4 billion).

Economic activity is concentrating in CBDs and inner suburbs because highly knowledge-intensive firms need highly skilled workers, and locating in the city gives firms access to more of them.

But these small areas that generate most value are often a long commute from the fast-growing outer suburbs where many Australians live. For the sake of the economy and the fair go, we have to find ways either to enable more workers to live closer to these centres, or to reach them more quickly by road and public transport.

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