Report

Mapping Australia’s economy: cities as engines of prosperity

20 Jul 2014
Description

This report maps the Australian economy by the location of economic activity, defined as the dollar value of goods and services produced by workers within a particular area.

Overview

Eighty per cent of the value of all goods and services produced in Australia is generated on just 0.2 per cent of the nation’s land mass – mostly in cities. Today, cities are the engines of economic prosperity. But the concentration of highly productive activity in city centres presents challenges for policymakers. Too many workers live too far away to fulfil our cities’ economic potential.

This report maps the Australian economy by the location of economic activity, defined as the dollar value of goods and services produced by workers within a particular area. It finds that economic activity is concentrated most heavily in the central business districts (CBDs) and inner areas of large cities. The CBDs of Sydney and Melbourne – just 7.1 square kilometres in total – generated $118 billion in 2011-12, almost 10 per cent of all economic activity in Australia, and triple the contribution of the entire agriculture sector.

The intense economic contribution of CBDs occurs partly because of the concentration of jobs in these areas. But CBD businesses are also much more productive on average than those in other areas. Inner city areas and secondary commercial hubs, such as those around large cities’ airports, also tend to be more productive than other locations.

For example, in 2011-12 the Sydney CBD produced $64.1 billion worth of goods and services: about $100 for every hour worked there. Employing only 13 per cent of Sydney’s workforce, this small area generates almost a quarter of the value of the Greater Sydney economy. Parramatta, often said to be Sydney’s second CBD, generated only $68 for each hour worked, and its total of $6.8 billion was about a tenth of the value generated in the CBD.

There is a reason intense economic activity is concentrating in CBDs and inner suburbs. Many businesses in these areas provide highly knowledge-intensive and specialised services such as funds management, insurance, design, engineering and international education. These businesses depend on highly skilled workers, and locating in the heart of large cities gives them access to the largest possible pools of them. Proximity to suppliers, customers and partners also helps businesses to work efficiently, to generate opportunities and to come up with new ideas and ways of working.

Knowledge-intensive activity is present in all sectors, including manufacturing and mining. Perth’s CBD is home to more than a third of Western Australian mining jobs, including accountants, administrators, geologists and specialist engineers.

In the early 20th century one in three workers were employed in primary industry and almost half of the population lived on rural properties or in towns of less than 3,000 people. By 1960 manufacturing had grown to make up almost 30 per cent of GDP and employ one in four Australians, with a big presence in suburban areas. But today the small areas that generate most value are often a very long commute from the fast-growing outer suburbs in which many Australians live. If the prosperity that comes from knowledge-intensive activity is to be widely shared, governments need to enable more people to live closer to these areas, and to improve road and public transport networks so that they better connect employers and workers.

Publication Details
Published year only: 
2014
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