This paper discusses the forces generating social-spatial change in Australian metropolitan areas. The external forces associated with the internationalisation of capital need to be disentangled from the internal policy changes associated with the adoption of ‘economic rationalist' policies. The former are intensifying various forms of spatial competition while the latter exacerbate tendencies to urban ‘market failure.' The manifestations of these structural political-economic changes are increasingly evident in Australian cities, including greater social-spatial inequalities. Effective urban planning is increasingly difficult in these conditions, compounded by the fiscal crisis of the state, the political pressures arising from the proliferation of urban social movements and the effect of international regulatory influences. The paper posits an alternative which shifts from beggar-thy-neighbour spatial competition to a more balanced economic, social and environmental strategy suited to Australian conditions and having potentially more widespread application.