Over the last few decades there has been considerable change in the industrial and demographic composition of employment with substantial impacts on the spatial economy. There are significant disparities in employment growth rates across metropolitan and regional areas of Australia. These disparities are intrinsically linked to the persistence of unemployment rate differentials across the same spatial units and the accompanying social disadvantage (Mitchell and Carlson, 2003a). The capital cities experience lower unemployment rates, higher employment growth and recover from recession more easily.

Demarcating the regions into Capital City and Rest of State with the Territories as single regions (based on ABS Labour Force categories) and employing an array of statistical techniques (multiple regression, contingency table analysis, causality analysis, vector autoregression, and cointegration analysis), Mitchell and Carlson (2003a) examined the relative significance of national factors and region-specific factors in explaining these disparities.