Productivity is focused in Melbourne’s CBD

22 July 2014 — Eighty per cent of goods and services value in Australia is produced on just 0.2 per cent of the nation’s land mass, mostly in city CBDs, a new Grattan Institute report has found. However, with many workers located far away, the report warns that without adequate transport and housing policy, economic growth could be stymied.

The report, Mapping Australia’s economy: cities as engines of prosperity, found that the 7.1 square kilometres of Sydney and Melbourne’s CBDs generated close to 10 per cent of the value of Australia’s goods and services – three times that produced by the agricultural sector.

“The report reveals a great reshaping of Australia’s economic geography,” Grattan Institute Cities researcher Paul Donegan said.

“We have moved from prosperity coming from regional jobs in primary industry a century ago, to suburban jobs in manufacturing after World War II, to city centre jobs in knowledge-intensive businesses today.”

The report showed that CBDs contributed strongly to economic activity both because jobs were concentrated in these regions and also because businesses in the CBD were on average more productive than other businesses.

For example, in 2011-12 the Sydney CBD produced $100 in value for every hour worked there while in Parramatta the figure was $68.

Mr Donegan said economic activity concentrated in CBDs because knowledge-intensive firms needed highly skilled workers, and inner city locations gave access to a deeper talent pool.

“But these small areas that generate most value are often a long commute from the fast-growing outer suburbs where many Australians live,” he said.

“For the sake of the economy and the fair go, we have to find ways to enable more workers to either live closer to these centres, or to reach them more quickly by road and public transport,” says Mr Donegan.

The report recommended governments respond by:

  • enabling people to choose to live in areas with access to large numbers of jobs, thereby also giving employers a wide choice of employees
  • ensuring transport networks better connect employees with employers, and support connections between businesses and their customers, suppliers and partners
  • minimising barriers to highly productive activity in CBDs and inner city areas, including land availability, traffic congestion and public transport access

These issues were explored in a previous Grattan Institute report, Productive Cities.