City geography and economic policy Council of Capital City Lord Mayors John Daley, CEO Parliament House, Canberra 14 September 2015
City limits Australia s economy is increasingly dominated by services produced in cities Services are growing much faster than other sectors, and so big cities now dominate the economy More jobs are concentrated in city centres, while new housing is mostly at the edge Australian cities are nearing their limits Big cities are dividing geographically Inner cities have much better education levels, access to jobs, high incomes, and accessibility for those with children Housing ownership is falling for younger and low income households Many people want to make different housing choices, but planning policy results in developers failing to give people the housing they want. Planning, housing, tax, and transport policies need to adjust Planning policy is crucial : middle ring medium density development is a huge lever for economic growth, housing affordability and social outcomes Negative gearing, CGT and stamp duty are all dragging on cities We ve spent a lot more on transport, but have we spent wisely? 2
People are consuming more services Share of total nominal household expenditure 80 60 Goods 40 Services 20 0 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 Source: ABS5206 table 8 Notes: Excludes rents and dwelling costs and other goods and services. Based on seasonally adjusted current prices data 3
Australia is producing proportionately less goods, leading international trends Manufacturing value added (current prices), per cent GDP 50 45 40 35 30 25 20 15 10 Median OECD Australia 5 0 1970 1980 1990 2000 2010 Grattan Institute, The mining boom 4
Consequently, more people are working in services Per cent of workforce, Australia 90 80 Services 70 60 50 40 30 Agriculture 20 Construction Manufacturing 10 Mining 0 1890 1921 1934 1947 1960 1973 1986 1999 2012 Sources: 1. 1890-1980 Australian Historical Statistics: Labour Statistics, by G.Withers, T.Endes, L.Perry 2. 1984-2012: ABS6291.0.44.003, table 4 Note: 1981-1983 are interpolated using 1980 and 1984 data 5
Australia s economy is dominated by its big cities Australian economic activity, 2011-12 Per cent of State total 100 90 80 70 60 50 40 30 20 10 0 NSW Vic Qld WA SA Sydney Melbourne Brisbane Perth Tas/ ACT/NT 0 100 200 300 400 500 600 700 800 900 1000 1100 1200 $bn Grattan Institute, Mapping Australia s economy SE Qld Adelaide Hobart/Canberra/Darwin 6
Most new jobs are towards the centre, while most new homes are on the edge Employment and population growth, 5 largest Australian cities, 2006-11 Jobs per resident, 5 largest Australian cities, 2011 % 70 60 Net employment growth Net population growth 1.0 0.8 Did central city growth happen because of or despite government policy? 50 40 0.6 30 0.4 20 10 0.2 0 0-10 km from CBDs 10-20 km from CBDs 20+ km from CBDs 0.0 0-10km 10-20km 20+km Grattan Institute, City Limits Distance from CBD Distance from CBD 7
Why are the centres of big cities growing so fast? In a services economy, physical proximity matters Medial papers are more likely to be influential if the authors sit close together People in businesses in bigger cities communicate more with people in other companies in person, over the phone, and over the internet Before we do real business with another company, our first instinct is to meet face to face Communications technology increases the importance of being close to others The rise of communications technology (telegraph, telephone, fax, internet) has consistently increased the value of being physically close to each other The first companies to limit remote working and insist on physical proximity between their staff were technology companies 8
Total economic activity is most intense in inner cities Economic activity by location, 2011-12, Melbourne CBD: $39.1b Height of bar indicates total economic activity Bar not shown for economic activity less than $1 billion Docklands: $8.2b Dandenong: $5.9b 0 10 kilometres Southbank: $6.5b Grattan Institute, Mapping Australia s Economy 9
Economic output per hour is highest towards the centre Economic activity per working hour, 2011-12, Sydney Macquarie Park: $81 >$90 $80-90 $70-80 $60-70 $50-60 $40-50 <$40 Insufficient data 0 10 kilometres Parramatta: $68 North Sydney: $91 CBD: $100 Grattan Institute, Mapping Australia s Economy Airport: $65 10
City limits Australia s economy is increasingly dominated by services produced in cities Services are growing much faster than other sectors, and so big cities now dominate the economy More jobs are concentrated in city centres, while new housing is mostly at the edge Australian cities are nearing their limits Big cities are dividing geographically Inner cities have much better education levels, access to jobs, high incomes, and accessibility for those with children Housing ownership is falling for younger and low income households Many people want to make different housing choices, but planning policy results in developers failing to give people the housing they want. Planning, housing, tax, and transport policies need to adjust Planning policy is crucial : middle ring medium density development is a huge lever for economic growth, housing affordability and social outcomes Negative gearing, CGT and stamp duty are all dragging on cities We ve spent a lot more on transport, but have we spent wisely? 11
Inner suburbs have much high levels of tertiary education Tertiary education levels by suburb, Brisbane 2011 Grattan Institute, Productive Cities 12
Sydney shows the growing problems with access to jobs Percentage of jobs that can be reached in 45 minutes by car Grattan Institute, Mapping Australia s Economy 13
and public transport leaves many of Melbourne s outer suburbs under-served Percentage of Melbourne jobs that can be reached in 60 minutes by public transport Airport >50 40-50 30-40 20-30 10-20 <10 CBD Residents living in the darkest shaded suburbs can reach more than half the jobs within a 60 minute public transport trip. In the lightest shaded areas, residents can access fewer than one in ten of those jobs 0 10 kilometres Dandenong Grattan Institute, Mapping Australia s Economy 14
Women in poorly-connected areas face more difficult compromises Differences in male and female workforce participation by suburb, Sydney 2011 Grattan Institute, Productive Cities 15
Poor access to job leads to poor social outcomes Percentage of disaffected youth, Perth, 2011 Grattan Institute, Productive Cities 16
The divide between people and jobs has big consequences If many people can t get to the high productivity jobs disproportionately towards the centre then this drags on economic growth It is harder for women caring for children in outer areas to participate in the workforce. Longer commutes result in: Higher living costs of thousands of dollars a year Pressure on family life Lower well-being In outer suburbs people earn lower incomes on average, and are more likely to be employed on casual basis. 17
City limits Australia s economy is increasingly dominated by services produced in cities Services are growing much faster than other sectors, and so big cities now dominate the economy More jobs are concentrated in city centres, while new housing is mostly at the edge Australian cities are nearing their limits Big cities are dividing geographically Inner cities have much better education levels, access to jobs, high incomes, and accessibility for those with children Housing ownership is falling for younger and low income households Many people want to make different housing choices, but planning policy results in developers failing to give people the housing they want. Planning, housing, tax, and transport policies need to adjust Planning policy is crucial : middle ring medium density development is a huge lever for economic growth, housing affordability and social outcomes Negative gearing, CGT and stamp duty are all dragging on cities We ve spent a lot more on transport, but have we spent wisely? 18
Home ownership is falling for younger ages, particularly low incomes Home ownership rate by age Per cent 90 80 65+ 55-64 Percentage point change in home ownership rates, 1981 to 2011 10% 0% Age-group 25-34 35-44 45-54 55-64 45-54 70-10% 60 50 35-44 25-34 -20% -30% Income quintile Lowest 2nd 3rd 4th Highest 40 1981 1991 2001 2011 Source: Grattan Institute, Wealth of Generations -40% 19
Many people want to trade off location against price and dwelling type Desired trade-offs between location and house type - Sydney Detached Semidetached Up to 3 storeys 4 storeys & above TOTAL 4 3 2 1 Inner Inner-Middle Outer-Middle 9% 9% 12% 4% 7% 7% 2% 4% 4% 5% 5% 6% 20% 26% 30% Outer 10% 6% 5% 4% 25% TOTAL 41% 25% 15% 20% 100% Grattan Institute, The housing we d choose 20
The market is supplying less medium density than people want Comparison between preferences and availability - Sydney 2 Inner-Middle Zone Shortages of: c.80k semi-detached dwellings c.80k apartments in 4 storey + buildings 4 3 2 1 3 Outer-Middle Zone Shortages of: c.80k semi-detached dwellings c.80k apartments in 4 storey + buildings 4 Outer Zone Shortages of: c.60k semi-detached dwellings c.60k apartments in buildings up to 3 storeys c.60k apartments in 4 storey + buildings Grattan Institute, The housing we d choose 21
What did we get for the big jump in transport spending over the last 6 years? Engineering construction work done for public sector % of GDP, calendar year 1.2% 1.0% Railways 0.8% 0.6% 0.4% Roads, subdiv s, bridges 0.2% 0.0% 1987 1992 1997 2002 2007 2012 Source: ABS, Engineering Construction Activity, Australia Cat no 8762 Table 11. 22
We can wish that new jobs were more evenly distributed around our cities We ve been wishing this for a long time. And if wishes were fishes 23