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 118billionin2011−12,almost10percentofalleconomicactivityinAustralia,andtriplethecontributionoftheentireagriculturesector.TheintenseeconomiccontributionofCBDsoccurspartlybecauseoftheconcentrationofjobsintheseareas.ButCBDbusinessesarealsomuchmoreproductiveonaveragethanthoseinotherareas.Innercityareasandsecondarycommercialhubs,suchasthosearoundlargecities’airports,alsotendtobemoreproductivethanotherlocations.Forexample,in2011−12theSydneyCBDproduced64.1 billion worth of goods and services: about 100foreveryhourworkedthere.Employingonly13percentofSydney’sworkforce,thissmallareageneratesalmostaquarterofthevalueoftheGreaterSydneyeconomy.Parramatta,oftensaidtobeSydney’ssecondCBD,generatedonly68 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