Shift In World Economy Has Finally Hit Home
Sydney Morning Herald
Saturday January 27, 1996
TOO often, economics is reduced to numbers. There's Paul Keating's famous boast about a "beautiful set of numbers" following the release of the national accounts figures last year, market economists' obsession with forecasting economic indexes and the blanket reportage of almost every monthly statistic released from Canberra.
Of course there's more to the economy than numbers. The production, exchange and distribution of goods and services heavily influences almost every aspect of our lives - from how we work, to how we play, to how we perceive each other and how we travel.
The economy also influences the cities and towns we live in. And it's a two-way street - urban structures and patterns of settlement also have a profound influence on the economy.
Last year, the Department of Housing and Regional Development released a comprehensive study of Australian cities and towns, Urban Australia: trends and prospects, which analysed the diverse economic characteristics of our cities and their effects on the people who live in them.
The report revealed that the seismic shift in the world economic order has had a pervasive impact on the structure of our cities. Financial deregulation and technological advances in communications and travel have disintegrated the geographical boundaries that used to constrain economic activity.
Companies can move their operations from country to country with relative ease, picking and choosing the environment which best suits them.
This trend has been augmented by the rise of knowledge-based service industries and the decline of more traditional "transformative" manufacturing activities.
While old transformative industries centred on the flow of resources and goods and the accumulation of tangible assets (and are more rooted to geographical areas), the new industries are interested in the flow of information and the accumulation of knowledge.
Not only do these changes mean economic activity is more footloose, but the shift in the nature of economic activity favours cities, particularly larger cities with skilled labour markets and good education facilities.
Even intangible factors - such as the cultural, climatic and recreational features of a city - are coming to the fore.
As the report stated, "the renaissance motif of the progressive city-state as the cultural and economic powerhouse for the era has been revived".
But how have Australian cities changed over the past decade or so?
While Brisbane and Perth have grown fastest in terms of population, Sydney and Melbourne have done better in terms of capital investment and economic activity.
Crucially, Sydney has dominated the investment associated with the industry sectors which are growing fastest and likely contribute most to the creation of wealth in the years ahead - producer services (finance, property and business services), tourism and high-value, sophisticated manufactured goods.
Sydney has emerged as this country's pre-eminent world city.
Since the early 1980s, Sydney has increased its share of investment in office construction, transport and communications, hotel construction and research and development.
Melbourne also performed well in these areas, although not as well as Sydney. Melbourne did, however, dominate investment in factory construction, reflecting its status as the hub of manufacturing in Australia.
But, according to the report, Sydney has emerged as the "pre-eminent world city; as Australia's international gateway ..."
Brisbane emerges as the big loser in terms of most types of investment. Despite a large influx of migrants from other States, it received comparatively little investment in the key industry sectors. Instead, it has only seen a big increase in health and education and residential housing investment.
In other words, it has been investing in industries which service its burgeoning population but don't create extra wealth by producing goods and services for people outside the region.
Not surprisingly, Sydney has led the jobs growth on the back of the boom in producer services. In contrast, Brisbane's job creation has been largely in social services and distribution.
With this new investment and employment, the make-up of our cities has changed.
For example, jobs in the expanding producer services sector tend to be highly concentrated in the central business districts of cities and in the suburban business centres. Consumer and social service jobs are more widely dispersed and broadly reflect population concentrations.
But high-value, sophisticated manufacturing activities are centred in a few locations in the major cities, most notably Sydney and Melbourne. Export manufacturing is almost exclusively focused on Sydney and Melbourne.
Overall, employment growth was fastest in the outer and fringe areas of metropolitan areas (albeit from a low base), in line with population increases.
But massive job losses have occurred in the middle and inner areas of most cities, mainly due to the decline of the transformative manufacturing sector. For example, since the 1980s, inner Sydney has lost 25,000 jobs and inner Melbourne 15,000 jobs in this sector alone.
Older industrial towns, like Newcastle, Wollongong and Geelong, have also suffered because of the shift in employment from manufacturing to service industries. Also, much of the remaining traditional transformative activity has shifted to the outer suburbs of the capital cities.
While the inner urban areas have borne the brunt of the shift away form old-style manufacturing, the picture of the inner cities is more complex.
The gentrification of significant areas has occurred as upwardly mobile professionals, largely employed in the burgeoning services sector, move into the city to be closer to work. This is particularly the case in Sydney.
Inner Melbourne, on the other hand, is characterised by the wealthy and the disadvantaged living side-by-side, with the heavy concentration of public housing keeping poor people in the inner-city area.
Overall, the study finds that the differences in income and employment opportunities between localities is sufficiently large to be an affront to social justice. It notes that public housing estates - many of which were built from the 1950s to the 1970s to accommodate workers in the transformative sector - tend to characterise those areas in economic decline.
People with lower work qualifications and non-English speaking backgrounds also tend to populate the depressed sectors.
Of course, it shouldn't be a great shock that poor people live in poor neighbourhoods. Through the mechanism of land prices, more desirable areas are always going to be off limits to the disadvantaged because they are too expensive.
But a vicious cycle of sorts also emerges, a cycle reflected in separate research by the Australian National University's Professor Bob Gregory.
He found that, in the period between 1976 and 1991, the poorest areas of Australian cities had lost one-third of their employment and one-quarter of their household income.
Average incomes in neighbourhoods with socio-economic status rankings in the bottom 10 per cent slumped $7,000 in real terms during this time, while incomes in the top 10 per cent of neighbourhoods climbed by about $10,000. In the top 1 per cent of suburbs, the income gain was almost $20,000.
While the mega-city may be the engine room of growth in the era of the global information-based economy, huge disparities of income across locations within these cities will only hinder efforts to attract firms to set up regional headquarters here.
That should be enough for even the most hardened free marketeer to support efforts to create more equitable living spaces within our cities.
© 1996 Sydney Morning Herald
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