Tuesday, March 07, 2017

Melbourne booms while the rest wilts, and it'll get worse

Melbourne has become so important it now accounts for all of Victoria's economic growth, with the rest of the state contributing nothing in net terms.

New regional figures compiled by SGS Economics and Planning show inner Melbourne's economy grew by a blistering 3.9 per cent in 2015-16, the city's north-east grew by 4.1 per cent, its north-west by 4.7 per cent, its south-east by 3.9 per cent, and its west by 3.9 per cent.

In contrast the Ballarat statistical area grew 0.1 per cent, Bendigo 0.4 per cent, Geelong 0.6 per cent and the LaTrobe Valley 0.5 per cent, offset by shrinkage of 2.8 per cent in the north-west, 1.4 in Shepparton and 1.2 per cent in Warrnambool and the south-west.

"Victoria's most important economic asset is what happens within 10 kilometres of the GPO," said SGS economist Terry Rawnsley, who produced Australia-wide and statewide national accounts while he worked at the Australian Bureau of Statistics.

"Our state is increasingly monocentric, as is Melbourne itself, with 40 per cent of its growth generated in the inner suburbs."


"Our graphs show no employment growth in the centre of Melbourne for 30 or 40 years until the early 1990s. In the two decades since, employment in the city has skyrocketed, doubling from around 250,000 to close to 500,000.

"The markers were the development of Southbank and the Docklands and the global financial crisis, which knocked the stuffing out of regional employment, especially in manufacturing, as jobs came to be concentrated in the centre."


Mr Rawnsley said Victoria had become so centralised it was too late to envisage attempts at decentralisation working, as the high-value jobs near the centre had become dependent on other high-value jobs nearby.

"There's no way the Latrobe Valley or Geelong could seriously take those jobs," he said. "Employers of accountants and lawyers and the head offices of firms will kick and scream before they leave they CBD. Those jobs, if they are going to move anywhere, would be more likely to move to central Sydney or central Auckland or central Brisbane than to the Latrobe Valley."

While some agencies such as the National Disability Insurance Scheme, WorkSafe and TAC have already moved to Geelong, Mr Rawnsley said that the really high-end jobs had to be near other high-end jobs in the city.

"You could imagine back office call centre jobs being moved, but high-end jobs need to be clustered. Maybe you could draw the workers away, but the jobs themselves depend on there being other workers in related jobs nearby. The bulk of them are going to be wedged in the city creating income and creating congestion."

Getting into the centre of Melbourne was the biggest constraint on the city's, and Victoria's, growth. There was little more that could be done to "sweat" transport assets by making trains longer or more frequent. Attempts to get people to change the times at which they commuted has already failed.

The Melbourne Metro project, when completed, will help by opening up development in North Melbourne and Richmond and taking pressure off the city loop.

But until then it would be hard to bring as many high-value workers into the centre of Melbourne as will be needed. Commuters begin to turn down jobs when it takes more than half an hour to reach the office by public transport.

Ideally, the state government would immediately begin planning the next generation of Metro projects so construction could commence as soon as the Metro is complete in seven to nine years. One such project could run from the CBD to Fishermans Bend, another from the CBD to the airport.

In The Age and Sydney Morning Herald