City Limits: Urban economic development and its policy implications John Daley, CEO, Grattan Institute Presentation to Auckland Conversations 1 September 2015
City limits Australia’s economy is increasingly dominated by services produced in cities Australian cities are nearing their limits Planning policy needs to adjust to changing patterns of work Tax policy should encourage rather than discourage home ownership 2
City limits Australia’s economy is increasingly dominated by services produced in cities • Services are growing much faster than other sectors • Big cities now dominate the economy • More jobs are concentrated in the centre of big cities, while new housing is primarily at the edge Australian cities are nearing their limits Planning policy needs to adjust to changing patterns of work Tax policy should encourage rather than discourage home ownership 3
People are consuming more services Share of total nominal household expenditure 80 Goods 60 40 Services 20 0 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 Source: ABS5206 table 8 4 Notes: Excludes “rents and dwelling costs” and “other goods and services”. Based on seasonally adjusted current prices data
Consequently, more people are working in services Per cent of workforce, Australia 90 Services 80 70 60 50 40 30 Agriculture 20 Manufacturing Construction 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 5 2. 1984-2012: ABS6291.0.44.003, table 4 Note: 1981-1983 are interpolated using 1980 and 1984 data
Manufacturing has steadily declined in Australia, “leading” international trends Per cent GDP 50 50 Value-added (current prices) Export volume 45 45 90 th percentile 40 40 35 35 30 30 90 th percentile 25 25 Median 20 20 Median 15 15 10 th percentile 10 10 10 th percentile Australia 5 5 Australia 0 0 1970 1980 1990 2000 2010 1970 1970 1980 1980 1990 1990 2000 2000 2010 2010 1970 1980 1990 2000 2010 6 Grattan Institute, The mining boom
Australia’s economy is dominated by its big cities Australian economic activity, 2011-12 Per cent of State total NSW Vic Qld WA SA Other 100 90 80 70 60 SE Qld 50 Adelaide 40 Sydney Melbourne Brisbane Perth 30 20 10 0 0 100 200 300 400 500 600 700 800 900 1000 1100 1200 $bn 7 Grattan Institute, Mapping Australia’s economy
Some context: Auckland is a mid-size “Australasian city Population, millions 7 2015 2031 (estimate) 6 5 4 3 2 1 0 Sydney Melbourne Brisbane Perth Adelaide Auckland 8 Infrastructure Australia, Australian Infrastructure Audit, Auckland City Council, Unitary Plan
Economic activity is most intense in inner cities Economic activity by location, 2011-12, Melbourne CBD: $39.1b Height of bar Southbank: Docklands: indicates total $6.5b $8.2b economic activity Bar not shown for economic activity less than $1 billion Dandenong: $5.9b 0 10 kilometres 9 Grattan Institute, Mapping Australia’s Economy
Economic output per hour is highest towards the centre Economic activity per working hour, 2011-12, Sydney Macquarie Park: $81 North Sydney: Parramatta: >$90 $91 $68 $80-90 $70-80 $60-70 $50-60 $40-50 CBD: $100 <$40 Insufficient data 0 10 kilometres Airport: $65 10 Grattan Institute, Mapping Australia’s Economy
City limits Australia’s economy is increasingly dominated by services produced in cities Australian cities are nearing their limits • Big cities are dividing geographically – Inner cities have much better education levels, access to jobs, high incomes – The divide is increasing, particularly disadvantaging women • Many people want to make different housing choices • Home ownership is falling for all ages under 55, particularly those on low incomes Planning policy needs to adjust to changing patterns of work Tax policy should encourage rather than discourage home ownership 11
Most new jobs are towards the centre, while most new homes are on the edge Employment and population growth, Jobs per resident, 5 largest Australian 5 largest Australian cities, 2006-11 cities, 2011 1.0 Net employment growth % Net population growth 70 0.8 60 50 0.6 40 0.4 30 20 0.2 10 0 0-10 km from 10-20 km 20+ km from 0.0 CBDs from CBDs CBDs 0-10km 10-20km 20+km Distance from CBD Distance from CBD 12 Grattan Institute, City Limits
Inner suburbs have much high levels of tertiary education Tertiary education levels by suburb, Brisbane 2011 13 Grattan Institute, Productive Cities
Most Brisbane residents have good access to jobs by car … Percentage of Brisbane jobs that can be reached in 45 minutes by car 14 Grattan Institute, Mapping Australia’s Economy
… but Sydney shows how there can be real problems Percentage of jobs that can be reached in 45 minutes by car 15 Grattan Institute, Mapping Australia’s Economy
… 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 Residents living in the darkest shaded suburbs can reach more than half the >50 jobs within a 60 40-50 minute public transport trip. In 30-40 the lightest shaded CBD 20-30 areas, residents can access fewer 10-20 than one in ten of <10 those jobs 0 10 kilometres Dandenong 16 Grattan Institute, Mapping Australia’s Economy
Women in poorly-connected areas face more difficult compromises Differences in male and female workforce participation by suburb, Sydney 2011 17 Grattan Institute, Productive Cities
Poor access to job leads to poor social outcomes Percentage of disaffected youth, Perth, 2011 18 Grattan Institute, Productive Cities
The divide between people and jobs has big consequences In outer suburbs people earn lower incomes on average, and are more likely to be employed on casual basis. 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 19
Many people want to trade off location against price and dwelling type Desired trade-offs between location and house type - Sydney 4 TOTA Semi- Up to 3 storeys L Detached detached storeys & above Inner 9% 4% 2% 5% 20% 2 4 Inner-Middle 9% 7% 4% 5% 26% 3 1 Outer-Middle 12% 7% 4% 6% 30% Outer 10% 6% 5% 4% 25% TOTAL 41% 25% 15% 20% 100% 20 Grattan Institute, The housing we’d choose
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 3 – ‘Outer - Middle’ Zone Shortages of: • c.80k semi-detached dwellings 2 • c.80k apartments in 4 storey + buildings 4 3 1 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 21 Grattan Institute, The housing we’d choose
Wealth is dominated by home ownership, but home ownership rates are falling Composition of household Home ownership rate by age wealth, 2010 Per cent 90 Business Shares 65+ Bank 80 55-64 deposit Home 45-54 Other 70 financial 35-44 60 25-34 Super- 50 annuation Other 40 property 22 Grattan Institute, The wealth of generations
Home ownership rates have fallen fastest for young people on low incomes Percentage point change in home ownership rates, 1981 to 2011 10% 0% -10% Income quintile -20% Lowest 2nd 3rd -30% 4th Highest -40% 25-34 35-44 45-54 55-64 23 Grattan Institute, The wealth of generations
City limits Australia’s economy is increasingly dominated by services produced in cities Australian cities are nearing their limits Planning policy needs to adjust to changing patterns of work • Planning policy results in developers failing to build people the housing they want. • Planning policy is economic policy: middle ring medium density development is probably the largest single lever for both economic growth and social equality • Residential tenancy policy needs to adjust to lower rates of home ownership Tax policy should encourage rather than discourage home ownership 24
Renting closer to jobs is a worse option than owning in Australia International comparison of rental conditions Indefinite 2-3 years 6-12 months Typical lease term 3 months or more 2 months 30 days Notice period for landlords Non-payment/misconduct only Landlord selling/moving in Any reason with notice Reasons lease can be terminated Only with landlord’s Tenant entitlement Subject to restrictions consent Pet ownership Permitted – considered normal use Only with landlord’s consent Minor alterations (hanging pictures, laying carpet, painting) 25 Grattan Institute, Renovating housing policy
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