AHURI BRIEF

Enabling economic activity to thrive in Australia’s cities

Economic growth, agglomeration, and connectivity. Attracting human capital, facilitating innovation and participating in global markets.

27 July 2020

Cities are the main contributor to Australia’s economy generating around 80 per cent of the nation’s GDP. Facilitating economic growth is the most prominent rationale in urban policies to shape the development of Australia’s cities. Visions for economic transition and future growth are captured in the 2016 Smart Cities Plan focusing on investment, policy coordination and new technology.

AUS GDP from cities

The economic structure of Australia’s cities is changing due to the shift from manufacturing to service- and knowledge industries. Urban policies respond to this in a range of ways, such as; promoting the attractiveness of central business districts to global companies, unlocking the value of innovative industries through agglomeration, and embracing new technologies to ensure ongoing productivity. The global economic impact of the COVID-19 pandemic is likely to have various effects across a range of industries that will alter the structure of Australia’s cities.

The Brief on ‘economy’ addresses ways urban policies are aiming to achieve productivity growth by clustering economic activities, increasing connectivity and facilitating structural changes in Australian cities.

Urban policies to achieve economic growth

Productivity

The Productivity Commission’s 5-year productivity review included a focus on Better functioning towns and cities which emphasises the economic importance of structuring cities more efficiently to enhance Australia’s productivity. AHURI research presents the evidence that economic development and productivity are affected by housing outcomes through intermediate factors like human capital, business investment and innovation.

Infrastructure Australia emphasises increased productivity, arguing that this can be achieved by better utilising existing infrastructure to improve efficiency and through microeconomic reforms. Infrastructure Australia recommends private sector provision of infrastructure services where a competitive market can exist. They also recommend the Australian Government establish a single Infrastructure Fund with value capture opportunities considered in all infrastructure investments.

Precincts

Productivity and land-use planning are connected, such as through the economic benefits of clustering jobs, transport and housing. Developing mixed-use commercial and residential precincts, and in some cases education and health precincts, is an explicit objective across many metropolitan planning strategies. AHURI research has shown that labour force participation and economic growth are impeded by limited affordable housing supply for low-income earners close to job-rich areas.

On a state level, Infrastructure Victoria highlights the importance of strengthening the workforce participation by better connecting people with jobs and promoting workforce health and wellbeing. This may be achieved by facilitating growth in major employment centres and transport corridors decreasing commuting times.

Connectivity

Metropolitan planning strategies identify connectivity as a central driver of productivity and a way to achieve the Smart Cities Plan’s objectives. AHURI research examines the way technology already is restructuring housing markets and the potential implications of the Smart Cities movement. Integrated transport modes potentially enable better connections between people, employment and markets within Australia, and also globally. The Australian Infrastructure Plan focuses on digital connectivity as a central feature of efficient markets. This would allow Australia to compete globally as well as provide access to services in regional areas. New infrastructure is required to provide digital connectivity, such as through high speed broadband or mobile networks, and facilitate technological innovation.

Globalisation

Australia’s economy is increasingly integrated within global markets and competes with these markets. Due to the shift from manufacturing to service and knowledge-based activities the pattern of production and employment in cities has been changing. The South Australian 30-Year Plan for Greater Adelaide emphasises the need to respond to these changes in the structure of the city and its transport system.

To attract investment, support innovation and create jobs, urban policies highlight the need for providing adequate infrastructure and plan for future structural changes. The ACT Planning Strategy 2018 focuses on investments in economically emerging sectors, such as in tertiary education and renewable energies or technology, and aims for land-use planning to support innovative services.

Policy implications

Urban polices have the potential to shape Australia’s economy. Supporting economic activity in regional cities and precincts within metropolitan areas can contribute to productivity growth by linking housing and employment more closely. The Smart Cities agenda could be strengthened by having urban policies pro-actively embrace technological innovations to provide desired outcomes in collaboration with communities. Future structural changes, the impacts of the current COVID-19 pandemic and climate change are challenging current economic growth paradigms. Cities are at the forefront of innovation and urban policies can contribute to the transition to a more sustainable economy.

Further lines of inquiry

  • How are urban precincts and economic agglomeration approaches being implemented in Australia to deliver innovation?
  • How does the urban form of Australia’s cities facilitate economic productivity?
  • How can strategic urban and regional development support strong economic outcomes and connectivity?
  • What are global economic transitions and transformations are likely to effect Australian cities?
  • In what ways does Smart Cities technology impact economic growth, connectivity and productivity?