Old notions die hard. If you took all the production of goods and
services in Australia and plotted on a map where that production took
place, what would it look like?
Any farmer could tell you most of the
value is created in the bush. A miner, however, would tell you - a bunch
of ads have told you - these days most of the wealth is generated in
areas such as the Pilbara in Western Australia and the Bowen Basin in
Queensland.
Then, of course, there are the great manufacturing
states of Victoria and South Australia - with most work done in the
suburbs of Melbourne and Adelaide, but also regional cities such as
Geelong.
That make any sense to you? It's completely off beam.
A
report issued this week by the Grattan Institute finds that, these
days, 80 per cent of the dollar value of all goods and services in
Australia is produced on just 0.2 per cent of the nation's land mass.
Just about all of that is in our big cities, as close in as possible.
The
report, by Jane-Frances Kelly and Paul Donegan, finds that big cities
are now the engines of our prosperity. If you take just the central
business districts of Sydney and Melbourne - covering a mere 7.1 square
kilometres - you have accounted for almost 10 per of Australia's gross
domestic product.
What do workers do in all those city offices? Nothing you can touch. That's how much the economy's changed.
To
find the economy as many people still imagine it to be, you have to go
back 50, even 100 years. About 100 years ago, almost half Australia's
population of 4 million lived on rural properties or in small towns of
fewer than 3000 people.
Many of these would have been market towns
serving the agricultural economy. Agriculture and mining accounted for a
third of the workforce. And only about one in three Australians lived
in a city of at least 100,000 people.
These days, agriculture
employs only 3 per cent of workers and contributes only 2 per cent of
GDP. Our two biggest CBDs contribute at least four times that much.
By
the end of World War II, manufacturing had become Australia's dominant
industry. At its height in 1960, the report reminds us, manufacturing
employed more than a quarter of the workforce and accounted for almost
30 per cent of GDP.
The rise of manufacturing shifted much of our
economic activity - our prosperity - to the big cities, but mainly to
the suburbs. Suburbs away from city centres had lower rents and less
congestion.
Postwar growth in car ownership made possible the
shift to a manufacturing economy with a strong suburban presence. It
also led to the demise of many small towns and the rise of regional
centres.
Today, however, manufacturing employs only 9 per cent of
the workforce and accounts for just 7 per cent of GDP. The thing to note
is that this seeming decline in manufacturing has involved only a small
and quite recent fall in the quantity of things we manufacture in Oz.
Similarly,
the decline in agriculture's share of employment and GDP has occurred
even though the quantity of rural production is higher than ever. The
trick is that these industries didn't contract so much as other parts of
the economy grew a lot faster, shrinking their share of the total.
One
of those other parts is mining, of course. But get this: "While
Australia's natural resource deposits are typically in remote areas,
workers in cities make a critical contribution to the industry's
success," the report says.
"For instance, in Western Australia,
where the most productive mining regions are located, more than one
third of people employed in mining work in Perth."
That's partly
because of fly-in fly-out, but mainly because many of these workers are
highly skilled engineers, scientists, production managers, accountants
and administrators.
So what explains the greater and still-growing
economic significance of big cities, so that Sydney, Melbourne,
Brisbane and Perth now contribute 61 per cent of GDP? The rise of the
knowledge economy.
Increasingly, our prosperity rests not on
growing, digging up or making things, but on knowing things. Our
workforce is more highly educated than ever, and this is the result.
"Knowledge-intensive
jobs are vital to the modern economy. They drive innovation and
productivity, and are a critical source of employment growth. In the
last 15 years there has been much higher growth in high-skilled,
compared to low-skilled, employment," the report says.
Knowledge-intensive
activities aren't confined to jobs in the services sector, but are also
increasing in mining and manufacturing. They often involve coming up
with new ideas, solving complex problems or finding better ways of doing
things.
But here's the trick: it suits many of the knowledge workers,
and the businesses that employ them, for those workers to be crowded
into big cities, as close in as possible. When you're all packed in
together, there's more scope for the transfers of expertise, new ideas
and process improvements known as "knowledge spillovers".
Such
spillovers come particularly through face-to-face contact. Large cities
offer employers knowledge spillovers and a large skilled workforce. They
also offer people greater opportunities to get a job, move to a better
job, build skills and bounce back if they lose their job.
