It may be a wide brown land, but 80% of the dollar value of all goods and services in Australia is generated on just 0.2% of the nation’s land mass according to a study released this week.
While it is notoriously expensive to work in the CBD, the study by the Grattan Institute shows nearly all of the dollar value of Australia’s goods and services is coming out of our central business districts.
The study shows workers in Perth’s relatively small CBD were the most economically productive employees in the country, generating the highest value of economic activity per working hour in 2011-12, at $124 per hour.
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Sydney workers produced $100 in value for every hour they worked there, while workers in the Melbourne CBD (including Docklands and Southbank) produced $87 per hour.
Grattan Institute cities researcher Paul Donegan told SmartCompany Perth’s productivity is tied to the mining boom, with one in three employees of mining companies located within the Perth CBD.
“Jobs such as engineers and software programmers, those jobs play a very important role in generating productivity, just as important as fly in fly out workers,” says Donegan.
If workers employed in the mining industry are excluded form Perth’s figures, the area’s labour productivity drops to below $90 per hour.
The report shows the combined CBDs of Sydney and Melbourne alone – 7.1 square kilometres – generate nearly 10% of Australia’s economic activity, three times that produced by the agricultural sector.
Donegan says there are two major reasons why the CBD produces the greatest wealth – because it has the best access to skilled workers and because it places businesses close to other businesses.
“As the workforce becomes more skilled and specialised, you want to have best choice of possible employees,” says Donegan. He says being in an area well-connected to public transport is particularly important to make it as easy as possible for the best talent to access a company.
“Being close to other businesses makes it easier for businesses to come up with new ideas, get deals done and meet people face to face,” says Donegan.
He says the Australian economy has shifted its reliance from regional agricultural areas, to manufacturing areas dispersed across the country, and now to highly digitised industries found in CBDs. Industries such as professional and financial services now makes up a large percentage of Australia’s wealth generation.
Donegan says the major challenge this concentration will create moving forward is the issue of population growth away from city centres.
“Employment growth is highest in the centre of the city, meanwhile population growth is the highest further away from the city,” he says.
“These are areas not well serviced by public transport and are a long way from where employment growth is happening. People in those areas, to some extent, are cut off form opportunities created by concentrated economic growth.”
Donegan says this will in turn harm the economy if business can’t get the best access to the deepest pools of skilled employees.
“If people can’t access those potential employers, that is bad for business because they won’t find the best fit.”