Economic Pulse: The economic price of a long commute

Many Australians living in the outer suburbs of Sydney, Melbourne, Brisbane and Perth can only access 10% of the jobs on offer in the city in under an hour’s commute.

It’s just one of the prices of urban sprawl identified in a new report by the Grattan Institute, which looked at how to make Australian cities more productive.

The report mapped how when it comes to jobs, our cities are shrinking.

The twentieth century saw the ‘hollowing out’ of the inner cities as manufacturing moved to the outer suburbs and blue-collar workers outward to be near their work.

But as the economy becomes more service-based, our CBDs are more important, and more expensive to live near than ever. And while some businesses (doctors’ offices, schools, utilities) are located in the suburbs, many workers are increasingly spending hours on the road as they commute from city to suburb. Many chose not to work at all, which is part of the reason why participation rates in the outer suburbs are lower than in the inner-city. This means businesses miss out on those who could otherwise make eager and productive workers.

The solution isn’t to have governments encouraging businesses to move (back) to the suburbs, Grattan Cities fellow Peter Mares tells LeadingCompany.

“There’s this idea that government can encourage the growth of these high-knowledge clusters,” Mares says. “Looking at the evidence, we don’t think that works.”

Moving businesses to the outer suburbs is expensive. And there are significant economies of scale in operating close to services and other businesses in many industries.

Moving government departments to provide jobs doesn’t work any better, as staff generally relocate along with their job. And anyway, “if the jobs created in the outer-area don’t fit the skills profile of that area, that’s little use overall,” Mares says.

This scepticism is controversial because trying to relocate jobs to the outer suburbs is exactly what several Australian governments are doing.

For example, in a footnote, the report mentions the Commonwealth’s $45 million Suburban Jobs Program, which included a $13.5 million grant to support a knowledge-intensive jobs precinct at the University of Western Sydney last year, the $30 million South Australia Innovation and Investment fund set up in 2008 following the closure of a Mitsubishy plant in Tonsley Park, and the proposed East Werribee employment precinct in Melbourne’s west.

But we should be looking in the opposite direction, Mares says. There are clear benefits to having things in the cities.

From A to B

The Grattan Institute surveyed four Australian cities. Mares says Perth, the smallest city surveyed, had the best connectivity, while Sydney had the worst.

“Perth invested heavily in its rail network – both north and south of the CBD. That means it’s easy to get from the outlying north and south on either its rail or freeway network.”

This meant that in Perth, 89% of the metropolitan labour force could drive to the CBD in 45 minutes while 74% could get there in an hour with public transport.

In Sydney however, only 53% of residents can drive to the CBD in the same amount of time, while the same number could get there on public transport.

“The biggest problem for Sydney was getting around by car,” Mares says, for which the solution  is to charge people for more of their road usage “Not just paying for roads in terms of fuel excise, but paying more as we use them.”

If you structure roads that way – you think, do I need to make this journey?

“If you hop in the car now, it seems to be free. But we all hop in the same time. Idea behind road pricing is you think, ‘maybe I won’t go now. I’ll go later, or I’ll walk’. You get discretionary trips off the road, and leave the roads freer.”

The housing people want

Another solution offered by the Grattan report is a rationalisation of the housing being built, which frequently isn’t what people want.

In a 2011 Grattan Institute study, ‘The Housing We’d Choose’, the Institute compared the housing types people said they wanted with the housing types actually being built.

“What’s getting offered is greenfield free-standing housing in outer suburbs. But what people want, if you give them the choice, is to trade off size and the type of house against the distance. What we see a lack of is townhouses, terraces, and two or three story apartments.”

But it’s easier to build in new outer suburbs, partly because there are fewer neighbours or current stakeholders to negotiate with.

“Building in existing suburbs is more expensive. But we can’t keep locking them down and saying they can’t be developed anymore.”


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