Productive Cities: opportunity in a changing economy

The latest report from the Grattan Institute Cities program [featured below and attached] argues that building more homes in established suburbs and improving urban transport could substantially boost productivity and safeguard national prosperity.

Cities are shaped by where people live, where they work and how they get around. When these three things are in tune with the structure of the economy, cities work efficiently to drive growth and create opportunities.

Productive Cities: opportunity in a changing economy analyses housing, income and travel data for our four largest cities to see if they are keeping pace with the changing needs of ever more knowledge-intensive economy. It reveals emerging strains in the triangle of home, work and transport.

As our economy becomes more skilled and specialised, it becomes more important to match the right person to the right job. It’s also important to increase the connections between firms so that they can cooperate and learn from one another. These things boost productivity and help to keep Australia prosperous and competitive. Yet this report reveals that in significant parts of Australian cities, links between firms are poor and labour markets are shallow. In many outer suburbs, residents can reach less than 10 per cent of all metropolitan jobs within a reasonable commuting time. That reduces the chances of finding the best fit between people and jobs.

Productive cities shows that employees with high-level qualifications and high incomes increasingly live close to heart of cities, while workers with trade skills or low skills, and people on lower incomes, tend to live further from the centre. Rising house prices make this polarisation worse. If the trend continues unchecked, then many people risk being locked out of the parts of the city that offer the best access to jobs. These people will be vulnerable in a downturn.

The report recommends increasing the supply and diversity of housing in existing suburbs, to bring people closer to jobs and opportunity. This in line with previous Grattan research showing that the greater housing choice that Australians want can be achieved if residents are engaged in decisions about their neighbourhoods and the disincentives developers face are addressed.

The report also recommends consideration of road-user charging to ensure the best use of our roads and as a way to raise funds for better public transport, such as improved bus services.

The goal is ensure that we build housing where it is most needed, and transport systems that link firms, jobs and people. This will be good for the economy and good for the fair go.  

Source: Gratten Institute