Regional city performance – where does your city sit?
Historically, there is no difference between the economic performance of Australia’s big five metropolitan cities and its 31 regional cities in terms of output, productivity and participation rate.
Counter to the traditional economic approach of only backing winners (which in Australia has usually meant the five big metro cities of Sydney, Melbourne, Brisbane, Adelaide and Perth), international literature on regional development emphasises that the greatest growth is in second tier regions – those traditionally considered ‘under performers’ ([i]).
The Regional Australia Institute’s (RAI) projections of regional city growth in output to 2031 supports this assertion. Regional cities represent great opportunity, cautioning against misguided assumptions that they have limited potential to grow ([ii]).
Regardless of past regional city growth performance – things are looking good for the future and bespoke policy approaches that target local issues, align government interests and stimulate growth for the national economy are what is needed.
Further, the RAI’s latest work predict future growth of regional cities (2013-2031) is likely to be greater than historical growth (2001-2013).
Find out how your city performs – take a look at the RAI’s online Great Small Cities data tool.
The projected medium-term growth of individual cities is summarised below, with some maintaining historical trajectories (i.e. Gaining cities, Slow and Steady cities) while others are in transition (Expanding cities, and Slipping cities).
City performance groups explored
Gaining cities are expected to continue their above average output growth (3.3 per cent Compounding Annual Growth Rate (CAGR)). A number of cities in this group directly benefited from the mining boom but are now being challenged to transition from reliance on mining to building stronger business and employment growth in new economy industries. Other cities; Mandurah, Fraser Coast (Hervey Bay), Gold Coast-Tweed and Sunshine Coast-Noosa have economies that are driven by population growth and the need for its servicing. The challenge for this group is for more businesses that employ people, with outward market and growth focus that will provide a foundation for more local jobs and more higher paying positions – rather than individuals ‘buying themselves a job’.
Expanding cities have experienced average or low growth in the past (2001-2013) but are predicted to have above average growth into the future (3.4 per cent CAGR). They are characterised as having low unemployment rates and high productivity per worker. While their foundations are strong in regards to new business entries and knowledge Intensive Business Services (KIBS) generally, these cities share a need for more growth-oriented local businesses and associated higher income jobs.
Slipping cities have experienced high or average growth in the past but are predicted to fall below the average growth projections (averaging 2.2 per cent CAGR), ensuring they have already or will shortly experience a downturn unless things change. All these cities are vulnerable to loss of higher income jobs since 2013 and impacts on the housing market.
Slow and Steady cities are expected to continue their low, but positive growth trajectories with below average growth rates (averaging 2.3 per cent CAGR). These cities are generally smaller, and lower in output – but still strong in productivity and participation rates. They have less knowledge-based employees and lower start up rates with strong housing affordability. Common for most slow and steady cities is the need to stimulate the local Business Dynamo, such as the rate of business entries, Knowledge Intensive Business Services (KIBS) and owner managers.
What is your local government doing to enhance its performance?
Are they nurturing new industry specialisations, better enabling local business growth, attracting more people to the workforce and building on existing lifestyle and affordability advantages? Are they laying foundations to get ready for a City Deal?
Regardless of a city’s past growth performance – things are looking good for the future, and bespoke policy approaches that target local issues, align government interests and stimulate growth for the national economy are what is needed.
That said, regions do need to get ‘investment ready’ for success. This means they need to be able to collaborate to develop an informed set of shared priorities for investment, supported by a clear business case grounded in evidence, linked to a vision for growth that builds on existing economic strength and capabilities.
The RAI provides specific guidance on how to get regional cities ‘investment ready’ and how to ‘get ready for a City Deal’ in ‘Blueprint for Investing in Regional City Deals: Are You Ready to Deal? ’.
As an extension of the RAI’s ‘Great Small Cities’ research and policy agenda, this work is practical and useful in getting ready for a City Deal. Go online to read the reports and join the conversation. We want to hear what you are doing locally to grow your city.
Do you have a burning issue that needs addressing or an idea that could grow all regional cities? If so, let us know. We look forward to sharing more in the future and welcome your comments and ongoing engagement.
For more information, contact:
Dr Leonie Pearson, Leader – Great Small Cities Program
[i] Parkinson, M., Meegan, R., Karecha, J., Evans, R., Jones, G., Sotarauta, M., Ruokolainen, O., Tosics, I., Gertheis, A., Tönkő, A. and Hegedüs, J. (2012) Second-tier cities and territorial development in Europe: Performance, policies and prospects. SGPTD Final Report.
[ii] Predictions are based on modelling, undertaken using the PwC Geospatial Economic model at Local Government level for Gross Value Added and jobs. As with any projections the sensitivity of outcomes is determined by the underlying assumptions of the modelling and economic expectations. To test the sensitivity of the regional cities to alternate economic expectations, we undertook three scenario analyses on future growth; base, pessimistic and optimistic[ii] as related to structural adjustment to mining boom and assuming enhanced organisational capacity and leadership. The results presented here are the base.
Modelling results show that sensitivity of regional cities output performance to each scenario is related to their historical growth group (High –mining, High – population, Average or Low). With highest sensitivity for the regional cities in the low growth group – as an addition of 1 or 1.5 percentage points to a historically low growth rate is effectively a doubling of the growth rate. While the same percentage point impact on a historically high growth rate is relatively much less. Therefore, while all cities are sensitive to future growth scenarios at the macroeconomic level – those low growth cities are particularly exposed.
Future growth forecasts of regional cities are not dependent on a single variable, as no single variable predicts historical growth rate or performance. However, the modelling identifies that there are variances in the growth trajectories of cities. The challenge for local leaders, policy makers and others is to identify how to improve the growth trajectory of each city, to ensure it delivers above its expectations, not below