Syd, Melb show other cities how to thrive

Australian cities need to follow Melbourne and Sydney's example by "finding what they're good at".
Australian cities need to follow Melbourne and Sydney's example by "finding what they're good at".

If all of Australia's 25 biggest cities were patched together they'd take up an area about half the size of Tasmania.

That megacity would hold 78 per cent of the population and have 80 per cent of Australia's employment, while covering just 0.45 per cent of the national landmass.

Those figures collected in the Knowledge City Index are a stark indicator of the importance of cities to the national economy.

But SGS Economics and Planning's Terry Rawnsley says while Sydney and Melbourne have reached critical mass, the rest of the nation's cities need to figure out what they're good at to thrive.

He says the two major cities have created export-focused service and knowledge industries that bring money in from overseas, such as finance, engineering and higher education.

"They're not just selling stuff to their local residents, they've got export markets, those export markets are growing, you attract more people into the cities, and then you have that virtuous cycle," Mr Rawnsley told AAP.

"The other cities have to find out what's their competitive advantage."

During the mining boom, Perth was the headquarters for major mining investments while Brisbane played a similar role in northern Australia.

Adelaide was the centre of car manufacturing while Darwin, Cairns and Townsville relied on resources.

Brisbane is now targeting higher education, tourism from Asia and other service industries in a bid to become more self-sustaining, while Perth is using its mining expertise to expand into operations in Africa.

"It's really a challenge of finding out what are you good at, how do you tap into domestic and international markets, and how do you create a high amenity location to attract people from the rest of the world?" Mr Rawnsley said.

He said one of the reasons Darwin had struggled to keep workers was a shortage of high quality high schools, which made families less likely to commit to moving.

Hobart's success at leveraging its globally significant Museum of Old and New Art (MONA) has created the kind of problems governments usually like to have.

The city has investors and migrants moving in, and money coming in for developments, but is also now dealing with growing problems in housing affordability and homelessness.

Australian National University population expert Dr Sajeda Tuli, who helped put together the Knowledge City Index, said successful cities needed to keep pace with infrastructure or risk losing their competitive advantages.

The Commonwealth Bank's global research team recently warned rising house prices in Sydney and Melbourne were forcing workers too far out from their inner city jobs, and it could affect labour markets.

"We are losing some localism in those cities. Housing prices are rising, local people cannot keep pace with that, they are leaving those areas," Dr Tuli told AAP.

CBA's housing affordability report found strong demand for major city homes will continue.

"There is genuine concern, however, that the price of housing, especially in the major cities, will drive people away from these cities and have a negative impact on the supply of essential labour," the report said.

"The alternative would involve both economic and social consequences, as people need to travel extraordinary distances between the housing they can afford and where their labour is needed."

Mr Rawnsley said creating more self-sustaining cities was important but difficult.

"There have been efforts to decentralise the country for 100 years, but over that time Sydney and Melbourne have picked up more of that share," he said.

Dr Tuli said governments needed to consider ways to make the 25 largest cities in Australia more economically diverse, while maintaining social inclusion.

"They have a total area of 0.45 per cent of Australian land, but they have like 78 per cent of Australia's total population and 80 per cent of Australia's total employment," she said.

"They're the economic engine of Australia."

Australian Associated Press