Posted: 18 Sep. 2018 10 min. read

A tale of two cities

Why inclusive growth matters

A new geographic divide

Melbourne has experienced tremendous growth recently with more than 1.5 million additional people coming to call Melbourne home over the past 20 years. To keep up with this growth we have, almost passively, taken on a low-density urban sprawl model.

Between 2006 and 2016 alone, Melbourne’s population grew by almost 1 million people, with 28% of all new Melburnians making a home more than 30 kilometres from the CBD. Today, 25% of all Melburnians now live 30 kilometres from the CBD[1], compared with 18% in 1986[2].

The fringe is also much further away from Melbourne’s centre than it once was. In the 1970s, new suburbs such as Wheelers Hill, Vermont South, and Bundoora were being established within 20 kilometres of the CBD. Today, the outer fringe stretches over 50 kilometres in the southeast[3].

Our management of Melbourne’s growth has had profound implications on access to economic opportunity and social and community participation for outer fringe residents.

Simply put, the distribution of where people live and work is uneven. In Melbourne, Australia’s most highly centralised city[4], medium and large sized businesses typically locate within the CBD and immediate surrounds. The trend of centralising ‘knowledge’ jobs is increasing, and while agglomeration does bring a range of critical economic benefits, they flow disproportionately to higher-income earners[5].

We are creating two Melbournes: an inner city characterised by good economic opportunities, high-incomes, choice and amenity; and an outer city characterised by fewer jobs, lower female workforce participation, lower wages, longer commute times, poorer amenity, and social infrastructure and services that severely lag behind residential growth.

The issue becomes even more vexed when housing affordability is considered. Wages and family wealth are increasingly influencing the places people choose to live. This puts us in the middle of a wicked cycle – people with higher incomes can afford better housing near higher-paying jobs with superior amenities and better access to vital health and education services. Conversely, the socioeconomically disadvantaged are forced further out, away from the infrastructure and services that they need.

All of this means that social disadvantage is increasingly clustered around Melbourne’s outer fringes (Figure 1).

Figure 1 – Index of relative socio-economic disadvantage, Greater Melbourne, 2016

Source: Australian Bureau of Statistics, 2016

Note: the darker areas experience greater social disadvantage, the greener areas experience less social disadvantage.

Residents in the outer fringe growth areas face the dual reality of having poorer access to jobs in general, yet increased access to lower paying jobs, than people living in middle and inner Melbourne. For example, there are around 4 jobs for every 10 employed residents in suburbs located 30 kilometres or more from the CBD, compared to 11 jobs for every 10 employed residents in suburbs located within 10 kilometres from the CBD[7]. Residents living 30 kilometres or more from the CBD also, on average, earn 21% less than people living within 10 kilometres of the CBD.

Spatial segregation also affects residents’ ability to participate economically: workforce participation 30 kilometres from the CBD is 4.9 percentage points lower compared to areas within 10 kilometres[8].

Female workforce participation is particularly affected by spatial disadvantage. Longer commutes make it harder for both parents to work which means working mothers often end up working less. Female workforce participation 30 kilometres from the CBD is 7.2 percentage points lower than areas within 10 kilometres of the city centre.[9]

Figure 2 – Disadvantage in Melbourne’s Outer Fringe

A lack of inclusive growth is an issue for all Victorians. We have modelled the economic costs of spatial socioeconomic disadvantage in terms of lower labour participation and productivity (wages). Lifting wages and workforce participation levels in Melbourne’s outer fringe, where socioeconomic disadvantage is clustered, to the same levels experienced across Melbourne could benefit the State economy to the tune of $3.3 billion per annum.

Figure 3 – Economic benefits to Victoria from closing the unemployment gap in Outer Melbourne

Critically, the benefits of improved outcomes in disadvantaged areas spread well beyond the disadvantaged areas themselves. Other areas of Melbourne, indeed Victoria, also benefit.

Far from being a concern only to those in socioeconomically disadvantaged areas, we all wear the cost of socioeconomic disadvantage. When we object to higher density growth and it ends up occurring somewhere else, we haven’t sent the problem away at all. Rather, the whole state continues to pay.

Social mobility and cohesion

Socioeconomic disadvantage isn’t just about economic costs. Socioeconomic disadvantage creates barriers to social mobility – the social and physical environments in which people live in and grow can affect their outcomes and trajectories in life. Geographic exclusion results in unequal access to critical social infrastructure and amenities including health, education, childcare and reliable public transport. This, in turn, leads to poorer economic and health outcomes for individuals and families.

Geographic exclusion drives a wedge between those seen as the beneficiaries of growth and those who are not, affecting social cohesion and undermining the broad consensus that economic growth should benefit the whole community.[10]

Promoting a path towards more inclusive growth?

All communities must be able to participate fully in the opportunities created by growth. Inclusive growth benefits the whole of Victoria.

We need to plan for inclusive growth. We need to develop longer-term planning frameworks and strategies for growing cities that fundamentally strive for and prioritise greater inclusion. We need to consider how the urban form is responsive to the needs of communities as they work, play and live.

This requires coordinated planning, investment and delivery across all levels of government and all sectors of the economy. The State Government’s focus on the development of National Employment and Innovation Clusters (NEICs) throughout Melbourne is a critical first step. However, a program of Government decentralisation can provide anchor institutions within fringe centres to help them grow more rapidly.

Deloitte is proud to be involved in the conversation about Victoria’s future and sharing our thinking on how we can maintain excellent liveability while growing our population. We’re excited to lead a discussion with businesses, individuals and governments on the things we need to get right to make that happen in each of the key sectors of the Victorian economy during the next phase of our project. We look forward to hearing from you and your community on what we need to start, what we must stop and the things we should continue to make Victoria the very best it can be #itshappeningvictoria

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Supporting Footnotes

[1]Deloitte Access Economics analysis of Australian Bureau of Statistics, 2016, Census of Population and Housing

[2]Deloitte Access Economics analysis of Australian Bureau of Statistics, 2016, Census of Population and Housing

[3]Victorian Department of Environment, Land, Water and Planning, 2017, Plan Melbourne 2017-2050, Map 1

[4]Rasmussen, B., 2016, Melbourne Economic Forum, Changing Business Location; economic geography of the West of Melbourne

[5]Sarker et al, 2016, Environment and Planning B: Urban Analytics and City Science, The scaling of income distribution in Australia: possible relationships between urban allometry, city size and economic in equality

[6]Grattan Institute, 2018, Housing affordability: re-imagining the Australian Dream

[7]Deloitte Access Economics analysis of Australian Bureau of Statistics, 2016, Census of Population and Housing

[8]Deloitte Access Economics analysis of Australian Bureau of Statistics, 2016, Census of Population and Housing

[9]Deloitte Access Economics analysis of Australian Bureau of Statistics, 2016, Census of Population and Housing

[10]Committee for Economic Development of Australia, 2018, How unequal? Insights on inequality.

More about the authors

Daniel Terrill

Daniel Terrill

Partner, Deloitte Access Economics

Dr Daniel Terrill is Lead Partner for Deloitte’s Agribusiness client service group and leader of the agricultural and environmental economics teams of Deloitte Access Economics. He is an economist with a unique blend of professional and lived experience in agriculture and environmental management. He comes from a livestock and broad acre cropping background from a family farm in Victoria. Dr Terrill received his PhD from The University of Melbourne, where he researched policy solutions to improved collective environmental outcomes from farming land. He has over 15 years of experience as a microeconomist, where much of his work is at the intersection of agriculture and the environment, particularly addressing the challenge of feeding growing populations more sustainably.