Decentralising population growth

I watched SBS’s Insight program on Housing 36 Million earlier this week.  A theme that recurred during the program and in the subsequent on-line discussion was the idea of decentralising a large proportion of the projected population growth from the major cities to provincial centres.

Decentralisation was tried in the 70s as an alternative to capital city growth but, while it had a measurable impact on major country centres like Albury/Wodonga and Bathurst/Orange, it didn’t significantly relieve growth pressures on the capital cities.

The problem was that it was hard to get firms to move to the country on a large scale even with various subsidies.  Those that did were chiefly manufacturers (e.g. Uncle Bens and Borg Warner to Albury/Wodonga) but there weren’t enough of them.  Getting firms to move today would be much harder because manufacturing is now a substantially smaller part of the economy.  There are regular announcements of manufacturing plants closing in country areas across Australia.

The mass migration from Melbourne and Sydney to coastal areas like the Gold Coast, Sunshine Coast and Surf Coast in the 70s, 80s and 90s was a form of decentralisation driven by retirees seeking a more amenable climate and cheap housing.  However the housing price differential has now gone and, as attractive as they are in many ways, inlands towns like Ballarat and Bendigo do not have anything like the same appeal as the warmer coastal areas.

Even if it were possible to ‘force’ decentralisation of growth away from Melbourne, a key risk is that many workers would end up commuting long distances to jobs in Melbourne.  While our largest provincial centres have good rail connections to Melbourne they also have good freeway connections.  With 72% of Melbourne’s jobs located more than 5 km from the centre, the likelihood is that decentralisation would give rise to much more long distance car-based commuting than rail-based commuting.  And our country towns would increasingly resemble dormitories.

In any event, I don’t think the case has been made that a much larger Melbourne is unsupportable.  New York is four and a half times Melbourne’s population but has a much lower per capita ecological footprint. Los Angeles has 12 million people and is the densest city in the US (yes, it’s denser than New York and San Francisco).  It’s also considerably denser than Melbourne even though it doesn’t have a good rail system like Melbourne enjoys.

The Melbourne economy is now overwhelmingly service-based and research shows that productivity increases with city size.  Spatial proximity is vital in a world where the economic driver is ideas and information, because it is expensive to move people (whereas the cost of moving goods is now very low).  That extra income can be used to provide the infrastructure and services needed in Melbourne to handle a much larger population.


13 Comments on “Decentralising population growth”

  1. Benno Spearritt says:

    “The problem was that it was hard to get firms to move to the country on a large scale even with various subsidies.”

    Again, I refer to rail being the best form of transportation. Companies would be happy to base operations out bush and people would be happy to live out bush; if they could catch a 350 kilometre an hour train to Warnambool, or Geelong, or Melbourne, or Woodonga etc…

    “inlands towns like Ballarat and Bendigo do not have anything like the same appeal as the warmer coastal areas.”

    By 2020 it should be within every Australian’s ability to catch a train to the beach. E.G. Griffith to Mollymook beach, Gunnedah to South West Rocks, Benalla to Squeaky beach and Ararat to Bells.

    • Alan Davies says:

      Warnambool would be a much more attractive place if it were that well connected, but most firms want the advantages of (external) economies of scale offered by big cities. These effiencies apply to markets, labour supply and information & ideas.

      That’s why Geelong – even though it’s probably no further away than Warnambool would be with a 350 kmh train – doesn’t capture significant numbers of firms at Melbourne’s expense.

      • Benno Spearritt says:

        “the advantages of (external) economies of scale offered by big cities. These effiencies apply to markets, labour supply and information & ideas.”

        This bit above is the bit I don’t understand. Perhaps I’m thinking that being well connected transport wise is the be all and end all for economies of scale? Communications wise that’s all sewn up, everyone’s well connected there.

  2. Alan Davies says:

    “This bit above is the bit I don’t understand. Perhaps I’m thinking that being well connected transport wise is the be all and end all for economies of scale? Communications wise that’s all sewn up, everyone’s well connected there”.

    Well, yes you’re right – maximising external economies of scale really is just about minimising the cost of transporting people, ideas and goods. It’s just that being connected to 101 Collins St (say) from Warnambool by even a 350 kmh train is still a high transport cost (time cost) compared to being close by in the CBD. That’s why firms pay so much more to be in the CBD.

  3. […] Any failure to count satellites within the metropolitan population of a city makes Melbourne look more sprawled by comparison, especially since our two major satellites – Melton and Sunbury – are, quite properly, counted administratively as part of the MSD. It is instructive that almost 60% of Melton’s workforce, despite being separated by 10 km of green wedge, commute to ‘mainland’ Melbourne (not that I endorse satellites – see an earlier post here). […]

  4. […] and regional areas. I’ve previously written about some of the potential pitfalls of attempting to decentralise population growth. Regional areas have to be underpinned by some organic economic force such as a minerals or tourism […]

  5. mc says:

    “Spatial proximity is vital in a world where the economic driver is ideas and information, because it is expensive to move people (whereas the cost of moving goods is now very low).”

    But surely given that ideas and information are even cheaper to transport than goods (and is becoming increasingly more so), the value of spatial proximity is decreasing further.

    To give an example, 15 years ago, to have this conversation I would probably need to be in an inner-suburban cafe or office. I am presently much further away from Victoria’s centre in a rural vineyard closer to Broken Hill. I could well be on the other side of the planet in a more remote area.

    • Alan Davies says:

      No, most of the evidence is in the other direction. Some activities can now be done remotely but more complex transactions still need to be done in person.

      Advanced communication technologies appear to have actually increased the demand for face-to-face contact, not lessened it e.g. you can communicate regularly now via e-mail with a friend who lives interstate or overseas, but that increased contact means the two of you are more likely to arrange to meet up than was the case before e-mail.

      Transport costs for manufactured goods are now so low that virtually everything can be made overseas and shipped to market. But it’s still much more expensive to “ship” in a person from overseas.

      PS sorry for the delay in resonding

  6. […] if it were to happen, there would be a serious risk (see my previous post) that all it would do is replace Melbourne’s fringe suburbs with regional dormitories from which […]

  7. […] the elevated significance of the three regionally-based independents*. I’ve previously argued (here and here) that there are big questions about the viability of decentralisation on a large scale, so […]

  8. […] previously concluded (here, here, here and here) that the prospects for diverting growth from our cities to regional centres […]

  9. Johnyboy says:

    I have to disagree with the transport of goods not being a factor in consideration. There is alot of infrastructure involved in cluding building ports and maintaining ports and then the shipping cost adds to the final cost. The transport costs can be easily be 20% of the cost. The margins can be 20% for some firms. That is the renvenue stream that usually results in profit.

    I am not sure on percentage wise but it is significant. This is the constant argument about distance from the market is a trade barrier. I am sure the chinese and japanese have written extensively about this and how local firms are protected from external competitors because of distance from markets.

    Then we have the serious cost impediment between australia and her asian trading partners. That is renumeration of the management that has to be paid with the hard work and toil of others before any profit is made.

    The local media disregard this and also disregard the cost of renumeration of executives, non executive members ( hidden costs) and CEO and board. The cost comparsion is a signifcant disadvantage for australia. The japanese particularly talk about the americanization of there companies and the fight to stop this outrageous renumeration. I think the CEO of toyota might just earn a million a year or even less. The biggest banks in the world are japanese yet the CEOs are again paid much less. Then there other executives even less. The japanese operations in north america have been haunted by there low pay for management and the discussion has been sabatoge by american firms because they are unhappy with the pay. This is a real threat.

    I am starting think everyone here lives in a bubble. I know for a fact that when manufacturing company here buys parts for there machines they have to import it and this eats into the profits. Why do they have to import so many parts? They are just not made here because the demand is not big enough.

    This cost is also part of the cost of even supplying electricity. The switchs and circuit breakers and other items in the buildings are all imported.


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