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Melburnians and Sydneysiders might think their cities are very different. But the latest census revealed striking similarities between Australia’s big urban twins.
Their populations are both around the 5 million mark, their median age is the same (37) and hospitals are the biggest employer in both cities. Even their education levels are eerily similar – 45.7 per cent of adults in both cities have either a bachelor degree (or higher), a diploma or a level IV trade certificate. The pair boast world-class universities and big international education sectors.
Rivals? Yes, but Sydney and Melbourne have much in common.Credit:AFL Photos
Sydney and Melbourne have been magnets for overseas migrants: more than four in 10 residents were born overseas, a much higher share than the rest of Australia.
Now a fresh tranche of census data released last week underscores how the economic character of the two cities has converged over time.
During the past three decades, knowledge-based service industries – including finance, professional services, IT, biotech, communications, marketing and media – have flourished in both cities. This trend has been evident in metropolitan centres across the world. Each census since 2006 has shown a steady rise in the share of white-collar jobs as a result.
In Sydney, professionals and managers now account for 45 per cent of workers (up from 37 per cent in 2006) while in Melbourne, that proportion has reached 41 per cent (up from 35 per cent in 2006). The share of “community and personal service workers”, which includes some non-professional health staff, has also climbed in both places over the past 15 years.
Illustration by Simon LetchCredit:
It’s a different story for traditional blue-collar occupations. Tradies and technicians get a lot of public attention, especially from politicians, but their prevalence is declining (from 12.7 per cent of workers to 10.5 per cent in Sydney over the past 15 years and from 13.6 per cent to 12.1 per cent in Melbourne during the same period). The share of sales workers and labourers has also declined in both cities since 2006.
These powerful labour market trends have affected Sydney and Melbourne well beyond the workplace. The boom in knowledge-based industries has created good, high-paying jobs which tend to cluster near major employment hubs, especially the central business district. Economists have dubbed this the “agglomeration” of knowledge-intensive services.
This shift in the distribution of jobs has had a big influence on property markets.
Terry Rawnsley, a demographer and urban economist at KPMG, says the influx of professionals and other knowledge workers pushed up wages and that, in turn, “influences house prices and rents”.
In Sydney and Melbourne, this upward pressure on housing costs has been exacerbated by inadequate supply of properties in well-located suburbs near major job hubs.
Rents in both Melbourne and Sydney have increased sharply.Credit:Peter Rae
Rawnsley says housing development in the so-called “middle-ring” neighbourhoods within 30-40 minutes of the CBD has not kept pace with labour market changes and this has contributed to housing affordability problems for workers “further down the income distribution”. That includes many essential workers including police, nurses and teachers who tend to earn less than those employed in financial and professional services.
“Lags in planning and community resistance to development in some areas means we haven’t seen growth in housing to match the new distribution of jobs,” says Rawnsley.
Property prices have fallen recently, but rental markets now loom as a major bugbear – asking rents have risen 14 per cent in Sydney and 9.3 per cent in Melbourne during the past year, according to Domain’s latest rental report.
There has also been a shift in population in both cities from inner and middle-ring suburbs to lifestyle destinations adjacent to the city. But it is not yet clear what lasting effects that will have on commuting behaviour and property prices.
The long-term mismatch between patterns of jobs growth and housing supply has significant economic costs.
Those forced to live a long distance from major job hubs often settle for employment closer to home which doesn’t fully utilise their skills. When that happens productivity suffers because know-how is not being optimally deployed.
Rawnsley warns the mismatch between patterns of job growth and housing supply could also discourage much needed skilled migrants from settling in Sydney and Melbourne.
“As international migration restarts in earnest we have lots of available jobs to be filled, but we don’t have the same pool of available housing,” he says. “If potential migrants are looking at a financial services job in Sydney or Melbourne they will check the salary and conditions, but they will also check out the housing situation. That might convince them to take a competing job elsewhere, like Singapore.”
Another thing Melburnians and Sydneysiders have in common is anxiety about the cost of housing. The latest Ipsos Issues Monitor, which asks a representative sample of respondents to select the most important issues facing the community, showed housing affordability ranks among the three top concerns in both NSW and Victoria.
Unless we do a better job at co-ordinating housing supply and labour market change, housing affordability will continue to be a worry for many in Australia’s two biggest cities.
Ross Gittins is on leave.
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