Cities and Productivity: Insights from the CEDA State of the Nation Conference

Recently, I had the privilege of participating in the CEDA State of the Nation conference, a leading public policy forum in Australia. As a panelist in the ‘Cities and Productivity’ session, I shared my insights on the role of urban centres in driving economic growth and prosperity.

James Tuma
Managing Partner

Australia ranks among the top urbanised nations globally, with 85 per cent of our population residing in cities. These urban centres are crucial economic assets, and sustaining their productivity is more important than ever.

When we talk about urban productivity two key things spring initially to mind. The first is that our economic productivity on a per capita basis is in decline. Despite some bright spots in key sectors and levels of immigration, our ageing population and, by international standards, lack of economic diversity, are creating a slow decline that is difficult to arrest.

These urban centres are crucial economic assets, and sustaining their productivity is more important than ever.
— James Tuma

The second main contextual point that is important to acknowledge is that economic productivity in and of itself is not an outcome – just a measure of things that really matter. What we are really talking about is our collective ability to deliver quality of life outcomes, to access to education, healthcare and opportunity, and to have the capital needed to invest in societal and environmental outcomes that can sustain the nation.

Looking at global benchmarks or indicators of above average growth in productivity – innovation and research districts are a good proxy for a city’s economic diversity and health. These districts tend to exhibit strong ‘place capital’, resulting in a distinctive identity, invest-ability and attractiveness to talent. They also often exhibit collaborative governance frameworks and a strong sense of intentional specialisation.

In Australia, whilst we often boast precincts and districts with strong ‘place capital’, we have not consistently seized the opportunity to build fit for purpose governance models, nor are there enough examples of the successful pursuit of clustering specialised industry sectors.

Perhaps a reason for this is that our cities, which are some of the best places in the world to live, have not faced the some of the fundamental economic and environmental crises that have catalysed some of the most productive urban places in other parts of the world. Whilst we of course hope that these crises never emerge, there are some valuable lessons to be learned from places, like Eindhoven, that have used reinvention as a force for productivity and systems change.

The concept of agglomeration is also crucial. The role that this ‘ratcheting force’ applies at both the Metropolitan scale, and, in some parts of the world, the national scale is well documented. Setting aside for a moment the metropolitan scale, a national mindset could plausibly deliver exponential urban productivity benefits. If all Australian cities invested in their competitive physical and structural advantages and explored fit-for-purpose governance models, the impact would be significant. Making tough decisions to prioritize high productivity sectors could amplify the aggregated impact of Australian cities on the global stage.

If all Australian cities invested in their competitive physical and structural advantages and explored fit-for-purpose governance models, the impact would be significant.
— James Tuma

The Australian Government has a significant role to play in driving more productive cities, controlling the major infrastructure agenda, taxation, and key regulatory levers. Directing these three forces into specific ‘positions’ on productivity outcomes in our cities could elicit an almost instantaneous response from industry and capital markets, with a significant impact.

Imagine if all our national programs and policies aimed to make our cities more competitive and liveable. This perspective offers an opportunity for the Australian Government to lead, using the emerging National Urban Policy to deliver cross-cutting benefits for the cities in one of the world’s most urbanised countries.

A bottom-up approach to productivity is also essential. The university and research sectors, start-ups, scale-ups, and the development of local business ecosystems significantly contribute to innovation and, by implication, productivity. Encouragement and nurturing are needed for local and state governments, venture capital, industry engagement, and other strands in this complex system if we are to meet our incredible potential.

The risk here is that cities are too often the victims of generalisation – for example, the opportunities and challenges to move the dial on productivity in Sydney vary significantly from those in Perth, and the competitive advantages of Melbourne are not comparable to those of Hobart. This nuance requires an acknowledgement of this complexity through more specific policy settings, and a multi-level, multi-speed approach to drive meaningful change in the productivity outcomes. It also requires collaboration, and a willingness to learn from global best practices.

With the right policies and leadership, our cities can drive Australia’s future growth and prosperity.

Interested in shaping the future of our cities? Contact me or any of the Urbis team to discuss how we can enhance urban productivity together.

Published: July 9, 2024