NSW regional areas' economic growth flags as Sydney booms

Sydney's economic hubs are streaking ahead of the rest of NSW. Photo: Mark Merton

Sydney's economic hubs are streaking ahead of the rest of NSW. Photo: Mark Merton

A yawning growth gap has opened between city and country as Sydney's dynamic economic hubs streak ahead of the rest of the state.

Economic growth in Sydney averaged 2.2 per cent between 2012 and 2015, while regional areas of NSW contracted by 0.3 per cent in that period, research by SGS Economics and Planning has revealed.

Between 1.6 million and 2.7 million people in NSW experienced at least one year in recession between 2012 and 2015, the analysis shows. 

Meanwhile, parts of Sydney have boomed. The Ryde-Macquarie Park area, a hub for high-value, knowledge-based services, grew by a runaway 5.8 per cent in 2014-15.

Four other Sydney regions – Northern Sydney, the CBD and surrounds, the northern beaches and Baulkham Hills – all had growth rates of 4 per cent or more in the year.

Australian Bureau of Statistics data shows the Hunter Valley has gone from slight growth (0.1 per cent in 2012) to breaking even, while Newcastle and Lake Macquarie have improved from -1.9 per cent growth in 2012 but remain in the red (-0.1 per cent in 2015).

Terry Rawnsley, an expert on regional economics who authored the SGS Economics and Planning paper, said the figures revealed a worrying pattern where a disproportionate share of economic activity and population was shifting towards the biggest cities.

"This is an alarm bell ringing louder and louder," he said. "Communities in many areas have been left behind due to rapid economic changes."

There are similar patterns at the national level, where solid growth in gross domestic product has masked huge regional variations.

Mr Rawnsley estimates that 6.6 million people, or 28 per cent of Australia's population, were living in a region where economic activity contracted in 2014-15.

Two thirds were in Queensland (3 million) and Western Australia (1.1 million) where the downturn in the mining sector has hit hard.

Another 2 million people in NSW were living in a "recession hit" area.

"While growth in GDP has averaged around 2.8 per cent since 2011, millions of Australians are living in areas of economic decline," Mr Rawnsley said.

There are clear signs the difficult economic conditions outside of big cities are having an impact at the ballot box.

"The Brexit result and election of President Trump was on the back of voters in communities who have not experienced the benefits of globalisation," Mr Rawnsley said.

"We have seen a similar process in Australia with strong support for One Nation in recession hit parts of Queensland and Western Australia."

One Nation candidate for Paterson Graham Burston finished a surprise third in the first preference count in this year’s federal election with more than 13,000 votes.

He received more than double the 5797 votes cast for the fourth-placed John Brown (Greens). 

Earlier this month, the NSW National Party lost the safe seat of Orange to the Shooters, Fishers and Farmers party after a historic swing indicating a high level of voter discontent.

Orange is in the Central West region of NSW, which Mr Rawnsley estimates has not recorded any economic growth, on average, since 2011.

The paper shows much of regional NSW has struggled economically since the end of the global financial crisis, as industries including agriculture and manufacturing have undergone structural changes. Conditions were particularly challenging in 2013 and 2014.

Five big cities have a growing share of both GDP and population.

Those capitals – Sydney, Melbourne, Brisbane, Perth and Adelaide – are now home to 63.5 percent of the population, 2 percentage points more than 1995. And those cities had a 66 per cent share of Australia's GDP in 2014-15.

Mr Rawnsley said powerful global economic forces underpinned these trends and that the divide between big cities and regions was likely to widen.

Federal and state governments needed to come up with "solid long-term" strategy to deal with this structural change in the economy.

"How will we manage this tidal shift of people into the city?" he said.

"Sydney's population could grow by more than 2 million people over the next 20 years. Investment in transport infrastructure and the provision of housing and economic development should be the focus for delivering the Sydney we want to pass onto the next generation."

Mr Rawnsley, who is national leader of economic and social analysis at the consultancy SGS Economics and Planning, will present the paper, titled "Getting the economy working for all", to the Australian Population Association conference in Sydney on Wednesday.

Sydney Morning Herald

Smartphone
Tablet - Narrow
Tablet - Wide
Desktop