Can we solve Australia’s city problem? (Part two)

 

In the previous article I observed that some 70% of Australians live in our 8 largest cities. By comparison, in the USA their 10 largest cities account for just 26% of their total population. This concentration of population (and especially of growth) in such a small number of cities is reflected in daily media reports of housing shortages and housing affordability (which is some of the worst in the developed world). We also read of rising congestion, hospital shortages, school waiting lists and other features of increasingly crowded cities which just don’t have the infrastructure to keep up with the frantic pace of growth – driven entirely by Federal immigration policy.

Can anything be done to reduce this pressure on our major capitals? After all, this is a big country and – notwithstanding the inhospitable nature of much of the landmass – there are very nice places other than our eight largest cities. Why aren’t more people moving there?

‘Decentralisation’ as an idea in Australia has been around since Federation. Writing in “The Next Australian City” by Suburban Futures, author George Wilkinson III pointed out that efforts to sway state votes in favour of Federation were heavily tinged with promises of decentralisation should Federation be supported. And so began our tradition of doing the opposite of what’s promised?  

In 1901, Australia was home to around 3.8 million people. Melbourne was the biggest with 495,000 people, followed by Sydney (487,000), Adelaide (162,000), Brisbane (121,000), Perth (45,000), and Hobart (36,000). Back then, our top 10 cities accounted for just 37% of the national population. That ratio is now reversed.

Rural and regional industries from mining to agriculture and manufacturing were more labour intensive back then, and the ‘tyranny of distance’ meant more emphasis on providing locally for local community needs. Food supplies for example were more likely to be locally produced, and available only when in season. So much has changed over time and much of that change has been to the detriment of vibrant regional towns and cities.

But ironically, the increasing congestion and collateral impacts of rapid growth in the big cities may once again turn the focus back to some of the regional centres. Which ones are likely to be best positioned, and what could we do to enhance that opportunity?

One thing we should have learned that does not work is the government enforced mandate to relocate entire swathes of unwilling public servants to regional towns they have no interest in. History repeats, and this trope is still sadly favoured by many wanting to promise instant fix solutions.

Instead, here are some suggestions for a more enduring approach to encourage growth outside the major capitals:

Pick candidates. Start with a list of regional towns and cities which offer a good basis for growth. They should have a certain critical mass and reasonable, sustainable economies. The top 20 non-capital city regional areas are a starting point (I am indebted to the good people at Urban Economics for this table):

Housing Affordability is a significant motivation to explore a regional centre as opposed to a capital. Hence the inclusion of median house prices in this table, which compare very favourably with the big capitals where the same house can cost you double or more, for less land and for an inferior dwelling too.

Connectivity is also important. Being able to access a nearby major centre without major difficulty means a local airport with regular services, or a rail connection, is a valuable asset. Armidale for example, which doesn’t make the top 20 list above because of its smaller population (25,000), does have an airport with multiple daily flights to Sydney. Ballarat, which does make the top 20 list above, doesn’t have regular flights to Melbourne but the train service is a 1.5-hour journey. That’s about the time many city dwellers complain about for their daily commute.

Employment is obviously critical. Many regional centres offer jobs which pay even more than the same occupation in a major capital. Many also have more vacancies than people to fill them. The Regional Australia Institute has done some excellent work highlighting occupations which pay a premium over the big capitals. This is little known and, as the Institute recommends, is something governments could do better at in educating new arrivals and Australian residents.

Education is also highly significant. A choice of schools – government and independent – as well as possibly tertiary education are essential to many considering a move to a regional centre. Armidale, despite its smaller population, is for example home to the University of New England and has several schools with excellent reputations. The same applies to many centres in the top 20.

Health care. Hospitals, medical centres, a range of general practitioners and other professionals are vital to any healthy community. Some regional centres are endowed with quality legacy health care, while others need more investment in this. Even attracting medical workers to regional centres can be problematic, despite in some instance very high incomes being offered. The reason? Amenity. See next point.

Amenity. “Why would we want to live THERE!” This is one of the biggest hurdles faced in attracting talent, capital and enterprise to a regional centre. Often, it’s the impression of amenity (or the absence of it) which kills the deal. Families and partners are more influential than economics when it comes to decisions like this. Ironically, amenity can be a low hanging fruit. Quality parks and recreation, community facilities, vibrant main streets – these are not overly expensive in the scheme of things. I’ve often made the point that a $100m investment in urban amenity in an outer suburb or regional centre makes a very big splash. In a capital city, it will go unnoticed (and with no gratitude either!)

Environment. Too hot, too cold, too dry or too wet. Not much can be done about our climate preferences. It’s a factor for sure, but hard to fathom our fussy attitudes when you consider the economic and lifestyle miracle of somewhere like Singapore – which swelters more or less year round. Having said that, many of the top 20 non-capital city centres offer amenable environments which avoid weather extremes.

Tax. The great irony of our tax systems in Australia is that they generally treat outer suburban or regional centres the same as if they were privileged inner city areas. Why for example, is payroll tax pretty much the same for a business employing 100 people in an inner-city office building as it would be should those jobs be in a regional centre? The same applies to other noxious taxes like stamp duty, land taxes, fuel excises – all of which are typically agnostic when it comes to location. The Federal Government – which is entirely culpable for the rapid rates of population growth – shows no interest in offering major income tax or company tax concessions to people and businesses in outer suburban or regional centres. If we want to seriously turn on the ‘open for business’ sign in a regional centre, why isn’t this also on the menu?

This is not an exhaustive list, but maybe it’s the start of one? I’ve long maintained that in the same way we saw a national program devoted to inner city revival (the ‘Better Cities’ program of the late 1980s had enormous impact) we need a new approach to outer suburban and regional renewal. That will require all levels of government acting together with specific place-based outcomes in mind. It’s a nice thought anyway. I am ever hopeful. What is certain is that the current ‘business as usual’ approach to population and settlement is broken. We cannot turn to BAU to fix the very things BAU broke in the first place.

 

Australia: we have a city problem! (Part one)

Australia’s large cities are facing extraordinary population growth pressure, with symptoms manifesting themselves in everything from shortages of housing to health care, education, transport and other forms of essential infrastructure. This pressure is fuelled almost entirely due to Federal Government immigration policy.  

The situation is exacerbated due to our historic reliance on a small handful of cities to accommodate our population: 70% of Australians live in our 8 largest cities. By comparison, in the USA their 10 largest cities account for just 26% of their total population. To get to 70% of the population of the United States, you would need to include 120 of their largest cities, not 8.

Source: author research

In Australia, by the time you are outside our top 5 cities, you start to encounter cities of 500,000 people. By the time you get near #10, you are essentially at a rounding error for Melbourne or Sydney. The curve drops off sharply in Australia, while in the USA there are many cities of 1 million or more and the curve is less pronounced, especially once you exclude the global mega city region of wider New York.

The focus on our largest cities getting larger is unlikely to change without some policy interventions (more on that in part two of this). For the time being, the largest cities are perceived by locals and immigrants alike to offer the greatest opportunities for employment, education, health care and general amenity. This explains why immigrants are overwhelmingly choosing to settle there.

Ironically, as the large cities get more and more crowded these perceived benefits are increasingly compromised: housing costs are escalating, traffic is worsening, and access to social infrastructure gets harder. The impression however hasn’t changed the preference to settle in these large cities, despite the obvious drawbacks in housing – to the extent that our housing affordability now ranks as some of the worst in the developed world relative to incomes.

Why Australia isn’t developing a number of second tier cities capable of reducing the pressure on the major capitals is nothing new. As City Growth Strategist & Economic Geographer George Wilkinson III pointed out in his chapter in “The Next Australian City” by Suburban Futures, even on the eve of Federation in 1901, “it was contended that the capitals were congested cesspools with state centralisation being a regrettable outcome.” To entice reluctant regional votes over the line, it was promised that Federation would herald an era of decentralisation. It didn’t.

None of this is to deny that many regional cities are experiencing solid growth relative to their size. The average growth over ten years for the largest cities (Melbourne, Sydney, Brisbane and Perth) was 20%. Many regional centres grew just as fast or faster in that time. Places like Geelong (Vic), Busselton (WA), Ballarat (Vic) and Toowoomba (Qld) for example are just some of the regional cities which grew by significant percentages in the 10 years to 2024.

But if you exclude the actual growth numbers in places like the Gold Coast-Tweed (135,624) or Sunshine Coast (91,202) there are not many regional cities growing by significant numbers of people despite the high percentages: they are coming from a relatively small base. Busselton’s 25% growth for example only represents an additional 9,036 people. That pace of growth will still pose a challenge for the local council tasked with accommodating it, but in real numbers it’s not going to help relieve the pressure we are placing on the larger capitals. In the same period Busselton grew by 9,000 people for example, Brisbane grew by nearly half a million people.

 Table of select non-capital city regions with the highest % growth rates

Australia lacks any form of settlement strategy, something the Planning Institute of Australia has repeatedly argued for: “When it comes to planning strategy, we need a greater focus on place-based infrastructure planning and funding, common infrastructure demand and population scenarios to make a real change.” Hear hear.

As our major capitals hurtle toward an uncertain future driven by growth they have no control over and with limited resources, it is timely to ask why more isn’t being done to explore opportunities to spread the population load more equitably. Are there centres in Australia capable of accommodating many more people than they have at present? Are there opportunities to nurture a series of second tier cities of between 300,000 and 1 million, where opportunities for employment, housing, health care, education and environmental amenity are at least as good as those found in the major centres? If so, where would you start, and what levers are at our disposal?

Part two will explore some ideas.

Winning the suburbs is the key to winning elections.

 

There’s a great line from the comedy show Kath & Kim, where the very suburban Kim expresses her desire to be like affluent city people. “I want to be effluent Mum," she says. "You ARE effluent, Kim," replies the equally suburban Kath.

The new political geography of affluent inner urban residents viewing life differently (and voting differently) to suburban and regional voters was proven again in the recent Australian Federal Election of 2025. The geographic pattern has previously been obvious in booth-by-booth results for recent State and Local Government elections, and the same happened for the Federal poll.

Inner city areas of our major urban areas are two things at the same time: they are much wealthier than suburban city dwellers, and more inclined to vote for far left/Green causes. The concentration of affluence in inner cities has been underway for many years, as inner urban areas were gentrified. Whether it is Sydney’s Balmain, Melbourne’s Richmond, or Brisbane’s New Farm, once working class/industrial areas are now home to the wealthiest people, living in the most expensive real estate, enjoying the highest levels of urban amenity and living the highest standards of living. They’re increasingly oblivious to the lives and issues of their fellow Australians.

This graph shows how it looks for Brisbane’s New Farm and West End, compared to middle and outer suburban areas. The same story is repeated across other cities in the country.

This level of income disparity also explains why voters in these areas view life differently to the suburbs. Worried about waiting lists for health care? Nope, they have the highest levels of private health cover. Worried about school class sizes or education generally? Nope, their kids attend the best private schools. Worried about the cost of groceries? Nope, they shop at Harris Farm markets in trendy areas. Worried about the cost of fuel? Nope, they probably have a taxpayer subsidised Tesla (soon to be traded in protest at Elon Musk’s MAGA conversion). Worried about crime and personal safety? Not really, they have private security or live in impenetrable apartments. Worried about being told you have to return to the office and can no longer work from home? Not really, the office for them is very close to home, plus they probably have managerial positions. Worried about immigration, housing shortages and the housing affordability issue? Not really, they can afford to live in high end areas and will outbid others if that’s what it takes. Worried about the cost of electricity? No, they can afford it - but are more worried about carbon emissions and climate change – so the very high cost of energy transition is worth it.

It's the irony of modern politics though that these affluent inner-city residents are also the ones most likely to vote for leftist/Green causes – many of which are anathema to their own interests. There would not be too many suburban superannuation accounts with over $3million that will be subject to an unrealised gains tax, for example.

The political reality is that the suburbs are different – they think differently and what appeals to the ‘big end of town’ interests associated with the inner-city set will not appeal to the suburbs. When Peter Dutton suggested Federal Government public servants must return to the office 5 days a week, he was talking like an entitled and clueless CBD building owner. He might have had privileged Canberra bureaucrats in mind, but the message had massive collateral damage in suburbia where congestion, commutes, school pick ups and drop offs and the cost of living are seeing quality of life go backwards. It did not go down well, especially with women.

Political parties and their leadership invariably gravitate toward the ‘big end of town’ - with major corporates, institutions, Universities, media organisations and others keen to associate with them and to press their arguments over fine meals in luxury boardrooms. But this could also be deadly for political leaders, whose time may in future be better spent in a suburban nail salon, coffee shop or gym where they will hear very different opinions on almost every topic. 

So detached have the views of the inner city set drifted from mainstream suburbia, that you wonder if a political party could actually grow on the basis of being the antithesis of the inner city zeitgeist. Like George Costanza in Seinfeld, just do the opposite?  

The maps below show Federal Election primary vote results by booth, based on Electoral Commission data, and reported by The Sydney Morning Herald.  The red dots are where Labor polled the most primary votes, the green are for greens, blue for Liberals, and grey for Independents (left leaning Teals in Sydney). The colours show the party with the largest primary vote – they do not take into account preferences or seat wins/losses.

I am just showing Brisbane, Sydney and Melbourne – which combined account for two thirds of the Australian population. If you can’t win here, you can’t win.

(Above) The clustering of green votes in inner city booths of Brisbane closely aligns with the highest income areas of the city. Labor dominated across most suburbs.

(Above) A wider view of South East Queensland shows the greens strength is confined to inner Brisbane, and does not extend to the Gold or Sunshine Coasts. Just south of here however is Northern NSW – a very strong green voting area (and a very wealthy one also). Liberals won the primary vote counts in Gold and Sunshine Coasts which are arguably more likely to house retirees or working boomers. This map covers a population of around 4 million – 15% of the entire country.

(Above) In Sydney, the independent/Teals votes are strongest in the wealthiest inner-city areas around the harbour. Labor did well everywhere else.

(Above) A wider view of Sydney, where Labor dominated the suburbs. This map covers roughly 5 million people – or around 20% (one in five) of all people in Australia.

(Above) Inner city Melbourne is another Greens stronghold, where the greens vote also closely follows the geography of urban wealth.

(Above) Greens in the centre city, and Labor in the suburbs. The liberal vote across suburban Melbourne was nowhere near enough to get it over the line. More than one in five Australians live in the area shown by this map.

Slow down!

Many in the development community cite population growth as a necessary ingredient for market health. To some extent, that’s true – except when it isn’t. Recent ABS data for population growth in Australia might have some cheering, while others will be worried.

In South East Queensland for example, Logan grew in one year by just a smidge under 4%. Ipswich grew by 3.5% in the same year. Brisbane, the Gold Coast, Moreton Bay and Sunshine Coast all grew by around 2.5%. There are similar numbers being reported in high growth corridors of all our major cities.  

 

Developers may celebrate these numbers. Many real estate salespeople actively promote them as reasons to have confidence in further real estate price rises. But in a world which is allegedly worried about housing affordability, is that a good thing?

More than that, market boosters are typically not the ones left with responsibility for the social and other infrastructure that is needed to support that growth. Growing hospital wait lists and bed shortages, growing classroom and school sizes, crowded roads, repairs to roads, footpaths, parks, strained public transport – none of these are responsibilities of the boosters, but instead fall to State and Local Governments which are under increasing pressure to keep up with the growth, and which are generally not coping.

For context, the World Bank once declared that countries with population growth rates above 2% were risking third world conditions. We have places in Australia doing double that. Saying that growth is good irrespective of the rate of growth is a bit like saying that driving through a school zone doing 100kph during drop off or pick up hours isn’t a problem. There’s a difference between being responsible, where risks to the community are identified and mitigated, and reckless. We are verging on reckless.

Nearly all of Australia’s population growth is a direct result of Federal immigration policy. We’re having fewer and fewer children – our birth rate is down to 1.5, well below replacement rate of 2.0. Some argue this is because housing has become too expensive that young families are electing to have fewer or no children because affording them and a house in their younger years is no longer an option. So the Federal government can pump up the growth stats through immigration and accepts no responsibility for the impacts at ground zero – which is increasingly in our major capital cities.

“But it’s a good problem to have” some will say. I am starting to question that. The evidence all around us should be telling us we have serious issues. Our increasingly unresponsive, cumbersome and costly regulatory mechanisms are simply incapable of keeping up. The planning process seems to be slowing down at the same time as demand is accelerating. Costs are piling up at the very time we have an affordability problem – not just for houses, but for pretty much anything that requires building something – anything at all .

How many years of zero growth might we need just to catch up? It’s an interesting but moot point. Hardly likely to happen. More helpful is to think about how countries with falling populations are faring. Surely if growth is essential, these countries must be in a dire position with falling prices and collapsing standards of living.

Japan is one such country. Their population is shrinking, by around 0.5% per annum. They reached ‘peak Japan’ of 128 million back in 2008 – and have been shrinking since. But here’s a chart of the Japanese real estate index since 2015. 

No collapse here. In fact, prices rose by around 3.5% in the last year. Sure, they are down on the crazy peak of the early 1990s, but that was a speculative bubble that puts Bitcoin to shame. It burst as fast as it ballooned.

Japan’s standard of living, educational institutions, national GDP, employment and other indicators are all reasonably healthy. This despite a shrinking population since 2008.

Japan isn’t alone. Here’s a map of countries with declining populations. Yes, that’s China, Russia, and much of Europe including economic powerhouse Germany, in contraction mode.

 

According to Reuters, who predict a 3.5% growth in house prices for Germany this year, “Fuelled by years of low interest rates and strong demand, the property market in Europe's largest economy boomed until a post-pandemic surge in borrowing and construction costs quickly turned it into one of the hardest-hit markets in a global real estate slump.” No mention of shrinking population as the cause of the slump, which is now being shrugged off despite a falling population.

I’m not suggesting we throw ourselves into reverse gear. But it does seem pretty clear that rates of population growth of over 2% or 2.5% are very high by world standards when it comes to advanced economies, and are more typical of third world nations. They are not only detrimental to our ability to maintain our standards of living, but actively eroding them. Plus, if other nations can actually survive with stable or even shrinking populations, without immediate signs of real estate market collapse or dire economic circumstance, maybe it’s time the growth narrative in Australia was given some serious thought.