Sydney has become Australia’s economic powerhouse, accounting for almost half of Australia’s economic growth.
The extraordinary figure of 41.2 percent is the highest since Victoria led the nation into recession in the early 1990s
New calculations show that Sydney and Melbourne combined accounted for more than two-thirds of Australia’s economic growth during 2016-17, a concentration rare on a global scale.
The capital city GDP estimates prepared by Terry Rawnsley of SGS Economics and Planning show Sydney’s economy grew 3.3 percent during 2016-17, easily surpassing Melbourne’s 2.8 percent.
The economy of regional NSW grew 1.5 percent; the economy of regional Victoria grew 5.8 percent.
A rough measure of living standards, GDP per capita grew 1 percent in Sydney while slipping 0.1 per cent in Melbourne.
GDP per capita shrank 0.6 percent in Brisbane and 4.7 percent in Perth.
Mr. Rawnsley said economic activity was gravitating to Sydney and Melbourne, even though Melbourne’s living standards were slipping.”It’s getting economic refugees from Perth and Brisbane, whose living standards are slipping faster,” he said. “Melbourne is more affordable than Sydney. If you want a big city with a vibrant economy but you don’t want to pay Sydney prices, you go to Melbourne.”
Sydney is Australia’s hottest capital city economy. SGS suggests that to rein in Sydney’s economy the Reserve Bank would have to push up its cash rate from 1.5 percent to 3.5 percent. To rein in Melbourne’s it would have to push it 2.25 percent. In Brisbane, Perth, and Adelaide, the cash rate would have to be pushed down to 0.25 percent.
Sydney and Melbourne were set to become even more dominant.
“The knowledge-intensive industries in which we are globally competitive are best located in big dense cities with good access to highly skilled labor,” Mr. Rawnsley said.
“Australia is unique in having a population of 25 million people and two cities of roughly 5 million each. Those cities are likely to become ever more important at the expense of the other capitals and regional centers like Bendigo and Ballarat or Orange and Wollongong.”
Financial services are by far Sydney’s most important industry, accounting for 15 percent of its economy, up from, 11 percent in 1997. The next most important is professional services at almost 10 percent, up from 6 percent in 1997. Construction accounted for 6 percent of Sydney’s economy in 2016-17, and manufacturing 5 percent, putting Sydney within spitting distance of Australia’s traditional manufacturing center Melbourne, where it accounted for 5 percent.
The official GDP figures, to be released on Wednesday, don’t break down GDP by state. The Bureau of Statistics does this once a year, in November. Shortly afterward Mr. Rawnsley estimates capital city and rest-of-state GDP. Before joining SGS he calculated statewide and national GDP for the Bureau.