Decentralisation
Are Australia’s cities getting “too big”? And if so, is decentralisation the answer? (image source: TechCentral)

Sunday Age columnist Farrah Tomazin reckons Melbourne is at risk of choking on its own growth and won’t be able to sustain a doubling of population by the 2050s “without a coherent plan to decentralise more of that growth into regional or rural areas”. She says population growth is Victoria’s biggest political issue:

It’s the underlying factor when it comes to transport, with a recent infrastructure study finding that as a nation we’re spending an average of 85 minutes a day stuck in traffic, at a congestion cost of almost $16 billion.

It’s the underlying factor when it comes to education and health, with figures showing some people are still waiting years to see a specialist doctor in a public hospital, or that Victoria will need 220 new schools in the next decade to meet enrolment forecasts.

The answer, she says, is to use “levers such as new employment opportunities, tax incentives or housing policies” to decentralise population growth:

Why not relocate more government departments and agencies to regional towns, following in the footsteps of the WorkCover head-office shifting to Geelong?

Why not aggressively market certain areas as employment hubs for specific industries: the south-west coast, for instance, could become the new home of renewable energy jobs, or Bendigo could be branded as regional Victoria’s chief financial district.

There’s more than a measure of hypebole in this argument. Melburnians travel on average for 66 minutes per day in total and only a small proportion of that could be described as “stuck in traffic”. The demand for public hospital places and for new schools is largely independent of whether population growth is concentrated in Melbourne or the regions.

But Ms Tomazin’s view on what needs to be done to manage growth is a popular prescription. It’s consistent with the current strategic plan for Melbourne released in 2013, Plan Melbourne. It’s upfront about embracing the idea of attracting population growth out of Melbourne to regional cities; it has a chapter titled a State of Cities (see Can the regions save cities from sprawl?).

Decentralisation is one of those enduring aspirations Australian politicians love. It’s almost magical; it promises to relieve the big cities of diseconomies of scale and simultaneously boost the economic prospects of declining country towns. Moreover, it sounds ‘big picture’ and, best of all, the cost and pain lie beyond the current political cycle.

The problem though is active decentralisation policy has never worked in Australia. Despite the great decentralisation experiment of the Whitlam years, Australians remain wedded to their big cities. Melbourne, for example, gets 88% of Victoria’s population growth.

The key problem is it’s almost impossible to get employers to relocate from big cities to regional centres. Whitlam had the great advantage of focussing relocation incentives on firms in the manufacturing sector – where firms are relatively agnostic about location – but his efforts had little effect.

It’s much harder now than it was in the 1970s because manufacturing industry is much less important. The growth is in services industries which are generally more sensitive to location; the industries nominated by Ms Tomazin as candidates for decentralisation – finance and government – value agglomeration extremely highly.

Bendigo has the headquarters of Bendigo Bank, but there’s no prospect of it becoming “Victoria’s financial district” as Ms Tomazin imagines. The financial services industry likes city centres more than any other sector, especially Sydney’s CBD and, to a lesser extent, Melbourne’s.

The story of Canberra is telling. It’s close to Sydney, has excellent air and road connections, and is the nation’s capital, teeming with influential people. It has the highest human capital of any city in the country. And yet it’s population is only 400,000. Albury-Wodonga was nominated as the key growth centre of the Whitlam years but today has a population of around 90,000. Neither city has “taken off”.

Where regional cities have grown strongly – like Cairns – it’s because there’s demand, not because of some policy intervention to make it grow (although government has a role in facilitating – or stopping – underlying demand).

So what’s going on here? The nub of the issue is this debate isn’t about regional development; rather, it’s about the idea of sending Melbourne’s population growth to regional dormitory suburbs instead of fringe suburbs. It’s the same idea as Plan Melbourne promotes i.e. substituting regional sprawl for suburban sprawl.

Is regional sprawl a better idea than fringe sprawl? It’s a plausible strategy. London, for example, has around forty ‘overspill’ or satellite towns like Hemel Hempstead and Milton Keynes lying beyond the green belt and housing 4 million residents. They’re closely tied economically to the centre; they’re London’s outer suburbs in the same way as Melton and Sunbury are Melbourne’s fringe suburbs.

Regional sprawl could provide benefits to regional centres:

  • Faster transport connections between regional cities and Melbourne would increase the locational choices of those working in the capital and enhance the access of regional residents to Melbourne’s attractions and specialised services.
  • All those new dormitory residents would create jobs in population-serving industries for regional cities e.g. tradies, fast food workers, teachers. That would help retain young people who currently leave for the big smoke.

On the other hand, regional sprawl could have some disadvantages compared to fringe sprawl:

  • It would require seriously expensive trunk transport infrastructure to get workers from their regional town to their jobs and other services (like the airport) in Melbourne.
  • There’s no infrastructure saving. Limited existing “spare capacity” in services in regional cities would soon be used up. The loss of economies of scale in the supply of services like health, education, water supply and sewage treatment, might increase costs.
  • The pressure to increase residential densities and reduce car use would be lower in small cities compared to Melbourne’s fringe because accessibility is greater.
  • Many long distance non-work trips to Melbourne and a significant proportion of commutes (not all regional commuters would work in the city centre) would inevitably end up being made by car because it provides flexibility at the destination.
  • The environmental impact could be worse, given much of the land around Melbourne’s north and west – where most future suburban growth is expected – is already degraded.
  • Melbourne businesses located outside the city centre might not get the same benefits from a larger labour market than they would if population growth took place on the suburban fringe.

The case hasn’t been made that Melbourne is or will be “too big”. There are plenty of successful cities in the world that are much bigger than Melbourne is forecast to be by the middle of the century (see also Will Sydney and Melbourne implode as they get bigger and bigger?).

Melbourne needs what all growth requires; better infrastructure and better management (and let’s not forget long-term population forecasts have a poor record for accuracy).

Although it’s already a core component of Plan Melbourne, the regional sprawl scenario is barely understood in terms of its benefits and costs compared to fringe sprawl. A lot more hard-nosed analysis is required.