At the end of last week I was the keynote speaker at a congress in Adelaide of the National Growth Areas Alliance (NGAA). I spoke on the importance of cities, the absence of any Federal policy towards them – and the need to fix this problem. The week before I spoke KPMG put out a report on the ‘city deals’ emerging in England, where city regions around centres such as Manchester and Leeds are agreeing formally with central government about the key objectives for their areas and the local flexibilities required from government and its key agencies to achieve them. There are big constitutional differences between the two countries with Australia’s federal system institutionalising the two tiers of government at ‘Commonwealth’ (national) and State level and England’s system being a unitary one. However, the city deals in England are attracting attention as Australia searches for a way of strengthening its own cities’ performance in the context of a new national conversation on the future of the Federation. While that conversation is focused on addressing what has been termed the ‘vertical fiscal imbalance’ currently existing between State governments and the Commonwealth. In reality the discussion ignores the real imbalance as Australian cities create most national wealth and the federal tax base but are starved of national funding for their infrastructure. We could thus do with some ‘city deals’ here though they would also (a bit like Contrats de Ville in France) have to involve all tiers of government. I should add that there is a key difference: in the UK most cities outside the southeast have been supplicants of national government since the ’30s having previously been net contributors to the nation. Apart from Tasmania and increasingly South Australia, Australian states and cities pay more to the Commonwealth than they get back. This is the speech I gave at the Congress, which was reported in the Australian Financial Review.
The Federal Government needs to have a sharper focus on Australia’s cities – the real engines of national wealth, innovation and competitiveness
Australian cities are real orphans of public policy at the moment. They create most Australian wealth but their role is not recognised in Federal policy and their infrastructure is not a focus of the Federal government’s funding plans. This has to change, in the national interest. The Government must stop thinking of infrastructure as boiling down to simply roads between cities and start working with the state governments to identify and jointly fund key infrastructure IN our cities.
It must also realise that with the mining investment boom now over, the time is right for a new program of infrastructure investment where most innovation in Australia in forward-looking, knowledge–driven sectors is actually taking place: in our cities. Sydney for one is now again the fastest growing capital city in Australia, contributing in itself 23% of national GDP. That is two and a half times the contribution made by the resources sector, creating many more jobs directly and indirectly. And what happens to the wealth created by cities like Sydney?
Research by SGS Economics and Planning for the Committee for Sydney shows that fully 82% of the tax gathered in Sydney goes to the Federal Government, with very little of that returning to the city in the form of infrastructure investment. The Federal Government takes from the cities but on present plans, it will give little back as reinvestment in the wealth-making engines of national growth. It will not be co-investing with state governments in the public transport infrastructure of our cities – leaving our cities behind competing cities globally, as others recognise that public transport is the key to economic success in modern cities and the knowledge economy. Added to this, the Federal Government is planning to actively cut its spending on education in states as part of the Budget process. This will mean insufficient funding for our cities in both hard and soft infrastructure.
The danger from this under-funding of our cities is not just that the nation will not be investing in the real engine of national economic success. It also means that much of the benefit of growth will be confined to areas and communities already well served by infrastructure. The social cohesion of our communities is at stake when city infrastructure is under-funded. Essentially, we are seeing inadequate infrastructure investment for some of the fastest growing parts of our cities such as those in the Growth Areas which need it most to achieve not just economic objectives but also social inclusion. In such areas we are creating places where people live but have to travel long distances to employment with all the consequences for individuals, families and lost productivity of that failure to invest in infrastructure and to fill the jobs gap. And remember, while our cities are growing twice as fast as regional Australia the Growth Areas are growing twice as fast again. Policy and spending need to reflect this fact and address the emerging challenges, urgently.
It is critical that the Federal Government invest in our cities. State governments simply haven’t got the resources to do the job. This is why I echo the call made by the NGAA for the upcoming national discussion on a renewed Federation to have as a key focus policy and funding for cities. Cities are the love which cannot seem to speak their name in Australian public policy. The Constitution is silent on them and they are falling through the cracks in our fiscal structures. We need action for cities, now.