Melbourne’s growing pains: From Rust Belt to Renaissance

For the past decade Melbourne has experienced a sustained period of population growth. With an average of 85,000 new residents every year, Melbourne’s population is growing faster than any other Australian city. This is a very different story to the previous decade when the average growth was 45,000 people per year.

Melbourne today is almost unrecognisable from the urban crisis it was in during the early 1990s. The recession battered Melbourne’s economy more extensively than the rest of the Australia. The industrial heartland of the city contracted sharply which had a range of flow on economic effects. The unemployment rate was near 12 per cent. There was heavy migration out of the so-called ‘rust-belt’ of Melbourne.

Today, Melbourne is a success story. However, the transformation has placed pressure on infrastructure and liveability. These pressures have raised questions about the rate of population growth.

Melbourne’s rapid population growth is due to a range of factors. Almost 20 per cent of the Melbourne’s population is aged over 60. This ageing population means that for each person that retires, a new worker is required. A growing and dynamic economy has resulted in an increase in demand for highly skilled labour which cannot be met without new migrants. The Melbourne economy is now more complex and difficult to define. While Manufacturing was once the dominant industry, Finance & Insurance and Professional Services are now Melbourne’s strengths. Making cars and clothes were easy to explain. Creating ideas and bespoke services to solve complex problems is a much more difficult narrative to tell.

It’s by no means clear that slowing this population growth would be good for the economy, the community and the environment. Growth generates a significant pipeline of work in construction and population serving industries. Many of these jobs go to medium and lower qualified workers. Many of these workers have been left behind in the restructuring of the Melbourne and Victorian economies. Growth also generates the tax revenues to help governments undertake environment repair, skills development and urban restructuring.

In any case, slowing population growth is not simple. There is no way to stop people from Bendigo, Adelaide or Queensland moving to Melbourne. Australian citizens returning from living overseas can’t be prevented from settling in Melbourne. Preventing skilled international migrants (Doctors, scientific researchers and the like) risks damaging the Melbourne economy and the services available to Melbourne residents. Of course, in periods of such high growth, reviewing all aspects of the migration program is sensible, but there is unlikely to be any huge reduction in migration.

While growing Regional Victoria through wise investments has merits, we have to be realistic about what we hope to achieve. Even if Regional Victoria’s historical population growth rate is doubled over the next 20 years (which would be an enormous task in itself), Melbourne will still add an extra 1.6 million people during the same period. Under that growth scenario, Bendigo would have to almost double in size, creating a range of growth pressures for that city. Creating more opportunities in Regional Victoria won’t change the Melbourne growth story.

The Victorian Government is in the enviable position of running operating surplus which is being used to fund vital infrastructure. However, many of the major transport projects will take 5-10 years to deliver. In the meantime, population will continue to grow at close to 100,000 people every year, which will continue to create transport headaches for commuters.

There is a massive disconnect between transport and planning, with transport too often appearing after the land use patterns have been set in place. Transport and community infrastructure shortages, and structural economic changes drawing jobs to the central and middle ring suburbs, mean outer urban suburbs are becoming more and more disconnected from the metropolitan job pool.

SGS has analysed where Melbourne’s youth population live, and the level of accessibility from these areas to jobs and education. While young people are widely distributed across the metropolitan area, large numbers live in suburbs with poor connectivity to jobs and education. Around one third of young people live in areas which don’t have convenient car access (30 minute travel time) to Melbourne’s employment and service pool. Current projections show this situation is likely to worsen.

We are also seeing an even greater disconnect between urban planning and economic policy. The economy has shifted to one that is focused on the central city, while growth in the suburbs continues at a rapid rate. We are now so far behind that there is almost no way to catch up with the growth.

No-one is seriously thinking about how Melbourne will function 50 years from now. Strategic planning, which should focus on setting out the city we want, has been reduced to narrow cost-benefit analysis of transport projects which are aimed at fixing yesterday’s problems, rather than preventing future problems from occurring.

Melbourne compared to other Australian capital cities

While there are these problems, Melbourne is better placed than many other Australian cities.

Sydney’s economic geography presents many more transport challenges compared to Melbourne’s situation. The costs to address these transport challenges are far greater than those facing Melbourne.

South East Queensland provides a parable of poor planning. In the 1990’s it was going gangbusters, but there wasn’t any commensurate investment in infrastructure. They grew South East Queensland so fast and for such a long time that it fed into consolidated revenue. Appalling sprawl was allowed to occur, without investing in any public transport. Now South East Queensland is in difficult situation.

The Adelaide economy is going through a similar transition to what Melbourne went through during the 1990's, however lacks the economic mass to reinvent itself as quickly as Melbourne did. It suffers from loss of its young people and a rapidly ageing population.

Perth is suffering at the end of the mining boom. Of all the economic metrics, falling house prices paints the clearest picture of the city’s decline.


Back to Melbourne itself, there are solutions to all of problems which have been identified. There is now a clear pipeline of infrastructure projects. This is combined with public and private capital to fund these projects. Even the topic of road pricing is now in the policy arena.

The Victorian Government deserves credit for launching the State’s first comprehensive affordable housing policy package in decades. This includes unlocking new housing supply in infrastructure rich suburbs and renewed investment in social housing.

Land use planning is placing greater emphasis on large scale employment clusters outside of the central city with national employment clusters located across Melbourne.

Even the focus on travel time savings (because in the long run they tend to be eroded away) to assess projects is giving way to a wider assessment of what the true economic and social benefits of transport projects are.

But all of these solutions are not quick fixes. For the coming decade Melbourne will have to manage population as best it can. Part of this management is a willingness to have an open conversation about what is driving our population growth.

Source: ABS Regional Population Growth, Australia, 2014-15 (Cat. No. 3218.0), ABS Labour Force, Australia, Detailed (Cat. No. 6291.0.55.001), SGS Economics & Planning, Australian Cities Accounts 2015-16