For Sydney it’s been a $109 billion decade.
That’s how much bigger the economy is now than it was at the start of the 2010s.
The city’s output reached $461 billion last financial year, analysis released last week by consultancy SGS Economics and Planning showed. That’s up from $352 billion a decade earlier.
It sounds impressive but there were plenty of ups and downs along the way.
Sydney started the decade in the slow lane. The economy had been left fragile by the 2008-09 global financial crisis, which took a toll on the city’s giant finance and insurance sector.
As the new decade dawned two more negatives appeared. First the mining boom, fuelled by Chinese demand, put a rocket under the Australian dollar. That was good for overseas travellers but it put a squeeze on Sydney’s big export industries, such as tourism and international education.
The Reserve Bank responded to the effects of the mining boom by lifting interest rates, which sapped the spending power of the city’s mortgage-laden households.
Sydney’s growth rate was lagging the nation. But in 2012 things started to shift. The mining boom finally began to fade and the exchange rate weakened, making Sydney’s exporters more competitive in global markets.
A series of interest rate cuts in late 2011 and 2012 handed the city’s indebted households a financial boost and set the stage for a property price rally. “We went from a China boom to a house price boom. Drum roll. Enter Sydney,” says economist Chris Richardson from Deloitte Access Economics.
Electoral politics even played a role – after voters dispatched the scandal-plagued Labor government led by Kristina Keneally in March 2011, business confidence perked up and investment improved.
By mid-decade Sydney’s economic growth reached an impressive 4 per cent, the fastest since it hosted the Olympic Games in 2000, although momentum has slowed sharply over the past two years.
The jobs market has been especially strong. Sydney now has half a million workers more workers than it did a decade ago and the city’s unemployment rate is lower. The workforce has also become more feminine during the past 10 years – women now make up a record 46.1 per cent of Sydney’s workers.
A long-term trend in favour of knowledge-based service industries has gathered pace over the past decade. The finance sector has long been the biggest contributor to Sydney’s economy and its influence continued to grow. That sector accounted for 15.1 per cent of the city’s output last financial year, followed by professional services (9.6 per cent) and construction (7 per cent) according to the “Economic Performance of Australia’s Cities and Regions” report by SGS Economics and Planning.
The once mighty manufacturing sector, however, has been in decline. Its share of Sydney’s economic output was 4.7 per cent last financial year down from 7.3 per cent a decade earlier.
Two more fundamentals had a big influence on Sydney’s decade: population and housing.
The growth in Sydney’s population was much quicker during the 2010s than the previous decade. The latest figures show Greater Sydney reached 5.2 million people in mid-2018, about 840,000 more than 10 years earlier.
Professor Nick Parr, a demographer at Macquarie University, said the city’s population growth rate accelerated following the end of the mining boom, primarily due to international migration.
The numbers arriving from overseas more than offset a steady flow of people leaving Sydney for other parts of Australia, especially regional NSW, south-east Queensland and Melbourne.
A boom in international education added a new dimension to Sydney’s population story. “Since around 2013 there has been a resurgence of international student movement into Australia and that has been heavily concentrated in Sydney and Melbourne,” says Parr.
International education is now Australia’s third-biggest export and has delivered a major boost to employment and economic activity in Sydney.
Some regions of Sydney have absorbed a disproportionate share of population growth. The Parramatta district, for instance, added nearly 96,000 people between June 2009 and June 2018, which was almost 10 times more than the Sutherland district’s population growth in that period.
Greater longevity is also changing the city’s demography. Sydney’s life expectancy increased by a full year during the past decade reaching 84.1 years.
It’s been a turbulent decade for Sydney’s property market. House prices took off in mid-2012 after a series of Reserve Bank interest rate cuts. The city’s median house price, which began the decade at a little over $600,000, surged past the $1 million mark in 2015 and peaked close to $1.2 million, Domain Group figures show. The median unit price reached almost $800,000.
In mid-2017 sentiment finally turned, or as economist Chris Richardson puts it: “gravity finally caught up with stupidity on Sydney housing prices.”
The five-year boom gave way to a two-year downturn which saw the biggest fall in Sydney property prices since the 1980s. The city’s economic growth rate has since slowed markedly, underscoring the close links between Sydney’s property market and the performance of its economy.
But despite the house price correction, Sydney’s median house price remains well above the $1 million threshold and about $475,000 higher than it was a decade ago.
But prices were not the only thing changing. Sydney’s skyline was also transformed by a shift to high-rise living. In past decades free standing houses have dominated residential construction but that changed in the 2010s. Sydney’s apartment construction boom meant about 20,000 more apartments and townhouses were completed in NSW during the decade than detached houses. The 2016 census showed Sydney now has more than 100 suburbs where at least half the population lives in a flat or apartment.
Patterns of housing tenure in Sydney have also changed. The share of renters in the city climbed from 29.7 per cent in 2006 to 34 per cent in 2016, census figures show. Tenants now account for a bigger proportion of Sydney households than those who own their home outright. Rates of home ownership have fallen as a result, especially among those aged less than 45.
Terry Rawnsley, an expert on regional economic performance and author of the SGS Economics and Planning report, says Sydney’s late-decade economic slowdown has exposed lingering problems.
“For Sydney the teens decade was much better than the noughties but the past two or three years have reminded the city that there are all these challenges in terms of its urban structure and economic structure which haven’t gone away,” he says.
One of those challenges is housing affordability. Opinion polls show concern about the cost of housing has grown steadily during the past decade and is now entrenched as one of the biggest worries for Sydneysiders.
Richardson says the past decade has drawn attention to how much Sydney’s economic growth performance is dependent on rising house prices. “Ultimately that’s got to bite Sydney in the bum,” he said. “Because in the end high house prices means massive mortgages and that Sydney risks pricing itself out as a competitive place to live.”
Congestion and overcrowding have also emerged as a major bugbear for Sydneysiders. The average commuting time in the city increased almost 10 per cent between 2011 and 2017 to 71 minutes, according to the latest Household Income and Labour Dynamics in Australia survey (HILDA).
Workers in Sydney “have consistently had the longest average daily commutes” among the capital cities, the report said.
While strong population growth has contributed to congestion, patterns of employment are also a factor. A disproportionate share of new jobs has been added in jobs hubs to Sydney’s east, whereas a large share of population growth is happening in the city’s west. Hundreds of thousands of commuters must leave western Sydney for work each day, putting intense pressure on road and rail networks.
The state government has ramped up spending on transport infrastructure in response to the city’s rapid population growth but the completion of many big projects, such as the Metro West rail link, is still some way off.
Rawnsley warns there are no quick fixes to make the city more affordable and less congested. “During the 1990s adding more people to Sydney was easier because there was a greater capacity to absorb the new population,” he said. “But by the 2010s a lot of that capacity has been soaked up, so every additional person is causing more friction in the system than previously.”
Sydney’s population has also become more unequal during the past decade. The richest 1 per cent of Sydney’s earners took home nearly 12 per cent of all the city’s income in mid-2016 up from 11 per cent in mid-2013, Bureau of Statistics figures show. The income share of the richest 10 per cent of Sydneysiders is also on the rise. The Bureau’s estimates of regional income distribution shows Sydney is Australia’s most unequal major city.
There’s plenty of room for improvement in the 2020s.
Source: Thanks smh.com