IMPACT OF THE RESOURCE BOOM ON THE ECONOMIC … Boom -Rasmuss… · RESOURCE BOOM ON THE ECONOMIC GEOGRAPHY OF MELBOURNE Dr Bruce Rasmussen and Kathleen Hurley Presentation to Conference

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IMPACT OF THE RESOURCE BOOMON THE ECONOMIC GEOGRAPHY OF GEOGRAPHY OF MELBOURNE

Dr Bruce Rasmussen and Kathleen Hurley

Presentation to Conference

1WWW.VU.EDU.AU

Presentation to Conference The Resources Boom: Understanding National and Regional Implications

Victoria UniversityMelbourne23 February 2011

The issues to be addressed

• How Melbourne, an urban economy in a non resource state, has been How Melbourne, an urban economy in a non resource state, has been effected by the resource boom

• How these effects are distributed spatially

• How one particular region within the urban economy, the Western Region of Melbourne is impacted by the boom and the policy

2CENTRE FOR STRATEGIC ECONOMIC STUDIES – VICTORIA UNIVERSITY

g p y p yimplications that arise

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Outline

• Transmission mechanism of the resource boom to the Melbourne economy• Services not manufacturing• Services not manufacturing• Investment earnings

• Spatial distribution of the impacts of the boom:• In the growth in service jobs and;• Investment earnings

• Western Region of Melbourne as a case study• Policy implications


• Acknowledgements :Alison Welsh, Dr Andrew Van Hulten, Neelam Maharaj and Dept of Business and Innovation

Domestic Supplies to the Mining Sector 2006-07, $billion

$9 0

Exploration & Mining Support Services

Prof, Sci & Tech Services$9.0

$4.0

$2.9

$20.6

Prof, Sci & Tech Services

Construction Services

Petroleum & Coal Product Mfg

Wholesale Trade

Non Ferrous Metal Ore


$ .9

$2.8

$2.5 $1.8 $1.6

Mining

Finance

All other

Total = $45.2b Source: ABS Cat No 5209.0.55.001

3

Change in % share of gross value added, key states, 2004 and 2010

2

3

‐1

0

1

2

VIC NSW QLD WA

Prof, Scientific & Technical Services

Financial and insurance services


‐4

‐3

‐2

Source: ABS 5220.0 Australian National Accounts: State Accounts

Possible reasons for resource-based demand for Victorian-sourced services

• Ghosts of the Collins House Group dominance of the Australian Ghosts of the Collins House Group dominance of the Australian resource sector remain

• Melbourne is the Australian headquarters of the world resource giants, BHP and Rio Tinto. Planning and resource allocation decisions require locally based finance, legal, accounting and engineering services


• Melbourne has been transformed into a major service based economy over the last 2-3 decades

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Employment Growth by Major* Sector, Melbourne Major Statistical Region (F/T 000)

Sector (ranked by CAGR) August Quarter CAGR 2004 2010

Professional, Scientific and Technical Services 112.0 153.9 5.4%Construction 116.0 158.3 5.3%Financial and Insurance Services 65.0 85.0 4.6%Education and Training 89.0 107.9 3.3%Health Care and Social Assistance 102.0 121.5 3.0%Wholesale Trade 67.0 77.6 2.5%Public Administration and Safety 69.0 77.8 2.0%


Source: ABS Labour Force, Australia, Cat. No. 6202.0,.* Over 50,000. CAGR = compound annual growth rate

Retail Trade 103.0 113.8 1.7%Transport, Postal and Warehousing 76.0 83.3 1.5%Manufacturing 239.0 197.7 -3.1%Grand Total 1293.0 1463.4 2.1%

Melbourne’s Labour Force Regions


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Share of Employment by Melbourne Regions, November 2010

25.0%

30.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Financial and Insurance Services

Professional, Scientific and Technical Services


0.0%

Source: ABS Labour Force, Australia, Cat. No. 6202.0,.

Share of Employment by Melbourne Regions, November 2010

25.0%

30.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Financial and Insurance Services

Professional, Scientific and Technical Services

Transport, Postal and Warehousing

Manufacturing


0.0%

a u actu g


6

Trend growth rates in selected services by region 2004 to 2010 (% per annum)



Trend growth rates in manufacturing and transport by region 2004 to 2010 (% per annum)

20.0

0 0

5.0

10.0

15.0

Manufacturing

Transport, Postal and Warehousing


‐10.0

‐5.0

0.0


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Place of residence vs place of work, 2006:Professional, scientific and technical services

13CENTRE FOR STRATEGIC ECONOMIC STUDIES – VICTORIA UNIVERSITYSource: Department of Business and Innovation

Place of residence vs place of work:Finance and Insurance services


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Workplace destination, Manufacturing and Transport, postal and Warehousing, 2006


The story thus far

• Geographically divided city• Relatively heavy concentrations of professionals who live and work in the inner

eastern regions of Melbourne in professional services and financeeastern regions of Melbourne in professional services and finance• Relatively heavy concentrations of people who live and work in the outer west,

north west and south east in manufacturing and transport and distribution• Some of signs of spillage however out of these regions with increasing numbers in

of professional service workers moving to the West and North East

• Implies that if one of the benefits of the resource boom to Melbourne is through professional and financial services then those effects are likely t b bl hi ll t t d


to be reasonably geographically concentrated

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Total Income received by individuals for Melbourne by source ($billions)

100.0

120.0

+13 3%

+8.2% p.a.

40.0

60.0

80.0

Other Income

Superannuation & Annuity Income

Investment Income

Own Unincorporated Business Income

Wage& Salary Income

+7.9% p.a.

+13.3% p.a.

+8.2% p.a.


0.0

20.0

2003‐04 2007‐08

Wage & Salary Income

ABS 6524055002DO003_200304200708 Estimates of Personal Income for Small Areas, Time Series, 2003-04 to 2007-08

60000

70000

Total average income* received by individuals by region and source, 2007-08 ($)

10000

20000

30000

40000

50000Other Income


Investment Income



0


*Per taxpayerInner ‘leafy’ east = Bayside, Boroondara, Glen Eira, Port Phillip, StonningtonEastern excludes leafy east

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Average investment income ($), 2007-08

25000

30000

35000

5000

10000

15000

20000


0

Other Melb Inner East Other East Region Western Region

Investment income by region, 2007-08 ($ billion)

0.78

0.710.36

5.59

1.03

0.92Inner 'leafy' East

Eastern

North East

Western

Outer East

South East

h


2.81

North West

Total =$12.2 billion

ABS 6524055002DO003_200304200708 Estimates of Personal Income for Small Areas, Time Series, 2003-04 to 2007-08

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Effect of the resource boom in Victoria has been to compound existing inequalities and opportunities

• Benefits of increased demand for professional services and finance jobs Benefits of increased demand for professional services and finance jobs is spatially concentrated in the inner east of Melbourne, although there is some sign of an ‘overflow’ the North East and West

• To the extent that the benefits of higher mining company profits are returning to Melbourne in the form of investment income, these are likely to be highly concentrated in the inner east


Case Study: Western Region

• Most of the outer regions of Melbourne, West, North West and South East are endowed with economic structures which mean that they are less likely to benefit from the boomless likely to benefit from the boom

• On the other hand they have rapidly growing populations requiring significant infrastructure investment and expanded provision of local services

• The Western Region of Melbourne has many of these characteristics and is therefore a useful case study. It has:• Social and economic diversity

Ch i i t t d i t t


• Changing economic structure due in part to:• Gentrification introducing increased numbers of professionals• Rapid population growth

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Share of Total Employment, Western LGAs 2006

25.0%

30.0%

5.0%

10.0%

15.0%

20.0%

Financial & insurance services

Professional, scientific &


0.0%technical services

ABS: Census 2006

25.0%

30.0%

Share of Total Employment, Western LGAs 2006

5.0%

10.0%

15.0%

20.0%

Financial & insurance services

Professional, scientific &

Transport, postal & warehousing

Manufacturing


0.0%

,technical services

ABS: Census 2006

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Total average income* received by individuals by Western Region LGA, 2007-08 ($ billion)

50000

60000

10000

20000

30000

40000

50000

Other Income


Investment Income



0

Income


*Per taxpayer Source: ABS 6524055002DO003_200304200708 Estimates of Personal Income for Small Areas, Time Series, 2003-04 to 2007-08

Net flows of managers and professionals to the Inner West, 2001-2006

Moonee Valley

Maribyrnong

Williamstown

1123 fromInner Melb


Williamstown

2215 from overseasABS: Census 2006

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Employment growth by sector: Inner West

Industry sector (ranked by CAGR) 2001 2006 CAGRPublic administration & safety 5,481 7,303 5.9%

Construction 5,884 6,981 3.5%

Fi i l & i i 3 3%Financial & insurance services 5,066 5,959 3.3%

Arts & recreation services 2,274 2,651 3.1%

Health care & social assistance 9,294 10,741 2.9%

Transport, postal & warehousing 6,855 7,810 2.6%

Education & training 8,542 9,513 2.2%Professional, scientific & technical services 8,518 9,385 2.0%

Trade 16,084 17,064 1.2%


, ,

Other services 19,497 20,019 0.5%

Manufacturing 16,734 13,250 -4.6%

Total 108,098 115,119 1.3%

CAGR = Compound annual growth rateSource: ABS Census 2006

Western Region Population by LGA

2001 2006 2008 2009 CAGR 2001-2009LGA no. no. no. no. %

Wyndham 87141 116332 133121 143879 6.5

Melton 52830 81414 92694 100000 8.3

Brimbank 168247 176003 181564 185890 1.3

Hobsons Bay 83367 84759 86334 87486 0.6

Maribyrnong 61226 66183 69998 71523 2.0

Moonee Valley 105442 106791 109635 111268 0 7


Moonee Valley 105442 106791 109635 111268 0.7Western Region 558,253 631,482 673,346 700,046 2.9

Melbourne 3,471,625 3,744,373 3,902,059 3,995,537 1.8

Source: ABS. cat. 3218 Regional Population Growth, March 2010 , ABS 3101.0 - Australian Demographic Statistics, Dec 2009 for Melbourne data.

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Population projections for Western Region, DPCD, September 2009

800000

900000

1000000

+205,000 or

300000

400000

500000

600000

700000

800000

Wyndham (C)

Melton (S)

Brimbank

Maribyrnong (C)

Hobsons Bay

Moonee Valley (C)

27% Melb growth

17% of Melb2009 population


0

100000

200000

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Source: DPCD VIF2008 Projected Population Totals - SLA LGA SSD SD 2006-2026.xls

Challenges for the West

• Compounding effect of the resource boom on existing inequalities• A low proportion of its residents work in high growth sectors, such as professional

services• Conversely a high proportion work in low growth sectors such as manufacturing• Conversely, a high proportion work in low growth sectors, such as manufacturing• Little access to the benefits of the resource boom through investment income

• High rates of current and projected rates of population growth for the region for the outer Western LGAs

• Low levels of investment in public infrastructureHi t i ll d l d i f t t j t $4 5 billi R i l R il Li k


• Historically and planned infrastructure projects, eg $4-5 billion Regional Rail Link, now in doubt following the change of State government and the Qld/Vic floods

• Predicament common to large areas of outer Melbourne

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What to do about it: address the fundamentals • Need to understand the drivers of successful urban growth better, but

this analysis suggests that:• Encourage the changes such as the increasing proportion of • Encourage the changes, such as the increasing proportion of

professionals, evident in the labour force and other data• Need for supporting infrastructure and other public services:

• Implement the planned infrastructure investments• Provide the sorts of educational, social and recreational services expected by

modern residential communities

• Adopt strategies to maximise the leverage to these projects and other changes to better connect the Western and similar regions to the


changes to better connect the Western and similar regions to the growth drivers of the Melbourne economy

• Otherwise we will have rapidly growing but poorly resourced communities occupying large parts of the metropolitan area

CONTACT DETAILS

DR BRUCE RASMUSSENDR. BRUCE RASMUSSEN

DEPUTY DIRECTOR

KATHLEEN HURLEY

RESEARCH FELLOW

CENTRE FOR STRATEGIC ECONOMIC STUDIES

PHONE +61 3 9919 1342


FAX +61 3 9919 1350

EMAIL [email protected]

WWW.VU.EDU.AU

Documents

IMPACT OF THE RESOURCE BOOM ON THE ECONOMIC … Boom -Rasmuss… · RESOURCE BOOM ON THE ECONOMIC GEOGRAPHY OF MELBOURNE Dr Bruce Rasmussen and Kathleen Hurley Presentation to Conference