But regional Victoria has been deprived of its share in the growth of the services economy, and remains heavily reliant on agriculture and manufacturing.
Melbourne’s strong economy has made it a magnet for new arrivals, attracting 125,000 residents last year at an extraordinary growth rate of 2.7 per cent. Regional Victoria, meanwhile, grew by fewer than 20,000 people.
The report has been released just as Melbourne is tipped to become a city of 5 million, prompting serious debate about how to encourage Victorians to move to the regions.
Opposition leader Matthew Guy has spoken regularly of wanting to decentralise the Victorian economy by promoting jobs growth in the regions.
The Andrews government has also renewed its emphasis on regional development, most recently announcing that its solar panel agency will be based in Morwell.
Twenty years ago manufacturing accounted for 16 per cent of Melbourne’s gross domestic product, but by last year its share had shrunk to just six per cent.
Meanwhile in regional Victoria, it has declined from 13 per cent of GDP in 1997 to 10 per cent.
The SGS report, Productivity or Perish, found Australian cities had turned population and employment density to their advantage, by building an economy based on information, financial and professional services, which offsets the decline in manufacturing.
But the regions struggled to provide white-collar professional employment.
“Currently, the regions are heavily dependent on agriculture which can be subject to unpredictable weather and commodities price cycles.”
Financial services has become the biggest component of Melbourne’s economy, having grown from 9 per cent of output in 1997 to 12 per cent, while contributing only 2 per cent of regional Victoria’s economy over the same time.
Agriculture has overtaken manufacturing as the biggest part of regional Victoria’s economy, accounting for 13 per cent of output, while mining, which includes gas production, has fallen from 10 per cent to just 2 per cent.
Agriculture is the biggest contributor to regional Victoria’s economy.
Photo: Glenn Hunt
The SGS report ranks Australia’s cities and regions by how much wealth they generate for each hour that is worked, using economic data from the Australian Bureau of Statistics.
It found the economies of Melbourne and Perth both generate $81 per capita for every hour worked, behind Sydney, which generates $93.
Regional Western Australia is most productive at all, with the average worker generating $164 an hour of output thanks to mining.
But regional Victoria was the least productive of all state and territory regions, generating $67 per hour of work performed.
The best way to improve the fortunes of Victorian rural areas was to improve the rail networks and invest in faster trains between Melbourne and the big regional towns, says SGS partner Terry Rawnsley.
“In regional Victoria, creating a European-style settlement pattern with fast rail transport between regional centres and Melbourne will provide some of the benefits of big city agglomeration to places like Geelong, Bendigo and Ballarat,” Mr Rawnsley said.
However, new figures from the Australian Bureau of Statistics released last week show regional Victoria’s employment rate is healthy, despite its low economic output.
Victoria’s regional unemployment rate fell to 4.7 per cent in July, its lowest since 2011.
Treasurer Tim Pallas said last week the figures showed the Andrews government’s halving of regional payroll tax and boosts in regional investment was growing local economies and creating jobs.
State Political Correspondent for The Age
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