Last month, Treasury’s Population Statement predicted that Melbourne will overtake Sydney as Australia’s largest city in little more than a decade. That optimistic outlook cuts against today’s prevailing narrative: that Melbourne is the capital of a failing state defined by its strained public finances, COVID hangover and an opposition obsessed with undermining its own credibility.
Yet despite these acute challenges, there’s a compelling (and underappreciated) case that Melbourne can reclaim its position as the nation’s undisputed pre-eminent city, as it was in the late 19th century. Then, it was one of the richest cities in the world, underpinned by an economy kick-started by the gold rush, world-class infrastructure and a cultural backbone anchored by inclusive public institutions.
These foundations have become so ingrained in the city that many of Melbourne’s residents take them for granted and fail to realise their potential. Melbourne must focus on doubling down on these natural advantages, and get over the political malaise that’s held it back for too long.
A genuinely sophisticated economy
Victoria’s Gold Rush spurred Melbourne’s initial growth, with nearly a third of the world’s mined gold at the time originating from Australia. With that gold came a flourishing financial sector: Australia’s first stock exchange was founded on Collins Street in 1859. That provided capital for Melbourne to become Australia’s workshop, supporting still flourishing businesses today like Carlton United Brewing. It also supported innovative export-based businesses, like the Melbourne Meat Preserving Company, which was a world pioneer of then advanced canning processes.
Melbourne remains home to Australia’s largest export-oriented companies. The modern descendants of our gold rush, BHP and Rio Tinto, have their headquarters within walking distance on Collins Street. These firms are ably supported by nearly $1t of retirement savings (via the Future Fund, AusSuper and IFM investors), alongside large banks like ANZ and NAB. And Melbourne continues to innovate, with CSL anchoring Parkville’s world-leading biomedical precinct (which is the home of 10,000 researchers and 20% of Australia’s patents).
Such export-oriented businesses are what drive long-term prosperity. Facing a global green transition demanding natural resources, and aging populations requiring new biomedical and investment products, Melbourne’s economy should be well-placed to deliver for the future.
But this can only continue if businesses are able to thrive, freed from today’s outlandish business impediments (which the BCA called the worst in the country). Beyond this, the state’s tax to gross state product ratio is far above the rest of the country: this is especially worrying given most state taxes are particularly inefficient.
Future-proof infrastructure and housing
Melbourne in 1840, a city of 4000 residents, was planned to be far bigger. The Hoddle Grid was designed with 99 ft wide roads in anticipation of a city of far greater scale. Robert Hoddle gives valuable insight into that decision:
“I staked the main streets ninety-nine feet wide, and after having done so, I was ordered by the Governor to make them sixty-six feet wide; but upon my urging the Governor, and convincing him that wide streets were advantageous on the score of health, and convenience to the future city of Victoria, he consented to let me have my will.”
Hoddle’s optimism was quickly vindicated: within 15 years, Melbourne’s population had increased twenty-fold; today, Collins Street and its surroundings comfortably hold the traffic of a city of 5 million.
This context makes the ultra-long-term grand vision of the Suburban Rail Loop (and its even grander price tag) seem somewhat less offensive, especially when considering the three million new residents who’re forecast to populate the city over the next quarter century. Compared with Sydney and Brisbane (cities constrained by hilly terrain and haphazard infrastructure), Melbourne is uniquely capable of absorbing population growth at scale without succumbing to permanent congestion (which hamstrings the benefits of agglomeration).
And bigness begets betterness. Each new resident brings more ideas for our innovators and larger markets for our companies. And Melbourne, with a CBD population three times the size of any other Australian city, has a density of residents to deliver those benefits. Encouragingly, recent planning reforms (which the Allan Government, especially Sonya Kilkenny and Harriet Shing, deserve credit for), appear to have made progress on growing the city without ballooning land prices: indeed, that one can have access to all of Melbourne’s amenities, for a fraction of the price of Sydney and Brisbane, should be seen as a success, not a failure, of the city.
But Victoria’s property tax system is doing its best to keep people out, with stamp duty rates well above every other state. The challenge now is to reverse the rising costs of property taxes that come as a package-deal with Melbourne’s lower-cost homes, to ensure genuine affordability for residents looking to buy a home.
Inclusive cultural institutions
Economic success alone, however, does not make a great city. What was once known as Marvelous Melbourne fostered inclusive cultural institutions which held its growing and diverse community together. In 1854, the State Library was established, as one of the first in the world free for the public (a radical idea at the time). That very same year just down the road, Chinese immigrants established what is now the oldest continuously operating Chinatown.
Today, Melbourne is arguably the nation’s sporting, creative and hospitality capital, underpinned by the world’s leading sporting precincts (like the MCG and Melbourne Park), the nation’s only true theatre district (which, reportedly, is home to a 100-year old ghost) and the nation’s best street dining (which, importantly, doesn’t yet rely on Justin Hemmes). Melbourne’s transport infrastructure, which makes it easier to access the CBD while living in the suburbs, has kept these amenities available for all.
Melbourne’s binding rituals (like the AFL Grand Final, the Moomba Festival, Midsummer and the Australian Open) and institutions (like NGV Australia and our State Library) should be critical for building the ever-elusive ‘social cohesion’ that our country is searching for.
But Melbourne can only achieve that through continued investment in inclusive cultural institutions. That should mean seriously reconsidering cuts to arts organisations across Melbourne, like those at Abbotsford Convent and Writers Victoria. Just as critically, it requires an outright rejection of the hateful groups who have tried to tear Melbourne’s culture apart.
Enabling growth to return
Critics would say that Melbourne’s current government—hamstrung by inefficient spending and reliant on rising taxes—are wasting the city’s economic potential. And those critics do have a point: record spending hasn’t delivered noticeably better services, and our tax settings are deterring new businesses from investing in what Melbourne has to offer.
While worthy ambitions, long-term projects must be delivered with far greater efficiency. There’s a running joke among Victorian Government economists, which suggests that big spending proposals are best measured in one currency: how many metres of Suburban Rail Loop they buy. As a result, all too often, funding a few metres of rail line has prevented serious reform from getting up in One Treasury Place.
This matters because Victoria, by far the nation’s most densely populated state, has every reason to be Australia’s most efficient state government. And achieving this could be simple in theory: stop wasting money on programs that don’t work, renegotiate bloated infrastructure contracts and invest in modernising service delivery.
But the task is difficult to execute in practice: Jaclyn Symes (despite inheriting most of this mess from Tim Pallas) must be brave enough to confront the parts of the community who benefit from these inefficiencies, face the fact that many of their past programs have been wasteful and take risks on new ways to deliver services.
But I’m optimistic that some of these changes will be made. The Silver Review has, finally, been made public. And for all the politics surrounding the document, it is an unusually plainspoken and direct diagnosis of Victoria’s spending woes. If the government succeeds in delivering on its five priority areas, it will hopefully become more skilled at identifying and implementing savings into the future.
Melbourne has industries, infrastructure and institutions that are among the best in the world (and certainly the best in Australia). With true fiscal discipline (and associated political bravery), it can once again be the country’s greatest city. The task for the Allan Government is simple in theory, if difficult in execution: let the city’s advantages shine, like they once did long ago.
Manning Clifford is the editor-at-large of Inflection Points, an online magazine about Australian public policy. He writes in a personal capacity at Cliffhanger.