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Economic Profile

RDA Sydney - Sydney Region Economic Profile - Economic Development

Key Economic Facts         Sydney Economic Strength          Economic_Opportunities        Additional Information

 

Key Economic Facts

According to A.T.Kearney’s Global Cities 2015 Sydney is one of the world’s top 16 Global Elite cities, being both ranked 15th with respect to Global Cities Index (based on current performance in business activity, human capital, information exchange, cultural experience and political engagement), and 11th in the Global cities Outlook (based on future potential with respect to rate of change in well-being, economies, innovation and governance).

Sydney is considered an alpha+ world city, according to Loughborough University's globalisation and world cities research network, which measures the connectivity of cities in terms of position and influence. According to its model Sydney is ranked in the top 10 most connected cities alongside New York, London, Tokyo, Paris and Hong Kong. Alpha cities in general have critical links with major economic regions and states that are linked to the world economy.

The Global Financial Centres Index measures competitiveness between 75 international finance centres and their performance in business environment, finance sector development, infrastructure, human capital and reputation. In 2013, Sydney improved its ranking by 8 places to 15th, and 5th in the Asia-Pacific region.

The 2013 Anholt-GfK City Brands Index ranked Sydney as the second best city in the world next to London for its brand appeal and image. Sydney was also voted the safest and friendliest city. More than 5,000 people from 10 countries were asked to judge cities' international status and standing, physical aspects, basic requirements such as affordable housing and public amenities standards, interesting things to do and economic and educational opportunities.

Quality of life indicators are increasingly being recognised for a city's importance beyond economic factors. The Economist Intelligence Unit ranks cities each year based on political and social stability, health care, culture, environment, education and infrastructure. Sydney was ranked in the top 10 world cities 2 years in a row in 2012 and 2013.

Like Tokyo, Hong Kong, Singapore and Seoul, Sydney as Australia’s leading global city is an important hub within the Asia Pacific region and the financial centre of the Australian economy.

Key aspects of Sydney's economy include: 

  • Within Australia’s population of 23 million, Sydney is the largest city of 4.5 million people, situated on the more heavily populated eastern seaboard of Australia. It lies midway between Brisbane and Melbourne within the major domestic combined market of Queensland, NSW and Victoria- which it is been estimated accounts for over 80% of the goods and services in Australia. The NSW government estimates the population to grow to over 5.8 million people by 2031.
  • In 2013-2014 Sydney had a GRP of approximately $334 billion per year, approximately one-fifth of Australia's GDP and nearly 70% of the NSW GSP.
  • Sydney offers Australian and international companies a highly competitive base to expand in the world’s fastest growing region.
  • It is one of the world's most multicultural cities attracting people from all over the globe, who bring a huge range of languages, cultures, cuisines and ideas to share.
  • The city hosts a mature, globally connected economy serviced by an extensive road and rail network, as well as Australia’s major air and sea ports close to the CBD. Both Sydney’s rail network and its international airport are the largest facilities of their type in Australia.
  • Sydney is the leading tourist destination for international travel in Australia. Sydney boasting 7 of the country's top 10 most popular visitor attractions. The city has consistently been named a favourite international tourist destination over the past 15 years in reader surveys for travel magazines such as Conde Naste and Traveller.
  • As well as being Australia’s financial and economic hub, Sydney is known for the stunning panorama of its harbour, iconic Opera House, large selection of green spaces within the city, and proximity to beaches which are among the most paradisical not just in Australia but anywhere in the world. It’s been ranked one of the 10 most liveable cities on the planet by both Mercer and The Economist.
  • Sydney has tied with Beijing as the eighth most influential city in the world, according to analysts at Forbes. They looked at the amount of foreign investment they have attracted, the concentration of corporate headquarters, business dominance, ease of air travel, financial services, technology and media power and racial diversity.
  • Within the world time zones, Sydney is situated in the same broad times zones of the rapidly growing economies of East Asia-China, Japan, Korea and South East Asia. Sydney is in fact closer by air to Shanghai, Singapore and Tokyo than London or San Francisco. Within the many new 24/7 worldwide financial services and consulting companies, and design-house industries - in fashion and defence and IT for example, Sydney provides overnight services between Europe and the US/Canada in integrated design teams. 
  • As Australia's main financial centre, Sydney is home to the Australian Stock Exchange and the Futures Exchange. More than (75%) of all foreign and domestic banks in Australia have their headquarters located in Sydney. According to the 2011 census there were over 151,000 workers employed in the finance and financial services sector in Greater Sydney with more than 55% located within the City.
  • According to Australia’s ABS, NSW still has the largest most diverse manufacturing base in Australia over $33 billion in GRP in 2013-2014, with two thirds of it ($21 billion) based in Sydney.
  • Sydney has a rapidly growing professional services sector particularly in health, design, engineering and scientific areas, with a global presence particularly in the Asian Pacific region. Sydney also dominates the numbers of information and communications technology companies that have been attracted here and as a result dominates much of the new age digital products, internet, and media design and production sectors in Australia.
  • According to the list in the Startup Ecosystem Report 2012 Sydney is recognised 12th in the top 20 cities start-up eco systems. PwC in their  2013 report ‘The Start-up Economy” predicted that the Australian startup sector has the capacity to deliver $109 billion to the economy, with opportunities for growth in the Finance and Insurance, Manufacturing and Health Care and Social Assistance industries.
  • Sydney has well a developed human capital and skill base, with a strong education and research sector. It is home to five universities featured within the QS World University Rankings® 2014/15 and also one of the best student cities in the world, according to the latest QS Best Student Cities index.
  • Sydney, as demonstrated with the successful hosting of the 2000 Olympics Games, has an impressive quality and quantity of arts, creative and sporting facilities, with specific venues renowned internationally. These facilities are utilised by the local population as well as by domestic and international audiences.

 

Sydney Economic Strength

As per our RDA Sydney 2015 Economic Baseline Assessment Report prepared by the AEC Group, the Sydney Metropolitan Region recorded an estimated GRP of $334.4 billion, representing nearly 70% of the estimated Gross State Product (GSP) for NSW. In 2013-14, the Sydney Metropolitan Region recorded real GRP growth of 2.7%, representing an increased rate of growth since 2012-13.

Over the past five years, the overall economic structure of the Sydney Metropolitan Region has changed with a trend towards a greater contribution by the services sector, in line with many other regions in Australia. The financial and insurance services sector ($51.8 billion; 18.9% of GRP) continues to account for around one-fifth of the Region’s GRP, reflective of the significant financial sector and Sydney’s status as one of the financial hubs of the Asia Pacific Region. The majority of this activity is focused around the Sydney CBD.

Other key industries in the Sydney Metropolitan Region include the professional, scientific and technical services ($28.8 billion; 10.5%) and manufacturing ($21.3 billion; 7.8%) sectors, jointly contributing around a fifth of the region’s GRP. While the professional, scientific and technical services sector’s GRP contribution has increased over the past five years, the manufacturing sector has recorded a proportionate decline in growth.

Other industries recording strong growth include health care and social assistance ($18.3 billion; 6.7%), transport, postal and warehousing ($17.1 billion; 6.2%) and wholesale trade ($16.3 billion 6.0%). This reflects growing demand for additional healthcare, the growth of online retail and imported goods.

Industries tied to the housing sector including construction ($15.2 billion; 5.5%) and rental, hiring and real estate services ($2.3 billion, 3.7%) also recorded strong growth over the past five years.

 

Economic Opportunities

In 2010, Price Waterhouse Coopers (PwC) commented in a report that while Sydney is often touted as arguably Australia’s only global city, the reality is that global city status can only be achieved by addressing “... business, infrastructure and social needs through innovative, proactive and successful business, social and infrastructure policies (PWC – “Sydney: Australia’s global city; 2010).” They suggested then that continuous monitoring of these factors with policy adjustments, and strategic investments to address issues and pave the way for future directions is would be essential to maintain the competitive advantage of the Sydney Region.

According to the 2013 data from the Regional Australia Institute, the Sydney region has the highest ranking in Australia for business sophistication and market size, 2nd for innovation, and 3rd for both human capital and technological readiness.

Whilst Sydney is Australia’s gateway to the world, and our major destination for tourists and international events, there have been up until now well-documented infrastructure constraints that make moving in and around the city, for both people and freight, both time-consuming and costly.

However, over the last 2-3 years, there have been several major trends over and above population growth and apart from lower interest rates and the Australian dollar exchange rate, that are having a significant impact on the Sydney Metropolitan economy including:-

  • Major Infrastructure Investment: Major commitments made by the Federal and NSW governments with respect to many long term infrastructure projects for Sydney eg  Badgerys Creek Airport, Sydney Light Rail, Second Harbour Rail Crossing, Parramatta Light Rail in addition to those projects already underway ie North West Rail, WestConnex and NorthConnex.
  • These commitments have spurred considerable additional international investment and economic activity in anticipation, particularly in major infrastructure design, transport, construction and new business investment. With the significant expected rate of change in Sydney with these projects, there are in fact immediate concerns about excessive congestion until project completion.
  • Major Planning and Development Governance Changes: The release of the much awaited NSW Government’s ‘A Plan for Growing Sydney’ has triggered a series of other actions including the announcement of the Greater Sydney Commission.
  • These potential changes in governance will have significant economic impact on Sydney in attracting investment, planning and implementation of major developments.
  • Digital Disruption: Rapid changes in digital real-time technologies, the speed of communication capabilities via the internet, and the impact of social media are having a dramatic and rapidly changing effect on people’s lives, and the behaviour of business, consumers and governments globally.
  • This disruption is having an immediate, and in some cases dramatic effect on the way Australians live, expect to communicate, buy goods and services. These changes are rapidly affecting the timeliness and manner of global and local business in financial transactions; the design, manufacture of goods and services and supply chain distribution; retail, health, and community and government services.
  • Manufacturing Transition: The Australian manufacturing sector has responded to the high wage and general cost structure and has moved much of the low value, processing-based activities offshore to low cost production countries, with the Australian manufacturing sector transforming with growth in advanced/ high-value aspects of the sector. Clusters of advanced manufacturing sectors in Metropolitan Sydney include:
    • Aviation/Aerospace: Mascot, Ingleburn, Richmond, Bankstown and North Ryde
    • Pharmaceuticals and Biotechnology: Norwest, Parramatta, Rydalmere and Westmead
    • Electronics: Penrith, Blacktown, Baulkham Hills, Auburn and North Ryde
    • Automotive: Bankstown, Blacktown and Ingleburn. The impending departure of car manufacturers in Australia, will pose significant restructuring challenges for automotive original equipment manufacturers.
  • Freight and Logistics: New port, road /rail intermodal transport infrastructure and increases in online selling has impacted the wholesale trade sector. There has been a trend towards businesses reviewing distribution and logistics operations to improve operational efficiencies and reduce costs. This has seen numerous major national and international retail and wholesalers establish major distribution centres in Western Sydney in proximity to key road infrastructure.
  • Badgerys Creek Airport: In 2014, the Australian Government confirmed Badgerys Creek as the site for Sydney's second airport. Currently an updated EIS process is underway. If a Sydney Airport Corporation design-build proposal (in exercising its right of first refusal to the government tender) is accepted by the Federal government early next year, construction will begin in 2016 and will be completed by 2026.
  • The airport has the potential to facilitate a significant volume of additional international visitors to Australia, as well as domestic visitors to the Sydney region through direct movements at the new airport, as well as the relief of capacity constraints at the Kingsford Smith Airport (KSA).
  • This project however could prove to be a potential catalyst for major economic development of a new Aerotropolis, bringing with it commercial, retail and professional service growth centres, technology and science parks; and new transport and logistics and manufacturing opportunities in the Western Sydney Employment Area (on and around the future airport site)
  • The development will also drive significant demand for industrial land associated with the airport, creating a need for substantial supporting infrastructure development in order to support demand and capture the full benefits of the Badgerys Creek Airport development
  • Growth in the Education Sector: Education and training has been one of Metropolitan Sydney’s key growth sectors, with employment increasing at an average annual rate of 3.0% over the past five years. As one of Australia’s major education hubs, Metropolitan Sydney is in a strong position to capitalise on an increasingly skilled labour pool. The region provides exceptional opportunities for enhanced research and development, as well as collaboration between the education and business sectors. The recent depreciation of the Australian dollar will likely see the education sector return to growth as an export industry, with Sydney ranked as the top destination in the world for international students in 2014 (AT Kearney, 2014)
  • The End of the Mining Investment Boom: Mining has been Australia’s boom industry from the early 2000’s. However after nearly a decade, the long running commodity bull market ended in 2011. The gap in economic activity generated by the rapid decline in mining investment poses a key challenge for the Australian economy and also significant opportunities as the skills shortages and wage pressures associated with the mining investment boom subside. The strength and diversity of the Metropolitan Sydney economy places it in a strong position to deliver new avenues of growth through key competitive strengths including finance, professional services, housing construction, education and high value manufacturing
  • Ageing Population: A higher proportion of the population is reaching retirement age. Recent increases in the participation rate of mature workers have resulted in the overall participation rate remaining relatively stable. However, projected future ageing of the population is anticipated to reduce the workforce participation rate and increase demand for health care and community services, and the dependency ratio (proportion of persons outside of working age)
  • Housing Market: Sydney currently ranks as the world’s third most unaffordable city in terms of housing (Demographia, 2015), with median house prices in excess of $1 million in many areas. A strong recent influx of overseas investment into the Sydney residential market has placed substantial additional pressure on house prices, alongside constrained supply and strong resident population driven demand. High prices have exposed many Sydney households to high debt levels and the risk of financial stress in the event of unemployment or when interest rates begin to rise from the current record low levels. Ensuring sufficient availability and diversity of housing supply will be critical to support ongoing population growth
  • Growth in the Start-Up Sector: Sydney is well established as the major hub of Australia’s technology start-up sector, with a total of approximately 950 active start-ups in 2012. PwC (2013) estimates that more than 75% of tech start-ups are targeting the information media and telecommunications sector. However, significant additional opportunities exist to tap into other larger industries, particularly in Metropolitan Sydney, such as finance and insurance (Fintech), and high value niche manufacturing.



Additional Information: 

 

Key Innovative and Research Capabilities

Sydney Key Innovative and Research Capabilities information.

Doing Business

Sydney investment, sustainable growth and economic development.

Social and Demographic Profile

Sydney has a diverse and dynamic ethnic mix.

Sydney Education Sector

Metropolitan Sydney acts as one of Australia's major education hubs.

Investment Opportunities

Some opportunities to invest in Sydney.

Key Industries

Some of Sydney's major industries.

 


Last Updated: 30 Aug 2016