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Western Sydney: From growth dynamic to new dynamic

The pandemic coincided with the end of a prolonged growth surge in Western Sydney, according to a new report that analyses the region’s past prosperity and explores what needs to change to boost its economic prospects in the post-pandemic future.

The economies of the Western Sydney suburbs Blacktown, Cumberland, Parramatta and the Hills District were cresting an exceptional growth surge when the COVID-19 pandemic struck in 2020.


In the period from 2013 to 2019, total jobs growth in what is called the Central City District (CCD) exceeded 20 per cent, led by extraordinary expansion in the construction, logistics, healthcare and social assistance sectors.


For these suburbs, which were the heart of Western Sydney in the 20th century, this was the fastest they had grown since the 1960s, spurred by immigration, housing construction, government infrastructure development and investment in the logistics industry by major domestic and global corporates.


The arrival of the pandemic, however, stopped much of that in its tracks and, after a decade of growth, the CCD now faces a very different dynamic as the region experiences the most severe impact of the Delta outbreak.


After five years of record growth, for example, activity in the construction industry slumped by AUD2.3 billion in the 2019/20 financial year, only four months of which was impacted by the pandemic.


A new report, Future Directions, commissioned in August 2020 by the four local government authorities, seeks to analyse both the pre-pandemic growth surge and looks at the CCD’s post-pandemic future.


A study in contrasts

COVID-19 has exposed the uneven nature of the CCD’s development and, at the same time, revealed how conducive its urban geography is to living in a post-pandemic world, says Professor Phillip O’Neill, co-author of the report.


“One big thing the virus revealed was the opportunity for eCommerce systems to be rolled out in a greenfields residential environment,” he explains.


The CCD’s growth surge in the decade prior to COVID-19 had been driven by the warehousing and logistics industry, attracted by affordable land prices and a geography where “you can still use forklifts off the back of the truck to unload to the household”.


“If you take an aerial shot of Kellyville, it has uncontested street spaces, the houses have very large driveways and you can drive into the front garages,” says O’Neill, Professor of Economic Geography in the School of Social Sciences at Western Sydney University.


“A container arrives from China, it travels on a perfectly flat surface on the ocean and then there’s barely a hill between Port Botany where it is unloaded and the last-mile delivery systems into perfectly aligned estates.”


Online retailing and home delivery boomed during the lockdowns as more people stayed at home, and ecommerce is likely to remain a part of daily living in the suburbs once the economy re-opens.


With large logistics centres nearby and easy access to homes from the street, the physical environment of the CCD is especially well suited to a retail sector increasingly driven by online ordering and home delivery.


“In terms of urban geography and demography, Western Sydney was going really well, and then the way the virus impacted probably accelerated the roll out of what we call Logistics 4.0,” suggests O’Neill.


Challenges to growth

The pandemic, however, also exposed some challenges caused by Western Sydney’s rapid growth.


While the CCD had experienced Sydney’s biggest increase in the number of workers with tertiary degrees, there was very little employment for these people close to home.


“Areas like Parramatta and Auburn have moved in the past 20 years from having well below average degree rates in the workforce to now matching eastern Sydney, with 35 to 40 per cent of people aged between 25 and 40 years having degrees,” says O’Neill.


Many of those people in Sydney’s west have been working remotely during the pandemic but, even if they continue to do some work from home under the new hybrid work model, they will ultimately return to their jobs in Sydney’s CBD.


“The biggest congestion issue in Western Sydney is not on the roads, it’s on the rail line from Sydney to Penrith,” says O’Neill. “There’s not enough room on the platforms and there’s no more room on that line to run more services.


“Over 40 per cent of Western Sydney workers with degrees have been travelling into the Sydney CBD for work, costing them up to two hours in the morning and two at night, and costing the state a lot of money to build infrastructure and transport systems.”


The CCD’s growth has been rapid but uneven, with a mismatch between the types of industries and government organisations and their capacity to provide sufficient jobs for a new generation of more educated residents.


While the number of CCD residents with tertiary degrees has increased, most of them are finding work outside the region, even though the region itself needs more tertiary educated workers to improve its prospects for growth, innovation and enterprise formation.


The record jobs surge of the past decade struggled, first, to generate enough jobs for the growing CCD workforce and, second, to generate sufficient jobs for degreed workers, the region’s fastest growing labour force segment.


The best-case scenario is for the new industries to provide jobs for local workers, and to build close local supply chains that will develop local economic eco-systems with a significant multiplier effect.


Going forward, says O’Neill, this is the CCD’s challenge: to join up the economic and social dots and foster a cohesive local economy that not only interacts with the rest of Sydney, but fruitfully with itself.


Bringing on the multiplier effect

The new report provides ample food for thought for government, urban planners and developers.


Two major strategies in the CCD have been to develop health and education precincts, with a focus on Parramatta, O’Neill says. “But the report finds that the level of local economic benefit from these strategies has been disappointing so far, and they are not doing the higher order servicing you would expect, or hope for.”


Moving a government department into an office building in the CCD might have a minimal economic impact, he points out, because “it’s a salary in a building, and those people go to their homes in other parts of Sydney when their work is done, after maybe buying a sandwich for lunch”.


On the positive side, the housing construction industry had a significant multiplier effect in the pre-pandemic building boom, engaging many small local firms and even individual ‘tradies’, although the lockdowns stopped construction in its tracks.


In the publicly funded health sector, Westmead Hospital generates research and service facilities around a major teaching hospital, but this is not replicated to the same degree at other facilities in Penrith, Liverpool and Blacktown, which exist in relative isolation to the local economy.


The report maps the impact of industries on the economy of Parramatta in the period just before the pandemic struck in 2020, and divides them into four categories: ‘local churners’, ‘metropolitan tenants’, ‘metropolitan drivers’ and ‘local drivers’.


Where education and training are mapped as local churners, financial services and public administration are in the metropolitan tenants quadrant, a category with exposure – and therefore risk exposure – to external factors.


More of an impact comes from transport and warehousing, accommodation, food and professional services, which are all ranked as local drivers.


Metropolitan drivers are manufacturing, health care, and most notably electricity, gas, waste and water, which is where the most encouraging case studies can be found. 


From old to new strategic centres

Professor O’Neill and his co-author, Western Sydney University School of Business senior lecturer Dr W Kathy Tannous, looked for ‘lead firms’ and found them in utilities Sydney Water and Endeavour Energy.


Lead firms are defined as larger organisations which act as frontrunners in stretching market reach, building supply chains and driving rates and direction of innovation.


From these leading organisations flow the value chains and linkages that drive the creation of strategic centres, higher order aggregations of business, institutions and agencies that together maximise economic benefits.


Sydney Water, for example, has around 2800 employees statewide, around 1640 of whom work in and around Parramatta and adjacent LGAs.


The organisation estimates that 36 per cent of contract services it commissions are sourced from the CCD, with a value chain of 200 suppliers in Blacktown, 100 in Cumberland, 250 from Parramatta and 90 from the Hills.


Of Endeavour Energy’s 1600 onsite staff, 75 per cent live in Blacktown and nearby LGAs. In addition to that, 2200 businesses supply services to the company, a significant number of these are based in the CCD.


Endeavour also builds, owns and operates the electrical network powering the Blacktown economy, and maintains street lighting on behalf of Blacktown Council. A transition to LED lights has saved an estimated AUD 848,000 and shaved greenhouse gas emissions.


“Endeavour Energy were surprised, because no-one had ever asked them for their supply chain lists,” says Professor O’Neill. “But they are not readily identified as a local business even though most of their contracts are sourced from the area.”


The opportunity O’Neill sees for the CCD is to build out “advanced manufacturing and logistics 4.0 as co-joined industries”.


“We have all these unassembled products arriving in Sydney, which need both manufacturing and logistics,” he says. “Right now we are not joining those possible connections, but there is significant potential.”


O’Neill grew up in the CCD and remembers the economic vitality of the strategic centres of each of the regions. While they have declined in importance, they still have “good bones” which can be built on, he maintains.


“These are the retail and commercial hubs of the community, which are still there but can be revitalised as new spatial points of congregation,” he says.


“Our report shows a need for these spatial nodes. They defined the post-war growth in the 20th century, and now we need to merge the newly emerging economic players and industries with these spatial formations as part of a wider development plan.”

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