Economy thrives while CBDs dive: the argument that CBDs are the engine rooms of the Australian economy is being tested right now

Many Australian CBDs continue to languish, with major CBDs only at from one third to two thirds of their pre-pandemic occupancy levels, despite the end of lockdowns and the lifting of many restrictions. This is having collateral impacts across the spectrum of CBD businesses that rely on office workers being at their CBD offices. Retail centres, restaurants, coffee shops, newsagents – every occupation and every business that depends on CBD workers and their wallets is feeling the pinch as CBD workers continue to preference their suburban homes as workplaces.

Public transport networks are still running but only at fractions of their pre-Covid loads. A public transport network designed to ferry suburban workers to the scheduled start and stop times of centralised CBD offices is looking increasingly challenged by new work-from-home practices with flexible hours and no commute costs (or time) to central work locations. The private car is reportedly now so much more preferred as a mode of transport that used car prices have risen markedly.

The damage to CBD reliant businesses is indisputable. In an effort to revive flagging public support, some CBD interest groups have called for everything from publicly funded entertainment to free public transport and free parking to stimulate interest in luring workers back. But nothing is free – especially public transport which is an already heavily subsidised service (used mainly by CBD workers due to it CBD hub and suburban spoke structure). There needs to be a strong case for such measures.

The "save the CBD" argument relies on the notion that CBDs are central to the performance of the Australian economy. "Our CBDs have been the nation's productivity powerhouses for decades, but have been sorely challenged by COVID-19 shutdowns. It's important for everyone that CBDs are able to reclaim this economic mantle,' said The Property Council of Australia.

The negative impact of Covid on the central city economy is well illustrated by news bulletins that love nothing more than recycling footage of once busy but now near deserted CBD streets as symbols of economic distress. Therefore, the argument goes, it is responsible public policy for governments (and taxpayers) to support the revival of CBDs. "Thriving CBDs will be critical to Australia's economic recovery," said the PCA.

But is that true? Are they important "for everyone"? I could have written those words myself some 15 or 20 years ago, convinced as I was that cities were the "crucibles of creativity" and indispensable bastions of the new knowledge economy. But in Australia today, the evidence seems to suggest that the economy is doing just fine, despite the very real problems of the CBDs.

Employment growth is improving with unemployment falling. According to Marketwatchin March this year: "Employment has rebounded strongly in recent months, in line with a broad recovery in economic activity, the fastest in 70 years." Unemploymenthas fallen to 5.6 per cent"just 0.4 of a percentage point above where it was before the mass job losses seen at the beginning of the COVID-19 pandemic."

As recently as early April, the IMF forecastthat Australian GDP would come 'pole vaulting' back to a very healthy 4.5% in 2021. The Chief Economistof the Commonwealth Bank expects the economic boom to continue into 2022. They predict a higher 4.7% GDP growth rate.

Stock markets are also imbued with confidence. The All Ordinaries Australian sharemarket index hit an all time recordof 7,331 in mid April.

Even the adverse impact of various politically inspired bans on Australian exports by the Chinese government has evidently failed to have the impactinitially feared. This is cold comfort to our lobster, wine and beef industries who have suffered greatly but according to the Grattan Institute"Exports to China have predictably collapsed in the areas hit by sanctions, but most of this lost trade seems to have found other markets."

Meanwhile, the predicted partial collapse of the tertiary education sector – segments of which were heavily reliant on foreign student income – may not yet eventuate. A representative of one of the Universities claiming to be seriously adversely affected confided to me in late March that the adverse impact is in reality looking like being less than 10%, as full fee paying foreign students have enrolled on-line and domestic student enrolments have supported the on-campus strength.

Buoyed by all this, consumer confidence – a critical indicator of economic health – has also hit record levels. According to the latest Westpac-Melbourne Institute Index, "Consumer Sentiment lifted 6.2 per cent in April to 118.8 – the highest reading since August 2010." Since 2010 remember… that's 10 years before Covid, making it a significant milestone.