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The Sydney paradox

By Tim Harcourt - posted Monday, 10 March 2008

Is there a Sydney paradox? How can the world’s greatest city be so unappreciated by its citizens that they are leaving it for pastures north, south and increasingly west? Have you never heard of the Sydney paradox? Let me explain.

It comes down to the two new pieces of news that Sydneysiders got on the weekend. There was good news and bad news. First, as Sydneysiders are usually sunny and optimistic, here's the good news. Sydney was voted the number one city in the world according to Simon Anholt's world renowned City Brands Index (CBI). The Index ranks the world's top 40 cities in terms of economic influence, quality of life, natural beauty and friendliness and Sydney came out on top again. And in a great all round result for Australia, Melbourne came in sixth place.

But Sydneysiders are always looking for something to worry about (Will we cope with the Olympics? Will we get a parking spot at Westfield? Will it rain on New Year's Eve?) So here's the bad news. According to a report on the front page of the Herald recently, Sydneysiders are leaving town in droves, because of housing costs, transport and overall liveability.


How can this be? We're the world's number one city, but everyone is shooting through? It depends on whether you think global or local. By global city standards, Sydney is not crowded, rushed polluted or even expensive. You can get a high flying job with beaches on your doorstop. But by Australian city standards, Sydney is the big smoke. If you are being lured by a big-paying job in another state, you might think about it.

People who are in the “globalised” part of the workforce tend to see Sydney in all its glory. Occupations in “global Sydney” include jobs in the financial markets, media, advertising, movies, sport and recreation. So if you are a globe trotter, returning expatriate, visiting business professional, or even a high flying rust-belt refugee - from Victoria or South Australia - who can therefore afford to live by the beach or the harbour then Sydney does have the best of both worlds.

You are living in one of the world's most influential global cities but with an attractive climate, lifestyle and fun people. As many visitors comment, it's like living in a big cosmopolitan city with a resort rolled into one. So international have the same view as the those citizens living and working in “global Sydney” and its no surprise that immigrants to Australia seek out Sydney as their number one choice for settlement (even if Sydney is not attracting interstate migrants domestically).

There’s also no doubt that Sydney is Australia's global city and it's not surprising the world sees it this way. After all, 10 out the top 20 listed companies on the Australian Stock Exchange are Sydney based and over the third of the total reside in the harbour city. Other empirical evidence supports this. For example in terms of trade, NSW has the highest number of exporting companies in the country accounting for over 15,600 exporting businesses - despite the resources boom in the west and in the north - and is the most important city in terms of service exports. Sydney's strong cosmopolitan flavour also helps given that almost a half of all our exporters are started by immigrant business people think of Sydney's great overseas born entrepreneurs from Frank Lowy to Bing Lee.

But through local eyes, it's a different story. If you’re in the non-exporting, non-global part of Sydney life can be a bit different. For example workers who work for exporting companies earn, on average, 60 per cent more than those who work for non-exporters, so it can be tough earning “domestic Sydney” wages but paying “global Sydney” mortgages.

But it's not just about the push of Sydney due to high housing costs its also about the pull of economic opportunity in the resource-rich states, Western Australia and Queensland. I was in Perth last week and was shown some population data. There was clearly a “Gilly” effect happening. Adam Gilchrist may be remembered for his lusty big hitting and effective wicket keeping but when he moved from Lismore to Perth he started a national trend.


New population data shows that Gilly was followed West by a large number of eastern staters particularly from NSW. WA and Queensland have attracted large numbers of interstate migrants, whilst NSW, SA, Tasmania and to a small extent, Victoria have experienced net losses. The WA mining boom has even attracted new sources of international migrants from Brazil literally from Rio to Freo but that's another story.

So there you have it, the Sydney paradox is explained but perhaps it’s not a paradox after all but an example matter of simple economic theory at play. It’s partly about supply and demand. The whole world thinks Sydney is hot, the price goes up, and many punters choose to shift as they can’t afford the price or see better value elsewhere. This is why Treasury Secretary Ken Henry told a Sydney business audience last year that he’ll see them in Perth in five years time, as “resources get re-allocated” to the resource rich states thanks to demand from China, India and the emerging economies.

But I have got to say, Sydney has a unique mix of exciting cosmopolitanism and laid-back Australian lifestyle. But I am biased. My grandfather was one of Bondi's original lifesavers 100 years ago. Kopel Harkowitz, was the son of Jewish immigrants from Transylvania and Poland. Kopel's mother always wanted to him to be a Rabbi, but young Kopel wanted to be a true blue Bondi lifesaver. He had trouble getting into the club as “Kopel Harkowitz” but when he fronted as “Ken Harcourt” they said “no worries”.

When I asked my grandfather why he changed his name, he used to say “Well, I didn't really, I just went left the Goldberg's and joined the Ice Bergs”.

Now I play with my three-year-old Chinese daughter Yun Shi, with my American wife Jo on the sands of Bondi where Kopel once did his drills. A mix of Asia, Eastern Europe and America right here in Bondi you can't get more Sydney than that!

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First published in the Sydney Morning Herald on March 4, 2008.

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About the Author

Tim Harcourt is the JW Nevile Fellow in Economics at the UNSW Business School, Sydney, Australia. He is also the author-host of The Airport Economist.

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