Commissioned to inform advocacy by the Council of Capital City Lord Mayors, the ‘Critical Role of our Capital Cities’ Report outlines the strategic economic importance of Australia’s capital city centres and proposes actions to strengthen their contribution to national prosperity.

The Critical Role of our Capital Cities

 Key Findings: The Five Critical Roles of Capital Cities

  1. Knowledge Generation
    Capital cities are hubs of innovation, hosting leading universities, research institutions, startups, and the vast majority (99%) of patent registrations. Cities like Melbourne and Sydney exemplify successful innovation districts.
  2. Supporting Productivity
    Central cities concentrate advanced business services (ABS) – IT, legal, finance, engineering – which enhance national productivity. Doubling ABS job density correlates with a 15% rise in productivity.
  3. Generating Exports
    Cities drive direct exports (e.g., tourism and international education worth $48 billion) and indirectly support mining, agriculture, and manufacturing through $43 billion in business service inputs.
  4. Leveraging Skills
    Cities provide unparalleled access to deep labor markets, attracting skilled workers within 15-45 minutes of CBDs. Infrastructure like the Melbourne Metro enhances this accessibility.
  5. Command and Control
    Capital cities house 92% of ASX-listed headquarters and host key government institutions, acting as decision-making and coordination centres for the nation.

Economic Significance

  • GDP Contribution: 22.5% from just 0.03% of Australia’s landmass
  • Jobs: 3.21 million across capital cities
  • Exports: Central cities underpin over $43 billion in inputs to national exports
  • Education: 6 cities rank in the world’s top 50 best student cities

Challenges

  • Underfunded Local Governments: Only 5% of public spending; many councils struggle to cover operating costs and renew assets
  • Tied Funding & Declining Grants: Restricts flexibility and responsiveness
  • Infrastructure Strain: Demand outpaces transport and amenity capacity

Global Best Practice Interventions

  • Flagship Assets: Sydney Opera House, Gardens by the Bay (Singapore)
  • Transit & Mobility: Sydney Metro, Paris cycling infrastructure
  • Green Infrastructure: High Line (New York), Cheonggyecheon (Seoul)
  • Congestion Solutions: London’s congestion charging
  • Cultural Events: Adelaide Fringe, Melbourne sporting events
  • Affordable Housing & Living: Vienna’s public housing model; Melbourne’s Postcode 3000

Conclusion

Capital cities are vital engines of Australia’s economy. Sustained investment and structural reforms are essential to unlock their full potential and ensure inclusive, resilient national growth.