Innovation districts are the “new geography of innovation”, says Ben Rimmer in his final week as CEO of City of Melbourne. He discusses the central role the knowledge economy will play in the city’s future prosperity and the economic value of Melbourne’s liveability.
Below is a lightly edited version of a speech Ben Rimmer gave at a CEDA trustee boardroom briefing on Wednesday, December 5.
The site of modern-day Melbourne has a long history of being a great place to gather. In fact, the settlement of Melbourne developed in what was a traditional meeting place for the Aboriginal people of the Kulin nation.
While this tradition was severely disrupted by European settlement, the idea of Melbourne as an exceptional place for people to meet, build trust and create value remains central to Melbourne’s identity. We value our Aboriginal history. We speak our 230 languages, and over 50% of the inner city’s population were born overseas. As I suggest today, these characteristics will also drive our future prosperity.
I’d like to make four main points today:
- Firstly, productivity growth in central Melbourne is our biggest economic challenge.
- Productivity in the knowledge economy is also about place.
- Melbourne is better placed than any other global city to take advantage of this.
- We can’t succeed unless we name the right problem and work out how to collaborate:
Cities Matter and Melbourne’s growth
There is no doubt that Melbourne is a city in the middle of serious economic growth and its success is driving the economic prosperity of not only Victoria but also the nation.
In 2017, the City of Melbourne generated $95 billion in economic value, representing a quarter of Victoria’s gross state product and 6% of Australia’s GDP. Within metro Melbourne, the inner-city area accounted for nearly 40% of the whole city’s output in 2017. With our neighbours in Yarra and Port Phillip, we house most of Melbourne’s output, most of Melbourne’s knowledge jobs, and most of our IP generation.
One of the promises of communications technology was that humanity could become more dispersed, as it becomes easier for people to live and work in regional centres or from home. However, Australia’s population is becoming concentrated in a few major centres – one of them being Melbourne.
The population of greater Melbourne is now 5 million and population is projected to rise to eight million in 2050. That makes Melbourne not just Australia’s fastest growing city, but also one of the fastest growing cities in the developed world.
Some say that this growth is a problem. I say sure, we can do better on infrastructure, but that the growth is the result of powerful economic forces that trounce the thousands of bureaucratic pens trying to hold back the tide with their planning reports.
Melbourne as an emerging global city
McKinsey Global Institute recently analysed 3,000 of the world’s largest cities – those that represent two-thirds of global GDP. Within this group, it defined 50 as superstars: cities that hold only 8% of the world’s population but account for 21% of GDP, 37% of high-income urban households and 45% of firms with more than US$1 billion in annual revenue.
The list of leaders included the likes of Boston, Frankfurt, London, Manila, Mexico City, Mumbai, New York, São Paulo, Sydney, Tianjin and Wuhan.
Although Melbourne didn’t make it onto the MGI list, it ranked as the 15th most influential global city on A.T. Kearney’s Global Cities 2017 report and sixth in terms of its likelihood to become more influential in the future, due to the wellbeing of its people, the strength of its economy, its stable governance and its support of innovation.
When considering either of these lists, it is clear that while size is important it is not the only thing that matters – what makes a city a super star or global city is its supremacy in an important sector.
For example, while New York and London have dominated since the industrial age, places like Hong King and Singapore have flourished as trading hubs, Washington and Brussels are renowned as the two great centres of government and more recently San Francisco because of its high-tech dominance.
Boston is far and away the world leader as a knowledge city with its unparalleled density of leading universities and startups.
And while there would be quite a leap for Melbourne to get to this level, as shown by the Global Cities report, Melbourne is widely acknowledged as an emerging force in knowledge and innovation.
Interestingly, our community don’t always see it that way, and that dichotomy between community expectations and global perceptions creates real challenges.
Melbourne needs productivity growth
Growth and transformation is not new for Melbourne – from first European settlement, the growth of the gold rush and more recently the transformation of the city over the last 30 years.
For this reason, I am cautious of some of the hyperbolic language currently being used to describe the challenges posed by Melbourne’s rapid population growth. But there is no doubt that the growing pains are being felt in our cities crowded trains, roads and footpaths, homelessness and housing shortages and increasing load on our services.
Population growth has for a long time been the main driver of Melbourne’s economic performance; as the population grows, so does the output, but it is shared among a larger number of people. For this reason, a conversation about Melbourne’s future prosperity must surely be focused on how we capture, enhance and target productivity growth.
In general, I believe that productivity is not used sufficiently our focus in the public debate of Australia’s economic prosperity, or Melbourne’s. When it is, it is limited to traditional concepts of market competition, business efficiencies and lower cost structures. Through this lens the role of government is reduced to deregulation and arm’s length facilitation of private sector investment and innovation.
I am convinced that a conversation about productivity as we move further into the so-called fourth industrial revolution is a conversation that explores the intersection of knowledge, place and talent and how this can be driven through the collaboration of public and private sectors. This is the debate Melbourne needs, not one focused only on corporate tax cuts or deregulation of pharmacies.
Innovation districts: a quick overview
The essence of this type of productivity growth is the birth of innovation districts – innovation districts or clusters are urban living labs that support the commercialisation of knowledge.
The Brookings Institution speaks of three key assets required to support innovation districts – the combination of networking, economic and physical assets. It is where the public realm of our cities becomes the focal point for entrepreneurs, startups, researchers, corporates and investors to collaborate and commercialise the next generation of jobs and businesses.
Innovation is no longer dominated by places like Silicon Valley that have very little focus on the actual place or life of those who work there.
But the Brookings Institute model should not be thought of as a cookie cutter that can be picked up and put down anywhere – this would miss the visceral nature that innovation clusters develop and the need for them to be profoundly grounded in place.
Liveability is Melbourne’s competitive edge
The transformation of Melbourne city centre over the last 30 years means it is particularly well placed to take advantage of the opportunities that innovation and knowledge as the driver of economic prosperity hold.
Everyone in this room will remember what Melbourne was like 30 years ago in the 1980s. Back then, there was no street life. It was a city that catered for cars, not people. After hours, we had a CBD of grey, empty office towers.
Fast forward to 2018, and it’s a very different story. Through bipartisan efforts and state and local alignment so much has been achieved in Melbourne. Through careful urban design and deliberate policy making, Melbourne’s streets and laneways are now vibrant and sophisticated.
Melbourne has excellent physical infrastructure and many supportive social and economic characteristics. Melbourne features one dense central city area that features an integrated mix of commercial offices, hotels and residential accommodation, making it easy to walk – or ride a bike, or catch a free tram – to meetings and events.
By design, the city is dotted with many restaurants, cafés, parks and public spaces where people can interact and this produces one of Melbourne’s key assets, its unique culture and ambience. It is among the most multicultural and diverse cities in the world, and heavily integrated with other global centres. Not to mention, it is internationally recognised for its creativity from its music venues, art galleries and film festivals.
For all of these reasons and more – Melbourne is consistently ranked as one of the world’s most liveable cities. In a global competition to be an emerging knowledge and innovation centre, this is Melbourne’s competitive edge.
Melbourne’s knowledge economy so far
Already, Melbourne’s knowledge economy contributes almost $60 billion to its gross local product. There are 1,100 tech startups in Melbourne – twice the average of other ecosystems at similar developmental stages. The rate of employment in the knowledge sector continues to grow and now accounts for more than half of the jobs growth in our municipality over the past decade.
The number and variety of innovation clusters that are already in Melbourne is exciting — from Fishermans Bend Employment Precinct (advanced manufacturing) to the Melbourne Innovation District (engineering, design, and a mix of industry), and other clusters emerging in Collingwood, Fitzroy, Prahran and Richmond just to name a few. This model of multiple clusters coming together in one city was recently called out as a potential game changer in how innovation and knowledge cities are seen.
Melbourne Innovation District
Launched in June 2017, the Melbourne Innovation Districts (MID) is a partnership between the City of Melbourne, RMIT University, and the University of Melbourne, to develop urban innovations in Melbourne.
The first MID is focused in the area known as City North – a significant area to the north of the Melbourne city grid – that is home to many of the city’s education, knowledge, research and innovation institutions.
The area is currently home to 21% of all knowledge sector jobs in the City of Melbourne and hosts the majority of the municipality’s 227,000 students (including 35,000 international students). MID City North was the site of Melbourne’s first playground, Melbourne’s first women’s hospital and Melbourne’s first university.
The concentration of life sciences organisations in the City North is now regarded as one of the top five biomedical precincts in the world. Some 53% of ASX-listed life sciences companies are based in Melbourne and the city attracts more than 40% of Australia’s medical research funding and associated researchers. The City North area is also home to the $1 billion Victorian Comprehensive Cancer Centre and the Melbourne Brain Centre, both ranked among the leaders in their respective fields of cancer and neuroscience research and services globally.
This area is experiencing major infrastructure investment from the City of Melbourne, Victorian state government, and the universities in the area including: Queen Victoria Market Renewal, RMIT New Academic Street, University of Melbourne Carlton Connect and Student Precincts, State Library ‘smart space’ refurbishment, Melbourne Bio-medical Precinct, the construction of two stations for the Melbourne Metro, and several upgrades to urban streets and historic parks.
The combination of these knowledge and innovation functions, the volume and density of knowledge workers, students, and visitors they attract, plus the extensive investment in infrastructure and facilities is unprecedented and creates an environment primed for cutting edge innovation.
Micro level reform
The collaboration between City of Melbourne, state government and universities to create MID is an example of the extraordinary promise of productivity growth and high value jobs that is achieved when there is a shared commitment to investing in a place to enhance its unique characteristics.
There is too much focus on macro level responses to the challenges posed by population growth – migration patterns, for example, or panic about road congestion.
I am here today to argue for micro city reform that is grounded in place. This type of investment, as shown by the outputs already from the investment at both state and local government level in MID, is how real gains in economic prosperity will be derived.
This is not necessarily about additional expenditure, as innovation clusters are part of the normal development of the city. It is about getting to grips with the visceral development of places and provided targeted support – appropriate for the place.
I am putting the case out there that we need a shared national consensus on building great places. One level of government cannot serve the community effectively in this area alone or without collaboration with the private sector.
In conclusion, I want to leave you again with the following four observations:
Productivity growth is the key to the next 30 years of economic prosperity. It means more than just driving business efficiencies – it is how knowledge, talent and place intersect to drive innovation.
The fact that Melbourne is a place for people gives it a competitive edge over other cities vying to be the next global leader in this sector. We need to value liveability as an economic asset, not just as a ‘nice to have’.
Melbourne’s prosperity will be driven by micro city reform that is grounded in place. The investment in the budding innovation clusters around Melbourne will not only drive Melbourne economic growth, it will create jobs and spread the benefits of a high standard of living to the broader community.
Finally, we are all in this together, and it is time for us to be bold to make the most of the significant opportunity that is available.
I argue that Melbourne is better placed than any other global city to take advantage of the economic opportunities of the next 30 years. But we will only deliver on this if we’re clear about what matters, what we need to enhance, and how we work together to achieve our goals.