The vast potential of regional cities

There’s been a welcome, and not unsurprising trend in the past five years of smaller regional cities making waves in Australia’s economic development. 

Many cities outside the big three – Sydney, Melbourne and Brisbane – are buzzing with potential. With remote work becoming more common, people have been drawn to better lifestyle options and more affordable living. This influx of skilled workers is giving local economies a boost.

In fact, KPMG has identified 12 Enterprising Cities where entrepreneurial spirits are thriving thanks to a combination of diverse capital, innovation and natural resources. These 12 regional centres employ nearly a quarter of Australians and contribute to over 35 per cent of the economy.

So, what makes regional centres thrive and how can they continue to grow sustainably?

The strengths of regional cities

In the face of global economic challenges, growing regional cities are demonstrating remarkable resilience and proving to be crucial contributors to Australia’s productivity. Behind their successes are the local communities and each city’s distinctive strengths, including: 

• Natural assets: prosperous regional cities lean into their unique resources to create opportunities for primary production and nature-based tourism.
• Physical assets: robust infrastructure including transport, energy and communication networks are creating more trade opportunities and paving the way for investment.
• Human capital: the collective knowledge and experience of skilled workers looking for a better lifestyle outside the big three cities are driving innovation and productivity.

We are also seeing regional growth in certain industries such as advanced manufacturing for renewable energy, advanced materials, aerospace, healthcare, agrifood (all stages involved in getting food from field to fork) and defence. Plus, opportunities are emerging in professional services such as IT, accounting and engineering.

Tackling the challenges

The rising cost of living has been tough on family budgets and local businesses, reflecting broader economic pressures across the country, particularly in the last 18 months. Moving from city life to regional areas has brought fresh energy and growth to these communities, but it’s also stirred up some challenges, especially around housing, skills and community infrastructure.

Strong population growth, coupled with high construction costs, can dampen a city’s economy and introduce social issues. With a key challenge being the ability to attract and retain skilled workers, as affordable housing becomes scarcer. 

Regional cities also need to navigate regulatory environments, inflation and cyber risks while identifying and capitalising on investment opportunities. Sustainability, climate resilience and resource efficiency are also crucial, and regional cities need to be strategic about how they’ll cope with future natural disasters and changing climate conditions.

Finally, let’s not forget the global picture – trade wars are causing uncertainty for key industries in these areas, affecting both raw materials and manufactured products. Adapting to these shifts and finding sustainable solutions is vital to regional city growth and stability.

The way forward: opportunities to keep thriving

Facing these challenges head-on is key. KPMG’s Cities of Value framework provides a template for sustainable urban development that provides multiple forms of value to citizens. It covers: 

1. The attractiveness of a city in drawing in and retaining workforce talent, external investment and social and cultural activity. This includes addressing housing availability and affordability by implementing innovative development strategies.
2. Quality of life and overall wellbeing of residents, including availability of health services, education and recreational amenities.
3. Economic prosperity including cyber security and digital transformation. These are pivotal for protecting economic activity, fostering innovation, improving efficiency, expanding market reach and ensuring business resilience.
4. Sustainability and proactivity in the face of changing climate conditions. 

The role of local government

As one of KPMG’s trusted advisers to the local government sector, I am passionate about the critical role local government plays in fostering thriving communities. There are many opportunities for councils to enhance a city’s reputation, attract investments and retain talent by providing grants, incentives and services to local businesses. 

Strong partnerships and advocacy at state and federal levels are also necessary – especially for planning and deploying infrastructure. 

Powering Australia’s future

The growth of regional cities is crucial for enhancing national productivity. Regional hubs are fuelling local businesses, fostering diverse entrepreneurial activities and solidifying their impact on the Australian economy.

By leaning into their strengths such as cultural heritage, geographic location and innovative spirit, regional cities can differentiate themselves globally, promote sustainable growth and drive the nation’s productivity forward.