There’s been an exodus from Australia’s cities to the regions. What does that mean for local economies?

·5-min read
<span>Photograph: Dave Hunt/AAP</span>
Photograph: Dave Hunt/AAP

A diversified economy is a healthy thing, but there are growing pains

We’ve all done it. Standing in line for a checkout, a drink, or, worst of all, a bathroom stall. They’re all causes of frustration. It’s worst if you’ve had the (mis)fortune of statistical training – because you know just how much of a difference one toilet stall could make. At least calculating wait time is a good way to distract yourself if you’re busting.

The maths explains a little something about the search for workers, too. Even inside a workplace you don’t want every worker to be 100% busy all of the time. It helps to have a buffer for when something comes up or something goes wrong. Hospital and ambulance staff have been (rightly) raising alarms about this for years. The pandemic has proven them right.

It’s the same across the economy. When we reach full employment (probably at an unemployment rate of around 4.5%), the system starts to struggle. That’s part of the reason very few economists will argue for a 0% unemployment rate. A little spare capacity goes a long way.

Related: The ‘Omicron wave’ was the catastrophic dumper that closed our Sunshine Coast restaurant forever | Teresa Russell

For regional areas with smaller populations, this is a sore topic. Despite what you might think, regions with smaller populations tend to have less slack. If you look at a list of Australian regions, you might be surprised. The highest unemployment rates (as at September 2021) are in capital city areas. In contrast, of the six labour market regions in Australia with less than 100,000 working-aged people, four have unemployment rates under 4.5%.

If you had the privilege of regional travel during the summer break, you, like me, likely would’ve seen how Covid has exacerbated the problem. At the start of the pandemic, international and domestic tourism plummeted. Businesses in tourist regions battened down the hatches and hoped to weather the storm.

The problem is that tourism accounts for over 20% of employment in some of these regions. With limited outside options and no end in sight, some workers chose to leave the regions in search of more populous pastures.

Tourism share of employed people

Source: Tourism Research Australia

So when the tourists finally started to return, there was nobody there to serve them. Wandering down the main street, two in every three restaurants were closed. The third often had staff so thinly stretched that long waits, reduced menus and shorter hours were par for the course.

Omicron has pushed hotels, tourism operators and kitchens out of the frying pan and into the fire. With fewer locals and so many people ill, keeping the doors open must feel like mission impossible. Combined with Covid cancellations, it’s easy to understand why some are forced to close the shutters. Which creates more incentives to leave – and a vicious cycle.

Even direct attempts to address labour shortages in regional areas have had limited success. It has been reported that only 453 people took up the offer of $6,000 to move to a regional area and work in harvesting in the last two months of 2021.

There is a silver lining. Office workers are now pretty convinced that remote work is not going anywhere any time soon. Freed from the chains of the cubicle, the long-awaited white-collar tree/sea change is happening in earnest. Almost 66,000 people left capital cities for the regions in the three months to March 2021. In net terms, there was an exodus of almost 12,000 – the biggest move to the country recorded since we started collecting this data.

Take the Gold Coast. There were 21,000 more 15-to-64-year-olds living in the region in September 2021 than in September 2020. Instead of working in theme parks and cafes, many are working in professional services. In fact, with an influx of 10,400 professional services workers over 2021, the Gold Coast ranks behind only Sydney metropolitan in absolute growth terms. While there’s little evidence, it seems likely many of these people are working for employers that are not based in the Gold Coast.

Related: ‘Praying it won’t happen’: how Omicron could cut off Australia’s rural towns from essential services

In the short term, these workers may exacerbate local labour shortages, rather than address them. More suits means more demand for coffees, entertainment and, well, suits.

Ideally, this is short-term pain for a long-term gain. A well-rounded and diversified economy has a better chance of managing economic disruptions. The increased demand will provide more reliable year-round trade for cafes and restaurants. It provides insulation from the ebb and flow of tourists’ whims. Better revenues and greater certainty means businesses can afford to offer premium wages – and entice more workers to the region.

There are legitimate concerns about what a flood of internal migration means for regional economies. It puts pressure on infrastructure, wages and housing prices.

However, it may also lift some regions out of the current tourist trap. It’s a much-needed sugar hit to encourage back both workers and businesses. After a long and hard two years, our regions deserve the sweetness.

• Jessica Mizrahi is an economic consultant and commentator. She has taught, researched and applied economics for over a decade

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