The author of a report into the state of Australia's economy says sluggish growth in Newcastle underlines the challenges in attracting people to regional areas.
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The report issued on Monday by respected analysts SGS Economics and Planning showed Newcastle's economy grew just 0.9 per cent in the past year, well below Melbourne's (4 per cent) and Sydney's (2.6 per cent).
The Newcastle 2019 figure was less than half the city's average annual economic growth of 1.9 per cent over the past five years.
The result reflected a slowing national economy which on Monday forced Treasurer Josh Frydenberg to wipe $22 billion off projected budget surpluses in the next four years.
In the SGS report, Newcastle's economic growth was easily the weakest on a list of the 16 major contributors to Australia's gross domestic product (GDP).
SGS's national leader for economic and social analysis, Terry Rawnsley, said the data showed the widening gap in prosperity between Sydney and the rest of NSW.
"With Sydney pounding along at 2.5 per cent this year and 4 per cent a couple of years ago, it is creating a bit of disparity in how well can the regional cities compete and specialise compared to the larger cities," he told the Newcastle Herald.
"That's the concern, that you can't have a state where more and more activity is being drawn into Sydney.
"There's been a lot of messaging around we want more people in the regions, which is great, but you've got to look at how brittle the regional economies are, and that shows you the challenge you have to get a substantial number of people moving out of Sydney to the various regional cities when the economic growth, the economic drive, is not quite there."
Australian Bureau of Statistics figures show an estimated 12,000 people arrived in the Hunter from Greater Sydney in 2017-18, up from 9500 the previous year.
"You need to keep working on making Newcastle and Wollongong attractive places to live, building on their own strengths in a lifestyle and industry, to try and make those economies more vibrant so they can provide better facilities for residents, but also if people want to move out of Sydney and live there as well," Mr Rawnsley said.
The Hunter is enjoying its lowest unemployment rate (4.1 per cent) in six years, slightly below the NSW rate of 4.3 per cent, after adding 13,600 full-time and 1400 part-time jobs in the past year.
But Mr Rawnsley said Sydney had far more "knowledge-intensive" service jobs than the rest of NSW.
"On average, somewhere like Sydney, for every hour worked you're generating about $80, and that's been pulled up by the financial and insurance guys, who are like $200 an hour, and the professional services," he said.
"Finance and insurance are 20 per cent of the Sydney economy. Then when you come to the regional centres you don't have that depth of those high-end jobs that generate all of the income."
Newcastle's economic performance in the past year has been stronger than in the rest of regional NSW, which is in recession after contracting by 0.3 per cent.
Wagga Wagga's economy shrank 2.5 per cent in 2019, and Orange's contracted 1.1 per cent.
Wollongong's economy grew only 0.7 per cent in 2019 but has averaged a relatively healthy 2.7 per cent growth over the past five years.
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"The past year has been a bit slower than the past five years for Newcastle," Mr Rawnsley said.
"There's a range of factors flowing through that. The rebound in the coal price has eased in the last year.
"There's probably a bit of drought impact ... farmers are spending less money coming to Newcastle buy a Land Cruiser et cetera.
"There's an overall weakness in Newcastle and all regional cities across NSW."
Hunter Business Chamber chief executive officer Bob Hawes said the report's findings were consistent with the chamber's quarterly survey of business conditions.
"Business confidence fell from a statewide high in January to a much more subdued outlook by year's end," he said.
"However, viewed against a slow rate of economic growth nationally, and negative growth in regional NSW, Newcastle is not performing that badly.
"Apart from Hobart and Launceston, which are riding the wave of Tasmania's economic boom across all sectors, Bendigo is the only regional area that has performed better in annual growth, which is apparently due to strong investments in health and education."
Mr Hawes said the SGS data on the Newcastle and Lake Macquarie local government areas "probably is not catching the full economic benefit of some significant regional investment, such as the activity around Newcastle Airport as a result of the Joint Strike Fighter program".
"Declining growth in agriculture will have been less of an issue in Newcastle than in other parts of regional NSW that are directly affected, but the hit to the manufacturing, retail and transport sectors over the past year would definitely be reflected in the city's GDP growth rate.
"Our strength in better-performing sectors like health, education and construction has probably shielded the city somewhat from the full impact of economic decline, and continued investment in related projects, such as the John Hunter Hospital precinct redevelopment, will help stimulate economic growth in coming years."
Michael Parris
Michael Parris reports on politics for the Newcastle Herald. He started at the Herald in 1994 after working in the ABC Newcastle newsroom. Michael spent much of his career as a sub-editor before moving into political reporting in 2017. He was a finalist in the Sports Australia national media awards for his stories about a male-only tennis club in Newcastle. He has covered NSW and federal elections, state and federal budgets and local politics. He has also written extensively about the COVID-19 pandemic with a special focus on data analysis and the effects of lockdowns on the Hunter community.
Michael Parris reports on politics for the Newcastle Herald. He started at the Herald in 1994 after working in the ABC Newcastle newsroom. Michael spent much of his career as a sub-editor before moving into political reporting in 2017. He was a finalist in the Sports Australia national media awards for his stories about a male-only tennis club in Newcastle. He has covered NSW and federal elections, state and federal budgets and local politics. He has also written extensively about the COVID-19 pandemic with a special focus on data analysis and the effects of lockdowns on the Hunter community.
