Our biggest cities diverge on office work trends
Our resident Stats Guy predicts the future of working from home in Australia’s biggest cities.
Photo: Unsplash.
Three weeks ago, the NSW Government called its staff to return to the office (RTO) at scale. Many public servants hate the idea as they don’t want to commute, and fear their work-life balance is threatened.
On the other side, Sydney’s hospitality sector cried tears of joy and the Victorian Government couldn’t help themselves, with a few cheap shots fired that mocked their neighbours’ policy.
“Any public servants from New South Wales who like flexibility in their workplace should consider moving to Victoria,” a spokesperson said.
Did NSW make the right call?
Forcing staff back into the office in a prolonged skills shortage is a big gamble. Job seekers might shun state government as an employer and join private sector companies that offer more generous working from home (WFH) policies.
The public sector in NSW might see staff retention figures worsen in the coming year. That’s just speculation at this point. As your friendly neighbourhood Stats Guy, I am rather pleased that one of our eight states and territories made the call to force staff back into the office.
While I suspect NSW’s RTO mandate was a bad call, I together with the other states will sit back and see whether or not the NSW plan turns out to be a success. I would like to see much more experimentation with policy on a state level.
Let’s take turns.
It’s Victoria’s turn to do something bold and untried next, then Queensland must implement an unproven but potentially groundbreaking policy shift. We just slowly work our way around the country until we eventually reach Tasmania.
All joking aside, we will be able to assess the outcomes of the bold move by NSW relatively soon. I doubt that we will be able to measure changes in productivity of public servants in any meaningful way.
We will therefore look to CBD activation (change in retail and hospitality sales) and public service staff retention figures to judge the success of the policy.
What’s the future of WFH in our two largest cities? Will Sydney and Melbourne differ in their WFH rates in the future? Both cities experienced long lockdowns. Melbourne, of course, much more than Sydney.
If I put on my demographic and geography goggles (well worth a purchase if I may say), I see a growing divide in working from home rates between our two biggest cities. In exactly two years, the 2026 ABS Census will put my theory to the test.
When the 2021 Census was conducted, Melbourne and Sydney were both under lockdown restrictions. Public servants and private sector employees worked from home at high rates. People in their 30s and 40s were most likely to work remotely. These workers will likely still prefer WFH for the remaining decades of their careers.
Melbourne will see significantly more population growth in the coming decade than Sydney because it offers more affordable housing. Affordability is a relative term.
Sydney is constrained by geography. The Blue Mountains to the west and beautiful waterways and coastlines throughout limit the sprawl. Melbourne can sprawl endlessly to its west, north, and east while Sydney must go up.
Having the opportunity to sprawl is great in the short-term as it helps median house prices. The cheapest way of building housing is to bulldoze a bit of land and put a cheap box on top.
This cheap way of adding stock is much more limited in Sydney.
Therefore, Sydney needs to densify more urgently than Melbourne.
The push for high-rise developments around Sydney’s train stations makes perfect sense from an urban planning perspective – as long as you find large developers to pull off this transformation. Local residents can easily commute from their train stations to the CBD.
Fewer people will live near each of Melbourne’s train stations. This means in Melbourne the motivation to work remotely will be bigger.
So far, Sydney has upgraded its commuting infrastructure faster than Melbourne. Since Victoria is more indebted than NSW, they might not be able to build adequate infrastructure in the future. Then again, so far debt doesn’t really seem to slow down infrastructure spending in Victoria so that might end up being a non-issue.
Millennials on the urban fringe will be very reluctant to commute back to the office. On top of this, Melbourne’s workers were exposed to longer lockdowns during the pandemic and established even stronger preferences for WFH than Sydneysiders.
Geography dictates lower house prices, more population growth, more people further away from the CBD, and a higher WFH rate in Melbourne compared to Sydney in the coming decade.
If the WFH rate in Melbourne is going to be much higher than in Sydney, should we just board up all buildings in downtown Melbourne and let nature take over (think I Am Legend)?
Far from it! Melbourne each year grows faster than Sydney (+100,000 vs +80,000) and even if a small share of this workforce ends up going to the office each day, the total numbers in the CBD will go up each year. I also argued in the past that AI will further drive people back into the office as a bigger share of our workday will be filled with interpersonal tasks.
I’d expect CBDs in Melbourne and Sydney to be more vibrant in the future than they are today, eventually both CBDs will reach 2019 activity levels.
Melbourne, however, will be a cheaper city; it will be home to more people, it will feature worse public transport, and have a higher share of the workforce who work remotely on a daily basis.
Melbourne’s continuing urban sprawl gives short-term respite to house prices; the lack of adequate infrastructure gets somewhat softened by higher working from home rates for a while. In the long run, Melbourne must urgently increase density to keep ongoing infrastructure maintenance costs down.
Demographer Simon Kuestenmacher is a co-founder of The Demographics Group. His columns, media commentary and public speaking focus on current socio-demographic trends and how these impact Australia. His podcast, Demographics Decoded, explores the world through the demographic lens. Follow Simon on Twitter (X), Facebook, LinkedIn for daily data insights in short format.
