18 Jun 2021
Generally speaking, regional areas in Australia have been more resilient to pandemic impacts than capital cities.
Capital cities are not only more prone to COVID-19 outbreaks than regional areas due to incoming international cases and higher population densities but the industry structures of capital cities are also more skewed towards COVID-impacted economic activity.
“Across Australia, employment recovered to pre-pandemic levels more quickly in regional areas.”
The bulk of economic loss from the pause in business travel, international tourism and education, international immigration and large events has been incurred by capital city businesses.
So it should be no surprise then that regional areas like Mildura in northwest Victoria have recovered more quickly.
Google mobility data show the Mildura local government (LGA) is far ahead of the Victorian average for local movement, including to workplaces, retail and recreation venues, train and bus stations, and grocery stores.
This has also meant regional labour markets have been more resilient during the pandemic than their capital city counterparts.
Across Australia, employment recovered to pre-pandemic levels more quickly in regional areas. In Victoria, the regional unemployment rate is 1.6 percentage points lower than the metro rate and in New South Wales it’s 1.3 percentage points lower (3-month average to May).
Strong demand and relatively tighter labour markets mean some businesses are having greater difficulty finding suitable labour. This should mean that wages growth starts to accelerate. But there are some barriers to people moving to the regions to take vacant jobs, including difficulty finding affordable housing and uncertainty around future travel restrictions.
In the North West region of Victoria, including Mildura, the unemployment rate actually fell during 2020, from 3.1 per cent in the first quarter to 2.7 per cent in the fourth. While it has increased over the first half of 2021, unemployment in Mildura and regional Victoria remains below Melbourne.
Snap lockdowns have been less frequent and lengthy in regional areas of Victoria than Melbourne which reduces the impacts on regional economic activity.
ANZ data show regional Victoria’s spending was down just 10 per cent during the weekend of 4–6 June compared with the weekend before the May lockdown, which is almost identical to the change in spending across the rest of Australia during that time.
Meanwhile, Melbourne spending was far worse as a result of lengthened lockdown conditions.
The lower risk of snap lockdowns in regional Victoria has boosted its appeal as a tourism destination for Melbournians. More broadly, the preference for regional travel has also been supported by caution from Australian residents around travelling interstate, brought on by iterative state border closures.
ANZ data show while travel spending in Sydney and Melbourne is still far below pre-pandemic levels, regional New South Wales and Victoria have been much closer to pre-pandemic levels.
Another factor behind the more resilient travel spending in regional Victoria is its lack of exposure to international tourism. In 2019, 25 per cent of Australian tourism spending came from international travellers but this rate was closer to 7 per cent for Mildura.
Business travel is also a far smaller portion of the tourism market in regional Victoria compared with Melbourne. So while major capital cities have been struggling to fill the gaps left by these visitor cohorts, Mildura and other regional cities have gained more intrastate travellers who might usually go overseas or to interstate cities and lost less from the fall in interstate and international travel.
More people in Australia are also moving to the regions. The net outflow of Australian residents from capital cities to the regions has been pushed up by the rise in remote working and the resultant stronger preferences for bigger houses over smaller dwellings closer to central business districts.
The stronger labour market conditions in regional areas and more opportunities for remote working are also curbing the flow of regional residents into cities for work. Since the pandemic migration from capital cities in Australia to the regions has almost doubled.
Many regional areas have seen stronger building approvals and housing price growth since 2020. Housing rents have also risen more quickly in regional areas, compared with capital cities.
Catherine Birch is a Senior Economist and Adelaide Timbrell is an Economist at ANZ
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
18 Jun 2021
25 May 2021