Cities are the beating hearts of Australia’s economy. They are where ideas collide, industries cluster and opportunity multiplies.

They are also where the nation’s biggest productivity challenges and cost pressures are most visible.

If we want to lift living standards, we have to get our cities right.

For decades economists have known that when people and firms cluster together they become more productive. Workers share knowledge, businesses specialise and innovation spreads faster.

Recent research from the e61 Institute shows that Australians who live in our capital cities earn on average about $8000 more each year. Even after adjusting for education and occupation, about half the gap reflects what researchers call the “place effect” – the productivity advantage of being in a dense, connected environment.

Tracking the same workers over time, e61 finds that those who move to a city experience an enduring wage lift of about $12,000 after seven years.

Cities don’t just pay more, they make people more productive. A city is an accelerator.

But not everyone benefits equally. Knowledge workers gain the most. For trades and care workers, the advantage is smaller or even reversed.

High housing costs and long commutes risk undermining the rewards of city life for many Australians.

That imbalance matters. Productivity is what drives wages and living standards. When the gains from city growth are captured mainly by property owners, while renters and younger families are squeezed out, the promise of the city starts to fade.

Across the developed world, economists have........

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