Some of New South Wales's old industrial heartlands are leading the charge in resurrecting their night-time economies with a flurry of small bars and live music venues, while driving down assault rates.

As the state's capital continues to grapple with the fallout of the much-debated venue lockout laws, the smaller cities of Wollongong and Newcastle are bucking this trend.

Both centres are gaining recognition as cultural and education hubs, transitioning away from heavy industry such as steelmaking.

In the centre of Wollongong, south of Sydney, more than 80 small bars and cafes have popped up since 2012.

But an audit by Wollongong City Council has found the rate of alcohol-related assaults has plummeted on average by 12.5 per cent each year in that period.

Surge comes as Sydney 'dies a slow death'

Wollongong, once marred by pub violence, is now being hailed as a leader in reviving the live music scene, and a NSW parliamentary inquiry has been looking at how it could be replicated elsewhere.

Christian Democrat MP Paul Green, who is chairing the inquiry and led his colleagues on a tour of the city's nightlife this month, said they were impressed with what they saw.

"Sydney is dropping off, it's not good, it's dying a slow death, but Wollongong, from the evidence we've received, is onto it — they've got a working model," Mr Green said.

While the night-time economy is thriving in some Sydney suburbs, the inquiry has been told venues in the city's CBD are being strangled by regulation.

Witnesses told the inquiry Wollongong had had a "terrible reputation" for violence, but allowing more small bars to open and attracting a more diverse range of people into town after dark had changed that.

Parliamentarians have been sampling some of Wollongong's nightlife as part of an inquiry into the music and arts economy. ( Supplied: Paul Green )

The so-called 'Wollongong Approach', which has also caught the attention of Newcastle City Council, has seen improved coordination between venues, police, planners and residents.

A streamlined noise complaints process has also helped avoid clashes between venues and residents, amid an inner-city apartments boom.

Adam Smith, whose Yours and Owls brand started as a small live music bar and is now a major festival, said having everyone at the table had ensured its success.

"You've had this flood of all these new small venues, there's been a big movement on from council and police to look at different strategies and provide people with options to not be in a situation where they will be violent," Mr Smith said.

Wollongong's success being replicated in Newcastle

Further north in Newcastle, where tough venue restrictions have been touted as a model for targeting alcohol-fuelled violence, small bars are now also reigning supreme.

Live music advocates say having a diverse group of people out after dark has safety spin-offs. ( ABC RN: Jeremy Story Carter )

Newcastle arts advocate Linda Drummond said both industrial cities were leading the night-time economy revival.

"People don't go to a small bar to get smashed, people go to talk with their friends, get some interesting music and drink a small amount of really high-quality alcohol," Ms Drummond said.

"The more things you've got to do, the more people there in a city, the safer you feel.

"It's not about lights and CCTV, it's about having a bulk mass of people who are out doing interesting things and enjoying themselves."

Ms Drummond said a strategy similar to Wollongong's would ensure inner-city residents and venues were on the same page.

"In Newcastle, there's been a lot more revitalisation and apartments being built in the city, but it's important for those people to realise the city doesn't close down at five o'clock. There's going to be noise, sounds and smells," she said.

Cutting 'crazy' red tape for bars, cafes on the agenda

Wollongong Council's economic development manager Mark Grimson said there was still some way to go in reducing red tape for music venues.

NSW small business commissioner Robyn Hobbs touts herself as a "regulatory revolutionary" and aims to cut red tape for small bars. ( ABC Illawarra: Gavin Coote )

"For example, if you wanted to start up a small bar or a cafe and the various steps that you need to go through, those types of things are under review at the moment by the Office of Small Business Commissioner," Mr Grimson said.

During a visit to Wollongong this week, NSW small business commissioner Robyn Hobbs said she aimed to be a "regulatory revolutionary" and help make it easier for small bars and cafes to operate more broadly.

"In the cafes, restaurants and small-bar space there are up to 75 different regulations, you know this is crazy," Ms Hobbs said.

"It's not that we don't or shouldn't have regulations, but we should have a light touch to them.

"We need to be flexible."

The parliamentary inquiry into the state's music and arts economy will next head to the northern NSW town of Byron Bay, the home of international music festivals including Splendour in the Grass and Falls Festival.