Michael Janda reported this story on Thursday, May 23, 2013 09:24:00

TONY EASTLEY: It's an inter-city rivalry older than Federation and a new report suggests it's not over yet.



The report concludes that in as little as 25 years Melbourne could overtake Sydney as Australia's largest city.



The Committee for Sydney's report also reveals that Melbourne has rapidly gained ground in the harbour city's traditional economic heartlands of financial and professional services.



And rather than being just a problem for Sydneysiders, the study's authors and big business say the city's woes will hold back the whole nation.



Business reporter Michael Janda has more.



MICHAEL JANDA: Following the gold rush, Melbourne passed Sydney as Australia's largest city but its heyday was short-lived and for the past century Sydney has been Australia's biggest urban centre.



But perhaps not for too much longer according to a study by the Committee for Sydney.



TIM WILLIAMS: Sydney was growing at half the rate of Melbourne in the first decade of the century so it was a bit of a lost decade in terms of productivity and population growth.



MICHAEL JANDA: The committee's chief executive, Dr Tim Williams.



TIM WILLIAMS: If Melbourne kept on growing at the pace it was growing and we stalled as we had done then they would overtake us in population terms in the middle of the century but we think that's now unlikely to happen because of what you see behind us which is there are cranes back on the horizon again.



MICHAEL JANDA: Sydney is seeing some massive developments. How much more of this style of development is needed to maintain Sydney's momentum?



TIM WILLIAMS: Look, it's fantastic. This is good news for Australia as well as for Sydney because when Sydney fires, the nation booms. We're responsible for about a quarter of the nation's GDP. We're 43 per cent of all financial insurance services here.



MICHAEL JANDA: Yet even Sydney's traditional financial dominance has weakened: Melbourne's financial sector was only half the size of Sydney's at the turn of the century, a decade later its almost two-thirds the size.



Dr Williams says the nation needs Sydney to regain its mojo in sectors like finance, information technology and professional services to offset the economic drag as the mining boom winds down.



TIM WILLIAMS: We need the cities to do well. That's where most productivity is to be found and we need the globally competitive sectors that are only found in Sydney to do well.



MICHAEL JANDA: Can't we spread this growth more evenly around the rest of the nation? Why is Sydney uniquely important to Australia's economy?



TIM WILLIAMS: It's a bit like asking why is London uniquely important at the UK economy. There are certain things that Sydney alone can do for the Australian economy.



MICHAEL JANDA: Dr Kurt Iveson is an urban geographer at Sydney University, and he says the city he lives and works in has no unique claim to global status.



KURT IVESON: We could talk to people in Brisbane and Melbourne and indeed Perth who would also be able to point to the ways in which parts of their urban economies are fundamentally tied to different global industries and different flows of capital and labour.



MICHAEL JANDA: Dr Iveson says collaborative development between Australia's cities and regions is far better than a competitive mindset. And when it comes to population, size doesn't matter.



KURT IVESON: At the turn of the 20th century Melbourne was much bigger than Sydney so inherently it doesn't seem to me to be a problem either way.



TONY EASTLEY: Dr Kurt Iveson, an urban geographer at Sydney University, ending Michael Janda's report.