Bad Weather, Ugly Beaches. Still, Aussies Are Flocking to Melbourne

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Melbourne Central Business District La Trobe Street tram trolley

Photographer: Jeff Greenberg/UIG via Getty Images

Its weather can be depressing, the beaches uninviting and it lacks  a mining industry to generate wealth. Yet Melbourne is growing at the fastest pace in Australia as employers vacuum up workers to meet the southern city's booming demand.

Melbourne, which served as Australia's political capital and financial center from federation through to the mid-1920s, is undergoing a renaissance. Its population is forecast to overtake Sydney's in the decades ahead now that the former rustbelt region has reinvented itself as a hub for education and high tech -- attracting firms such as Geli, a software maker that chose the city for its first office outside the U.S.

The city has refashioned its center. Dirty laneways have been turned into clusters of cool cafes and restaurants, and small bars have opened that would just as easily be at home in Paris. Central Melbourne reeks of fashion and has a feeling of being on the cusp of new ideas. 

“Melbourne and San Francisco share a stylistic and ethical vibe, and we believed the employees in our Melbourne office would immediately identify with the norms we have here at Geli,” Chief Executive Officer Daniel Loflin said in an interview from his company's headquarters in San Francisco. “That gave us confidence that we were launching somewhere that was quite akin to our home base.”

The rejuvenation has occurred in a state bereft of a mining industry and whose manufacturing was hammered by a strong currency during the resource boom -- including the shuttering of its car makers -- testament to Melbourne's capacity to innovate. It has opted for services like education and become a leader in health and the associated sectors that spill off it.

“This is a very diversified economy,” said Ian Harper, a Reserve Bank of Australia board member and senior adviser at consultancy Deloitte Access Economics Ltd. who is based in Melbourne. “Across agriculture, professional services, higher education -- Australia’s higher education industry, particularly its exports of higher education, are based here in Victoria. So we have a significant broad base: health, education, high-end manufacturing, agriculture, financial services. It’s not surprising that this state is very, very strong.”

It is also experiencing a housing boom. Melbourne prices have almost doubled since 2009, but it's important that properties in the city sell at a 26 percent discount to those in Sydney, where first-time buyers are close to being priced out of the market. Victoria's government also said in February it's planning 17 new suburbs around Melbourne's fringe, with the rezoning of 100,000 housing lots within two years, to help accommodate the new arrivals. Indeed, five of the 10 fastest growing suburbs in Australia are located around the city.

Victoria "invested earlier and better in infrastructure than much of the rest of Australia," Deloitte Access Economics said in a report on Australia's states. "In turn, that made house and land packages on the outskirts of Melbourne rather more affordable than their equivalents in Sydney and Brisbane and Perth."

To keep the city moving, and to cope with the population spurt, the government has begun a massive infrastructure construction program to ease traffic congestion. Deloitte estimates the city has A$48 billion ($35.4 billion) of engineering activity planned or underway.

"It's obvious that the secret is out," Geli's Loflin said of Melbourne's attractions. "If it was a secret then, the congregation of these companies and people shows you that it's not anymore."

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