Work from home is here to stay, but death of CBDs 'greatly exaggerated': Productivity Commission

Prime Minister Scott Morrison. Picture: Elesa Kurtz
Prime Minister Scott Morrison. Picture: Elesa Kurtz

Employees will keep working from home in higher numbers after the pandemic, but claims the trend will destroy CBDs are overhyped, the federal government's economic advisory body says.

The Productivity Commission has also urged governments not to fight against the changes brought by working from home, saying both employers and staff stood to benefit from them.

It follows calls earlier this year from Prime Minister Scott Morrison for public servants and private sector workers to return to their offices and revive ailing CBDs.

In a new report released on Thursday, the Productivity Commission said the amount of work done from home would likely remain much higher than before COVID-19. However it predicted most employees would keep working from centralised offices after the pandemic.

It recommended that governments support the growth of working from home, and said there was no need to take any immediate, direct action.

"While the process of change will be challenging for some, it is a fundamentally positive development overall, unlocking newfound value to be shared between workers and firms," the report said.

"Governments should not fight it."

The Productivity Commission said there were many reasons CBDs would remain attractive hubs of economic activity, and that many businesses would maintain their city offices as they adopted "hybrid working" - a mix of working from home and from the regular workplace.

"The death of the CBD has been greatly exaggerated," the report said.

"The benefits of close proximity - sharing, matching and learning - remain strongest in high density areas such as CBDs, even with the advent of digital technologies.

"The second-round effects of declining office rents will limit the exodus of firms from the CBD and could attract new entrants."

Some businesses that rely on high foot-traffic - such as cafes and hairdressers - may choose to locate in suburbs rather than in city centres, the Productivity Commission said.

Prime Minister Scott Morrison in June urged public servants around the country to get back to working in the office in a bid to help revitalise the nation's cities.

He also took aim at international companies who had embraced more flexible working arrangements during the pandemic, calling on them to push workers back to central offices.

The Productivity Commission said the pandemic forced up to 40 per cent of employees to work from home.

"The pandemic sparked an experiment in which workers were forced to work from home, and many discovered the benefits of doing so," the report said.

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Many staff wished to keep working from home, beginning a "second wave" of experimentation that would involve a long phase of negotiation with employers, trial and error, and adjustment.

Productivity Commission chair Michael Brennan said in a statement that working from home could unlock significant gains in flexibility and time for employees, and could increase the nation's productivity.

"Risks can be managed but we should keep an eye on them and be ready to intervene if necessary," he said.

The Australian Public Service Commission recorded a peak in August 2020 of about 64 per cent of federal public servants working remotely. Most returned to their usual workplaces by the end of the year, however lockdowns in the ACT, NSW and Victoria in 2021 prompted the Commonwealth agencies to tell staff to work from home again.

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This story Work from home 'won't destroy CBDs' first appeared on The Canberra Times.