Sydney has taken the crown as the nation's biggest manufacturing centre – an honour tightly held by Melbourne for many years.
A recent analysis of the economies of Australia's capitals by SGS Economics and Planning reveals Sydney is now the main industrial city.
Their report found that the value of Sydney's manufacturing industry was $21.7 billion in 2012-13 compared with Melbourne's $18.9 billion.
The gross domestic product of Sydney grew by 2.1 per cent last financial year, according to the report. Only Perth had a higher growth rate among the capitals, at 3.2 per cent. Sydney's GDP was $337.5 billion in 2012-13, Melbourne's was $263.7 billion.
The Victorian capital has traditionally been viewed as Australia's manufacturing heartland
But Victoria's manufacturing sector, which features large-scale, export-oriented manufacturers such as carmakers, had been hit hard by the higher dollar and low-cost competitors, said SGS analyst, Terry Rawnsley.
Sydney's manufacturers, however, have been more focused on the domestic market and high-tech manufacturing such as biotechnology and advanced electronics. These have been less affected by the high dollar.
"There has been a big shock to low-value manufacturing and that has hit Melbourne pretty hard," Mr Rawnsley said.
Industry assistance could have played a role in this reversal. "Maybe some of the Victorian manufacturers got a bit lazy because they know there were some government subsidies flowing around," he said. "Whereas the NSW guys made sure they were running a tight ship and made a profit."
The report said Sydney's economic growth had been broad based.
Sydney's workers had a higher output per hour than the other capitals.
"This is a reflection of two related factors," the report said.
"The first is the relative concentration of high labour productivity industries (financial and professional services) located in Sydney.
''The second reflects the advantages, in terms of economies of scale and scope, which are offered to firms by the virtue of the size of the Sydney economy."
Financial services was Sydney's biggest industry sector, accounting for nearly 16 per cent of the city's output. The professional services sector was the second-biggest (9.1 per cent) with manufacturing third (6.2 per cent).
Source: Fairfax Media