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KIBS in Regional Australia: Why Knowledge Services Are the New Growth Engine

The sharpest-growing part of a regional economy now sits in an office above a main street shopfront, selling expertise rather than a physical product. Regional Australia has become one of the more interesting growth stories in knowledge-intensive business services.

By Dr Tony Irish, CA Business Valuation Specialist 26 August 2026 · 7 min

For decades, regional economic development in Australia has been framed around what a town can dig up, grow, or manufacture. That framing is now incomplete. Increasingly, the sharpest-growing part of a regional economy is invisible in the paddock or the industrial estate: it sits in an office above a main street shopfront, staffed by an accountant, an engineer, an IT consultant or a planner selling expertise rather than a physical product. This is the world of knowledge-intensive business services, or KIBS, and regional Australia has become one of its more interesting growth stories.

What KIBS actually means

There is no specific ANZSIC classification for KIBS. KIBS is a deliberately broad category covering firms that sell specialist knowledge as their core product: architecture, engineering, legal and accounting services, management and IT consulting, R&D, market research, advertising, banking, insurance, telecommunications, software and media. In the Australian statistical system, most of this activity sits inside three ANZSIC divisions: Professional, Scientific and Technical Services (PST); Information Media and Telecommunications (ICT); and Financial and Insurance Services (FIS). Together these three divisions employed around 2.12 million people nationally in February 2026 (approximately 14.4% of the total workforce) and added a net 72,900 jobs over the year, driven by strong growth in PST (up 80,800 jobs, or 6.1%) offset by small declines in ICT and FIS. Median weekly earnings across the three KIBS divisions sit around 20% above the all-industries median. That is precisely why regional bodies care: KIBS jobs are high-wage, high-skill, and tradeable, so a regional town can export expertise the same way it exports wool or wheat.

That matters for diversification. A regional economy anchored solely in agriculture, mining or manufacturing is exposed to commodity cycles and automation. KIBS growth adds a countercyclical, human-capital-driven layer that also tends to retain the town’s own graduates, rather than exporting them to capital cities.

The other reason KIBS matter is less well known, yet the role this section of the economy plays is unique and non-substitutable.

Role in knowledge transfer and innovation systems: the real competitive advantage

The headline earnings and employment numbers matter, but they are not what makes KIBS strategically distinctive. KIBS firms sit at the interface between the wider knowledge base, universities, research institutes, industry associations, patent literature, professional networks, and the businesses that need to convert that knowledge into revenue. European regional innovation research formally defines KIBS as intermediaries between the producers of knowledge and its users, combining external information with client-specific knowledge to produce applied services and new goods, and characterises them as the engine of regional innovation systems. They represent the second level of an economy’s knowledge infrastructure.

In practical terms, an accountant who advises a manufacturing SME on R&D tax incentives is transferring policy knowledge into an operating decision. A regional engineering consultancy briefing a shire on grid-scale battery interconnection is translating national technical standards into a local capital project. A management consultant embedding a lean-manufacturing process at a food processor is moving productivity knowledge across firms that would otherwise never meet. Each interaction leaves accumulated knowledge behind in the client. That stock of applied knowledge is a large part of what raises regional productivity over time.

This role explains why regions with a shallow KIBS layer struggle to convert their knowledge stock into growth. A region can host a university, a research centre, an industrial base and a skilled workforce, and still under-perform, because there are too few intermediaries actively brokering knowledge between them. Building the KIBS layer is therefore not a passive by-product of population growth or infrastructure investment; it is the mechanism through which the rest of the ecosystem actually produces regional value. In competitive terms, the regions that will out-perform over the next decade are those that deliberately grow their KIBS density, not just their headline population or precinct footprint. KIBS representation in regions is around half that in capital cities, which leaves regional economies at a distinct disadvantage.

The data: KIBS is not just a capital-city story anymore

The long-standing assumption in the literature is that KIBS clusters overwhelmingly in capital cities, where client density and specialist labour pools are thickest. Regional growth dynamics are now beginning to tell a different story. The Productivity Commission’s submissions record the shift plainly: the rise in remote working means many more service and knowledge jobs can be performed from the regions, a structural change enabled by improved digital infrastructure. Nationally, the services sector (including Professional, Scientific and Technical Services) is projected to generate almost two-thirds of all employment growth to 2025, alongside Health Care and Education and Training. Small business data reinforces the same trend at ground level: PST was one of the main contributors to small business growth in regional and metropolitan areas alike over the past decade.

Ballarat and Western Victoria: the case study

Ballarat is a clear example of this dynamic in Western Victoria. Jobs and Skills Australia’s regional labour force data shows PST Services employment in the Ballarat Employment Region grew from 3,900 in August 2020 to 6,600 in August 2025, a 69% increase in five years. That growth has occurred against a backdrop of a city that added 10,529 residents between 2018 and 2023 (a 9.8% increase).

Highlighting the criticality of knowledge flows across a regional economy as a source of growth, Federation University Australia is a structural anchor for this shift. Its Ballarat Technology Park, built in partnership with IBM, now hosts 64 enterprises employing more than 2,100 full-time staff, generates in excess of $700 million of annual economic activity, and hosts roughly five per cent of all jobs in the Ballarat economy. An expanded footprint is projected to contribute more than $1.4 billion a year and support over 5,000 full-time jobs once complete. The university’s co-operative education model, in which 20% of higher-degree-by-research candidates are now industry-funded or co-funded, is deliberately designed to keep knowledge-service talent regionally embedded rather than lost to Melbourne.

The remote-work tailwind is real, if moderating. Regional Australia Institute data shows city-to-region migration flows running 16% above pre-2020 levels even as the post-pandemic surge normalises, with regional Victoria capturing 20% of net capital-city outflows in the year to June 2023. The Moorabool Shire recorded 138% annual growth in net migration inflows. Every knowledge worker who relocates with a laptop rather than a factory shift is a potential KIBS founder, client, or hire.

Policy levers regional bodies can pull to grow a KIBS base

  • Procurement preferences: direct a share of council and regional-body contracts (planning, engineering, IT, advisory) to locally based firms to build a viable local client base.
  • Co-working and flexible commercial space: lower the fixed-cost barrier for sole-practitioner and small-partner KIBS firms to establish a local presence.
  • Digital infrastructure: treat broadband and mobile reliability as core economic infrastructure, not an amenity, given KIBS firms are entirely dependent on connectivity.
  • Skills pipelines: align university and TAFE co-op placements with local KIBS employers so graduates have a reason to stay.
  • Anchor-tenant strategies: use a single credible employer (an IBM, a hospital, a university research centre) to de-risk the decision for the next ten firms considering a regional move.
  • Networks: the role networks play in moving knowledge across the economy cannot be understated. Developing, nurturing and growing networks across and between regions should be a primary focus.

What this means for your region

A region chasing knowledge-intensive business services isn’t chasing a fad; it’s chasing the fastest-growing, highest-wage segment of the modern labour market, and one that regional infrastructure and remote-work migration have made newly accessible outside the capitals. SED Advisory has spent nearly three decades building investment cases, regional profiles and workforce studies for regional Australia. Dr Tony Irish’s PhD research on knowledge-intensive business services in regional locations underpins the practice’s distinctive approach to KIBS and regional-innovation-system analysis. If your council, regional development body, or industry group wants a defensible strategy for building a KIBS base rather than hoping one arrives, get in touch with SED Advisory.

Sources cited

About the author

Dr Tony Irish is a director of SED Regional Advisory. He is a Chartered Accountant, holds a PhD in regional economic development, and is accredited as a CA Business Valuation Specialist by Chartered Accountants Australia and New Zealand.

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