It’s funny how sensitive some Sydneysiders have become over their city’s cultural vibrancy. The latest to do so are Sydney Theatre Company power couple Cate Blanchett and Andrew Upton, who’ve penned a speech on the matter for the City of Sydney.

“Sydney has rested on her laurels a bit and it is beginning to show,” Upton told the Sydney Morning Herald. “More importantly it is beginning to feel like that. When you walk along the rivers in either Melbourne or Brisbane there is a palpable pride in their precincts and an ambition … At times, Sydney can feel disinterested, bored, smug, lacking in direction.”

Blanchett and Upton used their speech to call for a new cultural precinct in Walsh Bay, tied to the Barangaroo redevelopment, that could be “the heart of a cultural ribbon stretching from Barangaroo to the Sydney Opera House”. They argue the new precinct could be “the world’s first green arts precinct”.

And they have some specific policy ideas to achieve it: “a freeing up of licensing … to bring nooks and crannies alive”; “assisted rent for artist studio spaces”; more “event recognition” for the companies that call Walsh Bay home.

Perhaps most controversially, Katdrew argues some aspects of the Barangaroo development could be managed by the Walsh Bay arts companies: “When talk turns to providing a community payback for Barangaroo, how about making that investment available to be managed by the Walsh Bay companies with a mandate to provide cheap — or preferably free — cultural events?”

They might be at the top of the tree of Australian culture but, like many of their peers in Walsh Bay, they seem to have lost touch with the grassroots. Ironically, the very thing they complain about is already changing.

Sydney in 2011 has substantially regained its mojo. At the street level, it has buckets of style and attitude. It has even started to acquire the sort of small bars Melbourne has long been famous for, thanks to long-overdue reforms slashing red tape around licensing and public entertainment. And, whatever Melbourne’s claims to the contrary, Sydney remains Australia’s most polyglot and immigrant-rich community.

A day after Upton and Blanchett issued their clarion call for the high arts companies of Walsh Bay to become urban developers, The Sydney Morning Herald‘s veteran arts reporter Bryce Hallett wrote a puff piece entitled “Sydney’s arts scene a pale imitation of its vibrant, go-get-it neighbours”. The article featured a range of inner-city Sydney arts bosses complaining Brisbane is more funky. “‘There’s a sense of Queensland being the artistic ‘place to be’ — supportive, sunny and surprising,” Sydney Opera House CEO Richard Evans told Hallett. “In the absence of a strong grassroots movement of artists, thinkers and innovators collaborating to push and prick the mainstream, NSW is stagnating.”

The irony of the boss of Australia’s best-funded cultural icon complaining about “the absence of a strong grassroots movement of artists” has not been lost on some. Former arts policy adviser and small venues campaigner John Wardle — a key player in the ultimately successful effort to remove NSW’s onerous place of Public Entertainment regulations — responded, saying Hallett “does a terrific job in his article of validating the impression in the wider community of the major performing arts being pampered and out of touch”.

Wardle observes that “with government subsidy and protected from the free market, the taxpayer ensures major performing arts [companies] are well looked after, whilst feeble resources are allocated to strategic policy for the broader arts community”. We can forgive Evans for not knowing any grassroots artists — he runs the Opera House, after all. But Blanchett and Upton’s speech deserves further scrutiny — if only because its ideas are so nutty.

The ultimate shape of the Barangaroo development is unquestionably important for the future of Sydney. But the idea major arts companies should have a management role to play in that development is simply crazy. How much urban development expertise do we really think resides in the rehearsal rooms of the STC or Bangarra? How would Upton feel about a property developer or urban planner directing one of his plays?

It’s an early 2000s idea that owes much to the “creative class” ideas of US academic Richard Florida, largely now discredited. Interesting, new culture seems far more likely to emerge in the cultural precincts that are already interesting right now — around Surry Hills and Newtown, in the warehouse spaces of Enmore and Alexandria, or in emerging western centres such as Parramatta and Casula — than in some mythical future cultural precinct in Walsh Bay.

US academic Jane Jacobs observed in the 1960s that a key aspect of cultural vibrancy was old buildings and cheap space: things that Walsh Bay lacks, despite Upton and Blanchett’s fuzzy call for “assisted rent”. Artists need cheap housing as much as they need cheap workspace, but affordable accommodation workspace is unlikely to be available in a new development in the newest part of Sydney’s CBD.

For those who don’t happen to warm the benches of Walsh Bay’s arts venues, Sydney’s post-Olympic “quandary” is long over. The “new Trade Union Club” that Upton longs for might well be the Red Rattler, or an underground warehouse space in Enmore. New events such as the Underbelly Arts festival and the Imperial Panda festival are springing up to incubate a new generation of emerging practice. The Casula Powerhouse is showing itself to be far more connected and responsive to its local community than the Opera House, which is spending hundreds of millions of dollars upgrading its loading dock.

What is in Walsh Bay are a lot of subsidised arts companies, which rather suggests the motivation behind Cate and Andrew’s vision. If Australia has an epicentre for public subsidy of the arts, Walsh Bay is it. The STC itself enjoys public funding of more than $2.4 million annually, which could comfortably support dozens of independent theatre  producers or small start-ups. Now there’s an idea for Sydney’s “next adventure”.