Some regions doing it tougher than others post mining boom

Some regions doing it tougher than others post mining boom


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The Productivity Commission is seeking public comment on the findings of a new preliminary report on regional economies adjusting to life after the mining boom.

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Commissioner Paul Lindwall.

Commissioner Paul Lindwall.

THE Productivity Commission is seeking public comment on the findings of a new preliminary report that’s aiming to develop economic measurement tools and policy suggestions, to help regional economies adjust to life after the mining boom.

The initial report “Transitioning Regional Economies” is being released today and also looks at economic trends and factors concerning the agriculture sector.

The independent research agency will now seek written stakeholder feedback - with a July 31 deadline - ahead of a final report being published in December.

In December last year, Treasurer Scott Morrison asked the Commission to undertake a study precipitated by the mining investment boom ending, to look at how the various regions are affected by different and specific economic challenges.

Commissioner Paul Lindwall said due to the mining boom and the mining investment boom ending, the research agency was tasked to analyse each region of Australia and assess its resilience to change and any strengths and weaknesses.

Mr Lindwall said the Commission was specifically asked to devise an indicator which accounted for a range of factors and tried to put a “view point” on the different regions and how resilient they were or their adaptive capacity to adverse events.

In making that assessment, he said the Commission looked at skills and education, employment, remoteness, access to infrastructure and services, the availability of natural resources, and a region’s economic diversity and financial resources.

A key message from that aspect of the report is that, over the years, 80 per cent of the regions have had general employment growth and are doing quite well and less than 20pc have had a population fall or employment is shrinking, he said.

The Commission was also asked to establish an economic metric system to rank the regions so as to identify those most at risk of failing to adjust.

Mr Lindwall said the final report that’s due in December would include any actual recommendations on policies for the different regions to aid any adjustment process.

He said currently, the metric tool was based on old census data from 2011 and the new census data from 2016 - which comes after the mining boom - won’t be out until October.

“The final report will incorporate the latest census data so we expect the metric will change,” he said.

“In a sense we’re very keen on showing that no single one size fits all policy is appropriate across the board and that the regions overall have done quite well, and Australia is better off, because of the mining boom.

“Some areas are doing it tougher than others and there are different reasons for that like for example around Mt Isa in Queensland where the cost of mining is high and the mine’s about to close, and is near the end of life, compared to say the Pilbara in WA.”

Mr Lindwall said the initial report showed agriculture had done “remarkably well” in Australia over the years but there was a long-term trend of increased productivity and declining employment.

The report said national employment in agriculture had fallen from 6.1pc of Australian workers in 1984 to just 2.6pc in 2016.

“Agricultural output has been increasing but employment has been failing and this is a long-term trend, not just a recent trend,” he said.

“And part of that is; some towns have been shrinking in size and population while others have been growing and that’s a trend we’ve observed, not just in Australia but also overseas.

“It’ll be interesting to see how policy can be calibrated so you can help the cities that are growing, because the last thing you want to do is discourage people from moving somewhere where it’s in their own interests to move to, and if they wish to move, they should be able to move.

“Policies that discourage mobility can be quite harmful.”

A key finding of the initial report is that employment decline in agriculture is being driven by efficiencies and technological innovation, leading to growth in production using less labour.

“At the same time, there has been a pattern of consolidation from smaller towns to larger regional centres, affecting the social fabric of these communities and engendering a feeling of being left behind as Australia prospers more generally,” it said.

Mr Lindwall said the Commission’s recent report on agricultural red tape showed there was scope for the government to reduce the regulatory burden in areas like zoning and planning and transportation generally, to help reduce producers’ costs and help to make them more sustainable.

He said the initial report looking at regional economies showed that areas of Queensland and WA had experienced “quite different” impacts from the mining investment boom ending.

He said Queensland was clearly worse-off, not because of the mining boom, but because places like Mt Isa were feeling the end of it “more severely” than in WA.

“The whole thing started because of the mining investment boom but once we looked into this we realised we couldn’t just focus on mining regions,” he said.

“If you look at fly-in fly-out (FIFO workers, a large number of regions have workers that might be based in the cities.

“In WA for example, 70pc of FIFO workers in the Pilbara lived in Perth or in the southern regions like Peel.

“So in a sense, what’s happened is the down turn that would have been quite stark for the Pilbara to some extent has been lessened by spreading the burden more widely, due to FIFO.

“FIFO has a number of benefits actually in terms of spreading and diversifying risk.”

Mr Lindwall said another factor in considerations was the diversity of a regional economy, which wasn’t always possible.

“If your region relies entirely on one industry or one company then of course you’re more exposed to a down turn than if you’re not,” he said.

“But you can’t just wish more diversity on a region, for the sake of it.

“The Pilbara is unlikely to be able to sustain market gardens, or cattle production or sheep production or something like that.

“Its speciality is iron ore and probably always will be so while economic diversity is good in one sense, you can’t just impose it.”

Mr Lindwall said the commission’s report highlighted the “usual hot spots” like Whyalla in South Australia, Portland and the Latrobe Valley in Victoria and Townsville in Queensland which had all experienced disproportionate economic shocks, due to being partly exposed to a single disruptive factor.

“In the case of Hazelwood it’s a coal fired power station that’s past the end of its life, Whyalla is a steel making town and in Townsville its nickel production,” he said.

“All of them have had a significant exposure to a single sector, although Townsville has a lot of defence personnel too so it’s protected in a sense.”

Mr Lindwall said with the final report due in December, there was plenty of time to consult the regions widely, and gather feedback from stakeholders and anyone else interested in the Commission’s findings.

“We’d like to hear what they think of our new metric which is unique and our other analysis and policies, overall,” he said.

“We’ve very keen to look at all polices that impact regional Australia at federal, state, territory and local government levels and put a coherent analysis across it and give some guidance to the government on policies that are likely or unlikely to work.”

The initial Commission report said regions that are predominantly based on agriculture, particularly broadacre cropping, tended to have lower rates of growth in employment.

“Whether a region contains irrigated or dryland agriculture, produces commodities exposed to international competition, specialises in livestock or cropping, or undertakes land-intensive or small-scale production affects how exposed the region is to various disruptions, such as currency movements, commodity price volatility and the weather,” it said.

“Partly in response to pressures on profit margins, primary producers have lowered their cost of production through productivity improvements and technological innovation, especially in cropping.

“Drivers of productivity growth have included better and larger machinery, use of technology (including autonomous vehicles), new crop varieties (including genetically modified varieties), precision agriculture (the precisely measured application of fertiliser and water using sensor technology) and the increasing size of farms.

“However, productivity improvements have not been equal across different types of agriculture.

“From the late 1970s, dairy (average productivity growth of 1.6pc a year) and broadacre cropping (1.5pc have seen large improvements in productivity.

“These have exceeded productivity improvements for beef (0.9pc) and sheep (0pc).”

The report said towns with fewer services become less attractive for residents and in the absence of a local industry or other social connections, people often relocate closer to regional centres.

“And if the population becomes too small, a cycle of business closures and further population decline can set in,” it said.

“This is particularly true after the closure of critical services such as medical general practitioners, schools and post offices.

“Population decline and the loss of services impacts on the people remaining in these communities.

“People who are the most mobile (and therefore most likely to depart the region to pursue other opportunities) are also often those who play key roles in the community, for example by leading local sporting clubs or volunteer organisations.

“Population decline can result in a deterioration of a community’s social and cultural life, and a loss of local leadership expertise and skills.

“This is not a unique Australian trend, with many OECD countries experiencing similar trends.”

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