Below is a summary by John Hine of some key articles on regional economic development from leading research groups in Australia.
These articles suggest that;
• Many of the current themes in regional development eg send more public servants to our region, fix our infrastructure etc are unlikely to lead to a sustainable economic base for a region.
• More economic research is therefore needed on how to assist regions and on evaluating these assistance measures.
However, it is also suggested that many of the city based, especially Canberra based, economic research groups seem to base their research on published statistics and don’t get down to the real issues for a region, which it is suggested are not identified by the ‘standard’ kinds of economic statistics.
A key challenge is how to encourage small and medium businesses in regional areas, many in traditional industries with a commodity focus, to consider new approaches and how to assist them acquire the skills to undertake new approaches.
INVESTING IN REGIONS
John Daley and Annette Lancy. The Grattan Institute, 2011
Scope of the Report
The report sets out to answer three key questions;
• Which regions of Australia are growing quickly and which are lagging and growing slowly or even shrinking?
• Can regional development policies lift growth rates in lagging regions and do their benefits justify their costs?
• Is government spending on social infrastructure well-targeted for variations in regional economic growth?
Economic growth is driven by population, participation and productivity.
• The regions in Australia growing fastest are those within 150 km of a large city, close to the coast or with significant mining activity.
• Agriculture does not seem to be contributing to growth in regional Australia at present, ie in 2011.
• Government spending does not fundamentally change economic trends in regions.
• Local job attraction schemes, regional universities, small scale roads and major infrastructure are all expensive but they do not materially accelerate slow growing regions.
• By not investing in regions where there is best value for money, overall productivity and economic growth are sacrificed.
• Trying to help slow growing regions is actually unfair as it penalises fast growing regions by under investing in those fast growing regions.
• The report does not say that social services such as heath, schools, transport and community facilities do not warrant investment in slow growing regions. Just that is should be recognised that this investment is being made on equity and social grounds, not for economic growth.
• The main drivers for growth are economic factors not really within the control of government, in Australia these are mainly agglomeration (the concentration of people and firms in cities), mining and coastal amenity. Governments can improve infrastructure and education but there has to be a fertile environment in the first place for economic growth to occur.
• Job attraction schemes, decentralisation, regional universities and infrastructure schemes do not appear to have made regional areas grow faster in the past.
• All new regional development programs need to be rigorously monitored and be transparent to identify programs which truly make a difference.
However, it is suggested that local attitudes can be central to a region changing its fate. This point was made in the study on Tasmania, see below.
REVIEW OF INTERNATIONAL EXPERIENCE
In 2003 the Commonwealth Bureau of Transport and Regional Economics released a report, ‘Government Interventions in Pursuit of Regional Development: Learning from Experience’, which analysed economic policy in the USA, Canada, New Zealand and Europe, as well as in Australia, that attempted to stimulate growth in struggling regions, see www.btre.gov.au
It was suggested that evaluation of polices was difficult, with separating the impacts of regional policies with wider economic development policies for the nation as a whole. The importance of effective monitoring and assessment of intervention strategies was stressed.
The key issues found to promote development in regions were;
• Well integrated and stable government.
• Recognising businesses as the key driver of economic development.
• Human and social capacity building.
• Providing essential infrastructure.
• Promoting sustainable development, and
• Taking a long term locational approach.
In terms of developing business in a region, experience has shown that programs to address productivity and competitiveness, indirectly through infrastructure and improving administrative arrangements and directly through programs to assist individual businesses, were effective. The importance of business education and training was stressed, including new ways to provide this education and training.
A REGIONAL ECONOMY: A CASE STUDY OF TASMANIA
In November 2008, the Commonwealth Bureau of Transport and Regional Economics released a case study on the Tasmanian economy, see www.btre.gov.au.
The study was done as the Tasmanian economy had through the 1990’s a growth rate lower than that Australian. However, during the 2000’s this trend was to some extent reversed and the State experienced stronger economic and population growth.
Tasmania was seen as a case study for many Australian regions. Tasmania does have;
• Many traditional commodity based industries.
• An issue with distance from markets.
• Lower average incomes, growth rate, skills base and productivity than for the rest of Australia.
• A loss of younger and educated people.
• A structural ageing problem that will have consequences for the future, ie a population with a higher percentage of older people than the Australian average.
However, there was no single causal explanation for the Tasmanian slowdown in the 1990’s.
Key points made in the paper were;
• The debt level of the Tasmanian Government had been high, with a significant interest burden.
• Since approx 2000, that high Government debt level, and consequential interest burden, had been reduced.
• The low cost of housing had led to population growth, through migration, which had boosted household consumption levels and hence business activity.
• That population growth had resulted in increases in housing prices.
• By comparison with other States, business and property services were smaller, however the point needs to be recognised that these services depend on wider economic activity and are not normally linked to the export of services outside the region.
• The larger cities eg Hobart and Launceston had stronger economies than the smaller towns and rural regions.
• A well organised comprehensive economic development strategy, Tasmania Together 2020, was developed with wide consultation. See www.tasmaniatogether.tas.gov.au. Some commented that this strategy was full of motherhood and bland statements but it may be that the consultation process was significant in helping the Tasmanian community think about the future.
Points of broader significance were that;
• As argued by Drache in 1997 (Drache D 1997, Jobs and Investment Strategies: The Challenge for Policy-Makers, www.abfoundation.com.au/research_knowledge/research/100 ) Governments can no longer be the principal instrument for economic change but rather can act as a catalyst and lead partner.
• Milne in 2000 suggested that all examples of small jurisdictions moving from economic weakness to strength come about ‘when communities actually face the challenges’. See Milne, D 2000, Ten Lessons for Economic Development in Small Jurisdictions, www.upei.ca/islandstudies/rep_dm_1.htm#lessons
It may be that the move by at least some Tasmanian farmers to move into higher value niche products rather than commodities may be having an influence on the Tasmanian economy. This trend may not have been apparent when this paper was being prepared in 2008.