Transitioning regional economies

Initial report

This initial report was released on 21 April 2017. You were invited to examine the initial report and to make written submissions by 31 July 2017.

Please note: This position paper is for research purposes only. For final outcomes of this study refer to the study report.

Read the study report

Download the overview

Download the initial report

Technical supplement

Described in this technical supplement are the data and techniques used to construct the single metric of regional adaptive capacity.

The mining boom has caused transitional pressures, but it has also made Australians substantially better off in the long term. A mobile workforce (including fly-in, fly-out) has spread the benefits of the boom across workers living in other regions, as well as reduced the cost of both the investment phase and the ongoing production phase.
About 80 per cent of regions have had positive employment growth over the past five years.
Even though overall employment growth has been positive, all regions have had highly variable growth in employment over time, with most also experiencing decreases at times.
Adjustment from the mining boom may not be the largest source of dissatisfaction outside of capital cities. Over the past five years, employment and population falls are evident in some agricultural and a small number of mining regions.
In agriculture, employment decline is 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.
Caution is required if making policy decisions based on the rankings of regions using the estimated metric of relative adaptive capacity in this initial report. There is unavoidable uncertainty about its estimated value for each region, and actual adaption to any specific disruption would be affected by factors beyond the metric.
The factors shaping adaptive capacity include: people-related factors (educational achievement, employment rates, skill levels, personal incomes and community cohesion); the degree of remoteness and accessibility to infrastructure and services; natural endowments (such as agricultural land) and industry diversity.
Most mining regions appear to be resilient and have relatively high adaptive capacity.
Regions with a greater dependency on manufacturing have relatively low adaptive capacity.
Remote and very remote regions (including Indigenous communities) also tend to have relatively low adaptive capacity.
There is no 'one size fits all' approach that will promote successful adaptation in all regions, although there are 'no-regrets' policies that should be pursued as soon as practicable.
Strategies for successful adaptation and development are those that focus on supporting people in regional communities to adjust to changing economic circumstances. Strategies work best when they are:
- identified and led by the local community, in partnership with all levels of government
- aligned with the region's relative strengths
- supported by targeted investment in developing the capability of the people in the local community to deal with transition, adaptation, and securing an economic future
- designed with clear objectives and measurable performance indicators and subject to rigorous evaluation.
Although government expenditure on projects can create short-term employment, it often does little to support transition and long-term sustainable growth in regions.
The initial findings in this report could change when data from the 2016 Census of Population and Housing become available in October and further research is undertaken.

Transitioning regional economies

Overall, Australia has benefited substantially from the mining boom, with gains still evident today around the nation. However, there have been transitional pressures for some people and businesses, and communities are still adjusting, said a Productivity Commission report into transitional pressures in regional communities.

'A highly flexible work force and a substantial use of fly-in, fly-out workers helped to spread the benefits of the boom and reduced adjustment pressures both during the boom and after it was over,' Commissioner Paul Lindwall said.

The report includes the Commission's early and preliminary design of an index of adaptability across Australia's regions.

It finds that employment in the mining sector remains significantly higher now than it was prior to the boom and that employment has grown over the past five years in about 80 per cent of Australia's regions. Adjustment from the mining boom may not be the only or even the main pressure being felt by regional communities.

'While incomes and house prices in some locations rose and then fell back in spectacular fashion, it appears that most mining regions are resilient, with a relatively high capacity to adapt to economic pressures. But remote and very remote regions, including Indigenous communities, and some locations in metropolitan areas, have a much lower capacity to adapt to change,' Commissioner Lindwall said.

Technological innovation and efficiencies in agriculture have led to growth in production, but using fewer workers. At the same time, regional populations have continued to become more centralised in larger towns and centres.

Some agricultural regions and a small number of mining regions have seen their populations decline and employment fall. 'These changes have affected the social fabric of these communities and naturally contributes to a feeling of being left behind,' Commissioner Lindwall said.

The report finds that there is no single approach that will facilitate successful transition and development in all regions of Australia.

It notes that some regional initiatives appear to have done little to facilitate transition and sustainable growth in regions. Investment in people and their capabilities (including local leadership) and removing or reducing restrictions on planning and occupational licensing are among the reliable ways of helping to lift investment in regions.

The draft report is open for comment until the end of July 2017 at http://www.pc.gov.au/inquiries-and-research/transitioning-regions/initial

Transitioning regional economies

Initial report

Download the overview

Download the initial report

Technical supplement

Transitioning regional economies

Download the infographic

Regional Resilience (Text version of infographic)

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