Regional centres offer growth opportunities
Written by Jack Archer, CEO, Regional Australia Institute, as seen in Stock and Land, 3 November 2016
The once-unthinkable has happened. Ford ceased making cars in Geelong, Vic, this month, and Toyota and Holden will follow suit early next year.
It’s time to focus unashamedly on the future for regional cities, which lies in building connected, globally unique services – not in propping up the creaking factory floors of the past.
It’s time to define our regional cities by what can be, rather than what was. The development of Australia’s small cities is an unexploited opportunity for the nation’s future.
Small cities have grown rapidly in the last 40 years, represent 15 per cent to 20pc of the economy and are home to 4.5 million Australians. Many more regional Australians live close to a regional city or regional capital and depend on it for jobs, access to services and as a market or support for their businesses.
For every 100,000 Australians who choose to live in growing small cities rather than our big five capitals, an additional $50 billion will be released in the economy across 30 years in reduced congestion costs and increased consumption.
The case for developing our network of small cities as part of our national economic agenda is clear.
International evidence demonstrates nations with a network of cities tend to have higher per capita gross domestic product.
Our key levers of economic policy – monetary and fiscal policy – are largely impotent. The reform formulas of the past are either exhausted or crushed by political division. We need to develop new ways of supporting growth in our economy.
After growing at more than 4pc a year and faster than our major cities in the early 2000s, the overall growth in regional cities has fallen sharply in the past few years.
This is despite the mining investment boom and the ongoing high population growth experienced by cities next to our major metropolises.
The fundamental reason for this loss of growth momentum is two-fold.
First, the industrial base of older regional cities has not shifted fast enough to new growth opportunities to sustain their long-term performance.
Second, we have not sufficiently developed the local private sector in emerging regional cities – resulting in an over-reliance on commuter jobs, seasonal domestic tourism and social assistance.
Much of our past policy approach to the economic development of regional cities can be characterised as managed decline with infrastructure stimulus. Neither approach does anything to solve these fundamental issues.
It’s time to let go of a confused and often confrontational system of governance.
If we devote a fraction of previous spending allocation on emerging opportunities instead, we will get a much greater return. This means building stronger networks of firms in new industries, seeking investment and fostering a culture of ambition and entrepreneurship.
It means nurturing specialisations in high value services, technology, tourism and aged care. These industries can and should become genuine drivers of long-term growth and good local jobs.
The government’s approach to implementing the City Deals policy is crucial to effectively change the direction of regional city economies.
Under this new policy approach federal, state and local governments will collaborate with universities and the private sector to come up with unique growth deals for Australia’s cities. The deals can include investment in infrastructure, innovation and skills or social policy reforms – whatever evidence suggests will be needed to get a city on the right track.
There are three tests to determine success of city deals.
First, we must be very clear about the problem or opportunity each city needs the deal to target. We can’t do everything through this approach, selecting one or two important opportunities for focus is critical.
The next is how creatively we can leverage existing money spent on regional cities to better effect.
- How will existing funds spent in innovation, trade and investment by the three levels of government be integrated to drive business growth in city specialisations?
- Can social services investment and skills be better designed to lift people out of unemployment and support transitions out of declining sectors?
- Can we leverage existing assets to develop a pipeline of private sector investment in infrastructure and city development?
The third is the quality of the long-term growth plan. Deals must outline what we expect to happen in a city across 10 to 20 years and how we expect the City Deal to positively change this.
To enable this, each deal should set unique targets for increasing growth and employment, reducing the numbers of people relying on welfare, and raising median incomes.
These are the measures upon which small City Deals should be judged and upon which the measurement of success in wider economic policy relies.