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Bush poised to accelerate Australia’s productivity ambitions

March 21 2023

The regions must headline the Treasurer’s campaign to resurrect Australia’s impotent productivity growth and restore the nation’s balance sheet. 

The bush has long been the engine of Australia’s productivity. Mining and agriculture – trusted constants, even in the bleakest of economic times. 

But it’s not just these existing heavy weights that have a job to do. In a de-carbonised economy and with increased geopolitical tension, the regions will also be home to industries critical to our future. Gladstone is already making its mark with hydrogen and the Pilbara, to date better known for its iron ore reserves, has made significant wind and solar plays. 

Yet over recent decades, as the urban-based service sector grows and population share increases in our major capitals, regional Australia’s contribution to GDP at just over 34%, has been slowly declining. 

Both OECD data and 10 years of Regional Australia Institute data clearly shows Australia can achieve greater productivity gains by growing its regions, rather than growing capital cities like Sydney and Melbourne which are facing plateauing agglomeration. 

But the key to accelerating the Treasurer’s productivity ambition, is de-coupling metro and regional data from national headlines to ensure policy measures for regional Australia can drive the highest productivity outcomes for the whole country.  

Starting with people and the need for the adaptable skilled workforce - the No #1 item on the Treasurer’s ‘How to fix productivity’ list. 

In the bush, positions vacant rates are growing faster than metro areas and at speed that even record levels of net city to region migration spurred on by covid can’t meet, despite being 45% higher than the average of the two years before the pandemic. 

Regional job vacancies doubled from circa 40,000 in January 2022 to an all-time high of 96,000 in October. This rise happened while metro job vacancy growth sharply halted in February 2022 when interest rates hit. The latest vacancy figures for regional Australia is still at a challenging 81,000. January workforce participation was the highest ever on record. Regional Australia's unemployment rate has been tracking below metro levels for the past two years. 

And then there is the skills mismatch in dire need of the government’s focus on education and skilled pathways. Within the next five years, Broken Hill will welcome three new mines online, with the potential to create 3000 mining and support jobs. But where will this workforce come from? Outback

Queensland has annual job vacancy rates at over 25% while unemployment sat at 10.6% - they have the people, but not the right skills. 

If BAU continued the population of regional Australia would rise from 9.4 million today to 10.5 million in 2032. The RAI has set a more ambitious target of 11 million, which, according to the Institute’s modelling, would add an incremental $13.8 billion to national GDP.  

This goal of a bigger regional Australia is not helped by current migration settings. The 2022 Population Statement by the Centre of Population has just 17% of overseas arrivals settling in our regions and over 60% settle in Sydney and Melbourne alone.  

The OECD also points out that Australian regions with the highest shares of migrants tend to have higher productivity levels. The WA town of Katanning is undoubtedly one. The wheatbelt community knows the value of migration to its economy. In 2023 Katanning is home to 53 languages: migrants making their home based on the promise of a better life underpinned by a job – most often at the local meat processing plant.  

The RAI is not naive to complex problems that influence the dream of a ‘bigger regional Australia’. In many bush towns, rental vacancy rates are less than 1% (read non existent!) and new developments are years behind. Ironically, because there isn’t the people to do the construction.  

There remains unacceptable inequities in the provision of essential services like access to GPs and birthing facilities and schools with NAPLAN results at or above the national average.   

The Productivity Commission has highlighted the non-market services sector, including the care economy will naturally drag productivity as our population ages. Here, the bush has been hit for years and harder than the metro areas. In December, there were more than 5400 carer and aide roles advertised in regional Australia, up 22% compared to the year before and 184% compared to five years ago, growth 80% higher than metro areas over the past five years. 

The RAI’s framework for the next decade of regional growth: the Regionalisation Ambition 2032 charts 20 targets to tackle the biting challenges of population; jobs; skills; housing; health; education and energy transition. And, speaking to the Treasurer’s call to arms, it includes a goal to bolster productivity!  

To advance these targets, the National Alliance for Regionalisation will meet for the first time in Canberra today. Established by the RAI, the Alliance includes more than 30 leading national peak bodies spanning business, education, infrastructure, environment and the arts This powerful cohort will be a voice that is difficult to dismiss. 

*Liz Ritchie is the Chief Executive Officer of the Regional Australia Institute. The RAI is the creator and secretariat of the newly established National Alliance for Regionalisation: a cohort of more than 30 peak bodies focussed on advancing regional Australia.