What, then, is regional policy?

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The independents, Oakeshott & Windsor, have everyone talking about rural and regional Australia – Ian McAuley dispels a few myths those of us in metropolitan Australia may be hanging on to.  Read Ian’s observations on the need to end our trivialisation of regional policy so that we might have a hope of addressing the inequities and complex problems facing these communities.

In recent years politicians and journalists have limited their concerns to rolling off the words “rural and regional” as if alliteration is a substitute for meaning.

In fact, those words are meaningless, because every part of Australia, from Toorak to Penrith to the Pilbara can be called a “region”, and the term “rural” can cover everything from a dairy farm in the Adelaide hills through to vast cattle stations in the Kimberley. The term may be shorthand for “we don’t know and don’t really care; all we ever see of it is from an airplane window”.

It is in keeping with the media’s trivialization of policy, therefore, that many commentators have cynically said that we can look forward to an era of regional pork barrels.

So far, however, the claims of the independents have been mainly about regional policy generally rather than their specific electorates.

Regional policy has two objectives. One, common to most countries, is to reduce disparities between regions – disparities in private means and in access to public services. The other, which has been an off-and-on objective in Australia, is to ease pressure on our five big cities, where two thirds of us live. Australia has a strange settlement pattern, with only around 20 percent of the population in cities in the 30 000 to 500 000 band, which are the city sizes where large proportions of the population live in other developed countries. (These are the targets of the Government’s “Building better regional cities” program.)

On the first objective, Australia is free of the severe and entrenched disparities such as those between west and east Germany, or between US states which became clear when Hurricane Katrina exposed the poverty of the southern states. Old industrial cities such as Wollongong and Newcastle have been hard hit by industry re-structuring, but their pain has been nowhere the scale of the devastation that has occurred in places like Detroit.

We have avoided these problems in large part through strong centralization of public revenue and expenditure, with the Commonwealth collecting 80 percent of all taxes. The Grants Commission sets formulae for re-distribution to the states, providing them with the capacity (but not the obligation) to overcome disadvantages in geography or demography in delivering government services. Even more important, the Commonwealth provides almost all income support services to individuals. Those mechanisms protect states from the destructive feedback mechanisms of poverty reducing a region’s taxation base while placing heavy demands on social welfare.

Within states, however, there are many regions and communities with deep poverty. The most striking cases are the outback and isolated indigenous communities in the north  – although many of the problems of these communities are manifest also in non-indigenous outback settlements. There are regions where the resource base, such as gold mining, has been depleted, and there could be more as climate change affects agricultural production. There are farming and horticultural regions which have suffered depressed world prices – in part a downside of a mining boom which has elevated our exchange rate. Other farming regions, particularly dairy regions, have maintained production but have lost population through consolidation.  And there are hundreds of small settlements which once provided local services, but which are now within easy driving distances of larger cities such as Dubbo, which are pulling in people and businesses from surrounding districts.

Many of these regions have lost their young and are left with an older population, which threatens the viability of schools at one end of the population spectrum, and which places demands on health services at the other end.

These problems leave governments with difficult decisions. Withdrawal of a public service such as a police station to a larger centre can trigger a successive collapse of other public and private services, such as banks, ultimately wiping the viability of all businesses. On the other hand, maintaining services, or providing specific assistance such as town improvements, can give false hope, encouraging people to invest in houses and businesses and therefore worsening their ultimate losses.

These small region problems are best handled at a state and local level. If the Commonwealth is to be involved, it is best done through those tiers of government, even if this means diluting some of the credit.

The other objective of regional policy can broadly be described as decentralization, which was boosted by the Whitlam Government, who, with great gusto, established a Department of Urban and Regional Development. The unattractive acronym DURD contrasted with its glittering objectives.

Even had the program survived past the short tenure of the Whitlam Government, it had design flaws, for it ignored the need for infrastructure – roads and railroads – to connect these new growth centers to the rest of Australia. It paid no heed to lessons from the USA and Europe that transport links were the most important determinants of settlement patterns. Also, it was too taken with greenfield developments on the Canberra model, forgetting that national capitals are perhaps the only situations in which such developments work, because public servants work within a mini command economy, and because national governments can appropriate funds for a one-off splash.

Coalition Governments tended to favour assistance to particular firms in designated growth centers. They had the uncanny knack of enticing firms with maturing technologies: I recall assistance to an electric typewriter firm just before the word processor met the market, and to a film processing plant while digital photography was at the R&D stage. With the benefit of hindsight, it is clear that firms were simply taking advantage of cost advantages, such as state payroll tax reductions, Commonwealth grants and cheap land, to shift established operations. Such incentives, costly to public budgets, can do no more than attract branch activities, at the competitive end of their life cycle. They do not get high value-added activities associated with new or emerging technologies, because such activities need connection with major cities.

With their emphasis on broadband the independents are doing what previous governments haven’t done. Even more cleverly, they are giving non-metropolitan Australia a head start. Connections will be not only with state capitals, but also with the whole world. Of course, there will have to be improved transport infrastructure as well; large cities like Bathurst-Orange are still poorly served in this regard. Windsor and Oakeshott are well aware of these shortcomings as they drive on the goat track known as the New England Highway and as they see the Pacific Highway upgrade advance at the pace of continental drift. And that’s before mentioning railroads.

Also promising is the potential of linking non-metropolitan growth to environmental policies. The benefits of shorter commutes with less congestion are clear, and there has been mention of proximity to renewable energy sources. Another, less mentioned benefit, is saving Australia’s small reserves of rich horticultural land, which have been encroached upon by major cities.

With our new enthusiasm for decentralization we are off to a good start, but there are lessons to be learned from the past, and from international research conducted since we last had decentralization programs.

One lesson from the past is to have clear and objective criteria for any government programs of regional assistance; loose criteria with interpretation open to ministerial discretion make for “whiteboard” allocation.

A lesson from international research, particularly the work of Richard Florida, is that people won’t live in places they find unattractive. To the lay person this may seem so self-evident as to be a trivial point, but in the past there has been too little attention to the liveability of cities, particularly their aesthetic qualities. The people who can bring entrepreneurial and social creativity to a region aren’t going to be enthused by weed-infested empty lots, jungles of billboards, tacky signage, abandoned buildings and highways cutting through city centers, which characterize too many of our cities; the practicalities of town planning are important. So too is wider spatial planning, to avoid the risk of Australia developing a 1 600 km suburban strip stretching from Nowra to Rockhampton.

To attract settlers, and to retain their young people, these places need good schools, a challenge for state governments. Tertiary education, too is important: Armidale sets a good example of what is commonplace in the USA and other countries – the university city.

More basically, a policy of attracting people with entrepreneurial enthusiasm is likely to have more enduring results and to cost less to public budgets than the old policy of attracting business establishments to re-locate. In this regard it can be useful to find ways of attracting newly arriving immigrants, including refugees, to these growth centers.

Politically, this rediscovery of regional policy is a brave move, for it will take time to show dividends in terms of relieving pressure on our big cities, where people have shown their displeasure at the ballot box. Many will feel that they have been ignored in favour of others holding the government to ransom. If these initiatives are to have a life longer than DURD, they need explaining, and it would be ideal if the Coalition came on side, particularly the National Party, whose constituents stand to benefit, and the Liberal Party, which  seems to have a visceral dislike of planning, even when planning helps develop new economic activity.

Ian McAuley spent several years in charge of a small regional policy unit in the Commonwealth Government, where he was exposed to the worst and best of regional policy.

9 Responses to “What, then, is regional policy?”

  1. Kate Charters

    Thank you Ian for your reflections.

    I would like to add a couple of my own. I think there needs to be a significant shift in regional policy to a focus that looks at how a regionalised Australia impacts on our National Outlook. Too often regional policy is in fact policy for regions and this piecemeal approach is reflected in the patchy outcomes.

    I am also interested in your two objectives for regional policy. Without splitting hairs on objectives and outcomes I think a pivotal objective is to promote sustainable economic growth. While your article acknowledges this in the text I would see it as prominent in consideration of policy decisions.

    Finally can I whole heartedly support your reference to criteria. I was involved in a small national survey that started to identify criteria for assessing regional policy decisions and am hoping to advance this over the coming year.

    Thanks again
    Kate

    Reply
  2. Jocelyn Davies

    Ian, thanks for contributing to thinking on this important issue. One thing that you wrote is quite problematic to me. In relation to areas that are depopulating and where there is no longer strong local demand for governemnt services, you wrote: “These small region problems are best handled at a state and local level. If the Commonwealth is to be involved, it is best done through those tiers of government, even if this means diluting some of the credit.”

    I comment on this from the centre of Australia. The remote arid regions are home to much of that 7% of the Australian population who won’t be covered by high speed broadband. These regions are the backyards of all the states. Some of these regions have growing populations. Others have shrinking and ageing non-Aboriginal populations and may also have youthful growing Aboriginal populations. The development and sustainability issues are similar in each state’s desert backyard but the differences in structures, policies, political representation, transport, communications etc etc make it very hard to approach common solutions. Local government is under-capacity in most of these regions, and in a few areas does not exist at all.

    Hence I struggle to see how these challenges can be left to state and local government! But perhaps you have just framed your comments for the coastal and near inland regions, not this 70% of Australia’s lands?

    Reply
    • Ian McAuley Ian McAuley

      Replying to Jocelyn Davies, it’s a good comment relating to that 70% of Australia where 7% of us live.

      These regions are easy to neglect (I grew up in the outback myself). They comprise few electorates, and those electorates are generally “safe” — although Tony Crook and Bob Katter may be changing that perception.

      As Jocelyn points out, they are all very different; there is no “one size fits all” approach. That’s why Canberra is not the best place to address their issues. But Canberra can provide funding through states (and the NT), ensuring that the states spend the money properly.

      What these regions do tend to have in common is a narrow economy dominated by few activities. The mining, pastoral and tourism industries are sensitive to fluctuating world prices; in addition the pastoral and tourism industries are highly seasonal.

      Other features in common are high prices and often the co-existence of skill shortages and unemployment. And of course government services are difficult to deliver. Urban dwellers would be surprised, for example, to learn how much of Australia is regularly (and irregularly) cut off from surface transport.

      What we need to put on the policy agenda is a settlement policy. That’s different from decentralization and population policies. Rather, it’s about how we occupy the land and therefore how we recognize the contribution those in the outback, indigenous and other, make by living on and managing the land. It’s easy for accountants to add up the costs of small schools and fly-in health services, but the benefits of settlement are rarely recognized.

      I remember an Aboriginal elder putting it neatly when he said: “It was bad enough when the invaders threw us off our land; it’s even worse when they then abandon it”.

      Reply
  3. Dieter Moeckel

    Seems to me that regional rural Australia is actually a Furphy – 95 % of Australians live in cities and therefore 95% of government revenue is raised in the cities, especially company taxes and such.
    Its a bit like the issue of rural rate payers arguing that all their rates are spent in the town whereas in fact the town’s closer settlement and rates access raises and supplements the rural infrastructure.
    Not that i object to rural development it is certainly necessary but to suggest that regional rural don’t get their share is not quite true – the cities and urban areas support the regional and rural areas. The best case in point is the NBN it take sabout 20metres of cable to attach one residence in urban areas and What? 2 kilometres in a regional rural area. Think on it.

    Reply
  4. Anne Coombs

    Thanks Ian. And with reference to Dieter’s comment, there are multiple reason why rural areas are important – food security, biodiversity, water conservation, as sources of alternative energy. There is also the question of livability – of both the cities and the regions. People don’t want to live in over-crowded cities, nor do they want to live in shrinking, depleted towns. Regional development done well could ease both scenarios. The question of settlement patterns always seem to be in the too-hard basket. But why do we accept that nothing can change? Why DON’T we have more mid-size cities?
    Spreading our population out a bit is the best chance we have for sustainable growth.

    Reply
  5. Robert van Aalst

    Several issues come to mind while reading this article…
    – Philosophically the policy of the Whitlam Government was correct, but as you so rightly put it, the lack of focus on significant transport infrastrucutre doomed the efforts. Perhaps if DURD had lasted another 5 years, these errors may have been corrected. Australia would be a much better country today if that were the case – economically, socially and environmentally.
    – It is absolutely critical for Australia’s future prosperity that regional Australia is further developed. And when I say the words ‘regional Australia’, I am referring to non-metropolitan. As the article notes, these are the population centres of between 30,000 and 500,000 people.
    – Ian briefly mentions the work and philosophies of Richard Florida, and I agree that some of the concepts Florida has espoused (and still does today) about providing a safe, healthy friendly, livable city, are absolutely spot-on. Many of the other concepts about creative economies, proportions of left leaning, homosexual artistes, may work for the central CBD of some cities but certainly won’t if we are trying to grow Dubbo, Kalgoorlie or Shepparton.
    – I have to agree though that trying to maintain and deliver a high level of services to smaller regional centres (perhaps less than 3,000/5,000 people) would be a mistake. To be equitable and support all these places would cost far too much and return far too little. It would also not be a sustainable policy. We would be far wiser providing greater support to one city of 50,000 than to the 20 surrounding towns and villages – and in the process improving access to the regional centres from the towns and villages by better roads, bridges (a sticking point for many local councils) and of course delivering services that can be delivered so, by broadband (education, health etc).
    – Australia is now at a ‘tipping point’ where a decent effort could be started, and sustained to help support non-metropolitan Australia. As many point out, making the regional cities more attractive to live in, more attractive and easier to do business in, and supporting the same level of health, education, policing and infrastructure (incl water/green energy etc) that metro Australia is used to; would allow a much more equitable and structured development of this Country. Indeed it would allow for this country to quite easily reach 40 million population without much trouble at all. The Federal Government needs to right the wrongs of the past and fix the enduring dearth of support for non-metropolitan Australia and hopefully the independents ‘balance of power’ will allow that to happen.

    Reply
  6. Geoff Edwards

    Thanks Ian.

    I think decentralisation policy suffered a few flat tyres in the 1990s following the rise in influence of economic rationalist thinking in the federal and State public services. Solutions that smacked of “intervention” just didn’t get a run. I am not sure how different things are now. I suppose we can get Intervention for the programs that governments think worthwhile, which is somewhat circular.

    You mentioned the prospect of attracting migrants. Given that houses can cost as little as $20,000 in rural townships, and that the marginal cost of connecting to services is almost nil, I wonder why the State housing authorities don’t offer people on public housing waiting lists a quick ride to the front of the queue if they would accept a rural assignment. Most rural towns already have an array of civic utilities such as swimming pools, kindergartens and sports clubs and are commonly very congenial places to bring up children. An active housing program would generate its own employment and could even be a sufficient economic driver by itself to generate population growth. And it has a big advantage: it is incremental and the risk of failure can be low.

    GE

    Reply
  7. Rod Brown, Cockatoo Network

    Very good article, Ian

    I had a chuckle re your the rural and regional alliteration. I am constantly amazed at how politicians rabbit on about rural and regional Australia, without giving any hint of knowing the difference.

    What seems to be missing in the whole debate is findings ways to better coordinate the delivery of hard and soft infrastructure – we are currently figuring out a methodology and which regions might be interested in being first-movers. Getting infrastructure right is a powerful influence on investment, which THEN creates jobs.

    PS Long time since our DITAC days

    regards

    Rod (our blog is http://www.investmentinnovation.wordpress.com)

    The Cockatoo Network (Canberra-based but with members in most regions) is currently focusing on in

    Reply
  8. Terry Bowring

    Ian

    Reading above articles one might wonder what started small inland towns in the first place. More than likely it was some form of agriculture , like we used to live off the sheeps back. Times have changed many forms of agriculture have automated, like grains, where one person with up to date equipment can plant and harvest huge acreage. Lack of reliable water to diversify into new forms of agriculture has been another factor that has also mitigated against small town expansion. The answers may come from Australia’s premier research organization the CSIRO who have identified key forces that will shape the world. 1) We live in an increasingly food in-secure world 2) We live in a increasingly urbanised world, 3) We live in a future carbon constrained world. Surely our political masters can see the potential to develop the cropping potential of our wide brown land to be a part of local and global change via cropping using carbon farming techniques, bio-fuel and power production from crop wastes. Why do we think BHP Billiton the big Australian is looking to invest in mining potash for fertilisers , they have done their homework, the next boom market will be related to food. What about water and expected climatic drying of our southern regions. Well amazingly per capita we have more water than most nations, the problem is it is all in the wrong places. Over 85% of rainfall is in the north and most of it flows to sea. Our Feds need to understand what grew huge states like California , was it the film industry , no, it was water supplied by canals to agricuture that built up inland towns and finally led to expansion of cities such as Los Angelos & San Diego, and then Phoenix and Tuscon in the Arizona desert. When all our mines are depleted and manufacturing keeps going to low labor cost countries the bush could again be our future. Lets see how to make it happen in an economic and enviromentally acceptable fashion

    Terry Bowring

    Reply

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