In response to the first iteration of One Nation, the Howard government — which had slashed funding for regional development when it first came to power — was faced with the need to focus greater attention on the bush, seen as the source for the economic component of the anger that fuelled Pauline Hanson’s rise.
The result was some thoughtful, often nuanced, regional policy led by former Nationals leader John Anderson, but one that didn’t carry a whole lot of cash. One of the aims was to stop the erosion of services in small towns by funding the establishment of banking services in post offices; another was to try to leverage private funding into regional projects via a Foundation for Rural and Regional Renewal (still plugging away in Bendigo). Eventually, after Anderson had departed and budget discipline gave way to Howard’s floodgate mentality to government spending, this degenerated into massive Nationals pork-barrelling of regional grants programs and the humiliation of the notorious “regional rorts” report.
Confronted with the return of One Nation, the current government is once again turning its mind to regional matters. And, like the first time around, it’s started off trying to do it properly.
In December, Treasurer Scott Morrison wrote to the Productivity Commission (PC) asking it: “to examine the regional geography of Australia’s economic transition, since the mining investment boom, to identify those regions and localities that face significant challenges in successfully transitioning to a more sustainable economic base.” And he wanted the PC to, inter alia, “establish an economic metric, combining a series of indicators to assess the degree of economic dislocation/engagement, transitional friction and local economic sustainability for regions across Australia and rank those regions to identify those most at risk of failing to adjust”.
Better yet, he wanted it done stat — within 12 months, and with an initial report in April. That report came out on April 21 this year.
And yes, as requested, the commission came up with an economic metric composed of human capital (skills), financial capital (wealth), physical capital (infrastructure and plant), natural capital (local resources), social capital (community engagement) and industrial diversity. Not all of these can be accurately measured with current data, however, and in any event, the PC concludes, “there is no widely accepted method to define and measure the economic resilience and adaptive capacity of regions. Noting this, an index of relative adaptive capacity has been estimated but caution is required in interpreting and applying it to policy making aimed at building resilience and promoting economic development.”
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Unsurprisingly, the PC is chary of government handouts to prop up regional communities. “Assistance to industries and regions has often been costly, ineffective, counter-productive, poorly targeted and inequitable,” it concludes (one feels like adding “but apart from that, it’s fine”). In the PC’s view:
“individual specific adjustment assistance (beyond generally available measures) is best reserved for unexpected circumstances and highly vulnerable groups of people, and should be aimed at helping individuals make a successful transition to employment. Assistance that creates false expectations about the future success of an industry or economic activity can lead to confusion and reduce individuals’ incentives to plan and adapt to changing circumstances.”
Notice that the PC wants assistance aimed at helping individuals — not industries or communities. Programs intended to help the latter tend to be ineffective, especially when they are directed at industries that aren’t viable. Programs that help the former to retrain and gain new skills are more likely to be effective in enabling resilience, especially in the wake of major structural changes in a region like the shutdown of a major employer. It also suggests assistance only be directed at communities coping with major but temporary problems, or the most vulnerable groups. Regions temporarily doing it tough, or communities that are relatively well-resourced to cope with structural change, are less of a priority.
Instead, the PC suggests some “no regrets” policies that will benefit everyone. These include reducing the burden of planning, zoning and development processes on business, addressing complex and duplicative environmental regulation and removing agricultural regulation in areas like foreign investment prohibitions. Inconveniently, it also notes the excessive compliance costs of the 457 visa program.
As anyone with a background in regional development knows, a key issue is what’s called the “sponge cities” effect. The biggest population shifts affecting the bush are not from rural to major city shifts, but from small regional towns to larger regional towns. These means that regional centres grow more quickly, provide greater economic opportunities, and retain services better than small towns, which face a future of declining population, poorer economic opportunities and fewer services. Some small towns are able to re-invent themselves and start growing again. Others are on course to vanish.
What’s the appropriate role of government in response to dying small towns? The PC believes they should be left to die:
“When people and businesses leave a regional community to take up better opportunities elsewhere, this often generates greater value and so increases the overall wellbeing of the population as a whole. However, such changes can have adverse effects on people left behind. Individuals who depart the region to pursue other opportunities are also often those who played key roles in the community, such as leading local sporting clubs and similar organisations. A shrinking of the population can harm a community’s social and cultural life, and reduce local leadership expertise and skills … It is a trend that cannot, nor should be, thwarted.”
The government would have wanted to hear little of this, but the PC’s response on regional development was always predictable. There’s a reason why Barnaby Joyce hates the commission. Back to pork-barrelling then.