Transitioning Regional Economies

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Foreword iii

Terms of reference iv

Abbreviations ix

Overview 1

Findings and recommendations 31

1 About this study 39

1.1 What has the Commission been asked to do? 41

1.2 The Commission’s approach 42

1.3 Conduct of the study 43

2 The Commission’s approach 45

2.1 Setting the scene 46

2.2 Observing the performance of regions 51

2.3 Measuring adaptive capacity — a single metric 59

2.4 A framework for assessing the scope for economic and social development in regions 64

3 Performance of regions 79

3.1 Recent trends in regional growth 81

3.2 Exploring trends in resources regions 93

3.3 Agriculture and the consolidation of towns 108

3.4 Growth of cities and regional centres 118

4 Regional adaptive capacity 127

4.1 How should the metric be interpreted? 128

4.2 Some emerging themes of adaptive capacity 131
5 Strategies for successful transition and development 141

5.1 Removing unnecessary impediments 142

5.2 Improving the effectiveness of planning and expenditure for regional development 148

5.3 Specific adjustment assistance 176


A Public consultation 189

B Results of the relative adaptive capacity single metric 197

C Australian Government expenditure on regional programs 203

D Functional economic regions 209

E Developing an index of relative adaptive capacity 227

Attachment A: Report on Productivity Commission Index of Adaptive Capacity 269

References 277



Australian Bureau of Statistics


Australian Capital Territory


Australian Pesticides and Veterinary Medicines Authority


Australian Statistical Geography Standard


Australian Securities and Investments Commission


Business Longitudinal Analysis Data Environment


central business district


Council of Australian Governments


Centre of Full Employment and Equity (University of Newcastle)


Developing East Arnhem Limited


drive-in, drive-out


functional economic region


fly-in, fly-out


Greater Capital City Statistical Area


gross domestic product


gross regional product


Industries Assistance Commission


Industry Commission


local government area


National Broadband Network


Organisation for Economic Cooperation and Development


Productivity Commission


principal components analysis


Public Health Area


Public Health Information Development Unit


Regional Development Australia


Royalties for Regions


Regional Growth Fund


Statistical Area Level 2


Statistical Area Level 3


Statistical Area Level 4


Structural Adjustment Fund for South Australia


Socio-Economic Indexes for Areas


Key points

Overall, the Australian economy has shown considerable flexibility and resilience over the past 30 years, with a large majority of regions (77 per cent) experiencing positive employment growth over the past five years. Employment in mining remains more than double preboom levels.

While the mining boom has caused transitional pressures, it has also made Australians substantially better off in the short term and over the long term.

A mobile workforce (including flyin, flyout) 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.

Adjustment from the mining boom is generally not a source of significant disadvantage and does not justify special intervention from governments.

Even though overall employment growth has been positive, all regions have variable growth in employment over time, with most experiencing falls at times.

Over the past five years, reductions in employment and population are more evident in some agricultural regions and a number of marginal mining regions.

Despite this, there is emerging evidence of rising incomes in agricultural regions.

As requested, the Commission has constructed an index of relative adaptive capacity. This metric does not, by itself, provide a basis for policy making. There is unavoidable uncertainty about its estimated value for each region, and transitions in the real world also depend on the specific nature of the shock, the options available to people and the decisions they make.

Using this metric, most major cities have relatively higher adaptive capacity, while some remote regions (including Indigenous communities) and many outer regional areas tend to have relatively lower adaptive capacity.

Governments should avoid providing ad hoc financial assistance to regions because it is rarely effective. It does little to facilitate transition and longterm development. Governments should also better coordinate and evaluate their activities that affect Australia’s regions.

Specific adjustment assistance to individual regions should be reserved for extreme events that are likely to result in high levels of permanent disadvantage in a community. Even then it should be targeted at assisting the most vulnerable families and individuals, in particular to help them secure employment.

There is unnecessary overlap in the regional development roles of all three tiers of government, contributing to concerns about the effectiveness and value for money from the large outlays on regional development programs.

Central responsibility for regional development resides with State and Territory governments, supported by local governments. They should:

remove unnecessary planning and zoning regulations that are obstacles to regional development

adopt more rigorous and transparent assessment and implementation of their regional development planning strategies to improve the effectiveness and value for money from the large expenditures on regional development. This requires strong and effective local leadership

direct discretionary funding to priorities identified in regional strategic plans.

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