Transitioning Regional Economies

3 Performance of regions

Key points

Over the past 30 years, the Australian economy has adjusted well to changing economic pressures. However, not all regional communities have experienced the same resilience. Over the past five years the number of employed persons has grown in most regions (about 77 per cent), although some regions (about 26 per cent) have experienced population decline. It is difficult to distinguish specific disruptions from the normal variation in economic and social indicators. However, some general patterns can be observed, especially in regions which are predominately resourcebased or agricultural. Workers in resourcebased regions (mining, oil and gas production) had, on average, higher income growth than in other regions during the mining investment boom. Although income growth in mining regions has slowed since the boom, median incomes are still higher in mining regions than other areas of Australia. Labour mobility, largely through flyin, flyout workers, has spread the benefits of the mining investment boom to other regions and also diluted the impact of the end of the boom on individual regions. The rapid rise (and subsequent fall) of house prices in some mining areas has had negative wealth effects on some people who bought during the boom, including investors who had no connection to the resources sector. Productivity improvements and the growth of regional centres and cities are driving a long term adjustment in agricultural regions. These changes are the result of natural forces and are important to ensuring the long term success of agriculture. They have resulted, however, in decreasing employment and populations in some agricultural regions. Capital cities and many regional centres are experiencing rapid population growth, particularly in ‘lifestyle’ centres along the coast and for regional centres that are well connected to major cities. The high rates of population growth in capital cities reflect overseas migrants and an increasing propensity for urban living.

In many respects, the current Australian economy bears little resemblance to the economy of the early twentieth century. Although Australia has enjoyed a sustained period of economic growth, there has been substantial transformation in the nature of businesses and jobs over the past few decades. The services sector has grown to dominate the Australian economy (as it has in other developed countries) and agriculture and manufacturing have shrunk in relative terms. Overall, employment and GDP have been growing at a national level, with a changing composition. In part, favourable countercyclical factors have benefited Australia, such as strong demand for resources from China. Australia’s economy has performed strongly through some difficult periods including the 1997 Asian Financial Crisis, the ‘dotcom bubble’ (1997–2001) and the global financial crisis of 200708. Thus providing evidence that the Australian economy is adaptive and resilient overall.

The above discussion does not mean that all regions are growing in line with the national trend or that all regional communities are resilient in the face of adjustment pressures. Many of Australia’s regional economies are reliant on mining or agricultural activity with products sold on global markets. They are susceptible to price cycles, the weather and other exogenous shocks and their cyclical nature means they experience varying rates of growth. Even so, some regions may be more adaptive and flexible than others, and this flexibility improves the overall resilience of the Australian economy.

Drawing on the framework presented in chapter 2, the Commission would have preferred to identify functional economic regions (FERs) that have experienced an outoftheordinary economic disruption (cycles that are larger than usually observed).

However, sufficient data for employment are only available at the Statistical Area Level 4 (SA4) (87 regions across Australia).⁷ Data on population and incomes are available at the more disaggregated Statistical Area Level 2 (SA2). The SA2 data have been aggregated into FERs. Gross regional product data have not been used in the report because robust estimates are not available at the required level of disaggregation.

Using the data available, it has not been possible to identify many examples of regions experiencing major isolated disruptive events. Rather, regions continually experience ups and downs. This could be a feature of the normal fluctuations in economic activity, which has more variability at a disaggregated level, or due to other factors. For example, events such as cyclones in Darwin and Cairns, and droughts have had large adverse impacts on regions. Although such events impact on communities, they do not appear to result in large shocks to regions in terms of economic activity as indicated by employment levels. In addition, there appear to be long–term trends across classes of regions, including those that are predominately focused on mining or agriculture or are regional population centres (towns and cities). These trends, and the factors that have shaped the performance of particular regions, are explored further in this chapter.

This chapter starts with an examination of recent economic and demographic trends in regions throughout Australia (section 3.1). Data are typically shown over the past 5 years as this coincides with the transition phase following the end of the mining investment boom. Drawing on the themes emerging from this analysis, the chapter then explores change in three types of regions: resources regions (section 3.2), agricultural regions⁸ (section 3.3) and urban regions (section 3.4).