Description
The effects of the global financial crisis (GFC) have been felt around Australia, from the CBD of Sydney to the CBD of Burnie. This is not surprising given the pervasive nature of the crisis and the considerable economic activity that occurs in regional Australia
The Parliament of the Commonwealth of Australia
The Gl obal Fi nanc i al Cr i si s
and r egi onal Aust r al i a
House of Representatives
Standing Committee on Infrastructure, Transport, Regional Development &
Local Government
November 2009
Canberra
© Commonwealth of Australia 2009
ISBN 978-0-642-79237-2 (Printed version)
ISBN 978-0-642-79238-9 (HTML version)
Cont ent s
Foreword ............................................................................................................................................. v
Membership of the Committee ........................................................................................................... vii
Terms of reference .............................................................................................................................. ix
List of abbreviations ............................................................................................................................ xi
List of recommendations ................................................................................................................... xiii
1 The global financial crisis and regional Australia ............................................. 1
Regional Australia ..................................................................................................................... 1
The global financial crisis ........................................................................................................ 2
Aim and scope of the report ..................................................................................................... 3
Conduct of the inquiry .............................................................................................................. 4
2 Impact of the GFC on regional business ............................................................ 7
Introduction ............................................................................................................................... 7
Resources sector ........................................................................................................................ 8
Manufacturing sector ................................................................................................................. 12
Tourism sector .......................................................................................................................... 16
Retail sector .............................................................................................................................. 24
Construction sector ................................................................................................................... 26
Primary industries ..................................................................................................................... 29
Banking and lending sector ....................................................................................................... 33
Business and downturns ........................................................................................................... 43
3 Impact of the GFC on regional populations ..................................................... 45
Introduction ............................................................................................................................. 45
Job losses in regional Australia ................................................................................................. 45
iv
Mortgage stress in regional Australia ........................................................................................ 50
The impact of the GFC on social services in regional Australia ................................................ 54
4 Impact of the GFC on local government ........................................................... 61
5 Strengthening Australia’s regions .................................................................... 67
Regional development policy in Australia ............................................................................ 67
Regional development and the post-trade liberalisation era ...................................................... 68
Three pillars of regional development policy ............................................................................. 70
Facilitating regional cooperation ........................................................................................... 83
Conclusion ................................................................................................................................ 88
Appendix A – List of Submissions ........................................................................... 89
Appendix B – List of Exhibits .................................................................................... 97
Appendix C – List of Witnesses & Public Hearings .............................................. 101
Appendix D – The Canadian Mortgage Bond Program ........................................ 113
For ew or d
The effects of the global financial crisis (GFC) have been felt around Australia and
certainly regional Australia has not been immune. Major export industries located
in the regions have suffered, as have small and medium sized regional businesses.
Working hours have reduced and job losses have been incurred.
The Committee acknowledges the economic importance of regional Australia and
has undertaken this inquiry in order to assist the Government to better understand
how economic downturns affect regional Australia, so that it will be in a better
position to formulate regional development policy aimed at strengthening the
economic resilience of our regions.
Examining an issue which continues to unfold has presented some challenges. The
changing nature of the crisis has impacted the Committee’s evidence, much of
which is anecdotal and does not provide a complete record of the impact of the
GFC on regional Australia. The Committee has reported on the evidence it
received, noting the effects of the crisis on key sectors in regional economies as
well as the impact of the crisis on local communities and government. The GFC
has also highlighted the importance of regional development in abating the effects
of economic downturns on regional communities. Therefore, the report concludes
with a discussion about the importance of continuing Commonwealth
Government programs and policies that build infrastructure, encourage education
and support the growth of business in regional Australia.
The Committee has made comments and recommendations where appropriate.
Some have been more general in nature while others more specific. The
Committee has recommended that the Government examine the use of structural
adjustment funds as a response to economic downturns and their ability to assist
small business. Increased funding for the TQUAL Grants program and increased
cooperation in identifying key tourism markets and setting priorities for
marketing those locations has also been recommended as part of the Committee’s
investigation into regional tourism. Discussion about the Government’s Bank
vi
Guarantee Scheme has led the Committee to support a review of its differential
pricing structure and comment on banking competition in regional Australia.
Should unemployment continue to rise, the Committee believes there may be a
case for the introduction of a national unemployment mortgage assistance
program, providing its impacts have been fully considered by government. The
GFC has demonstrated a need in regional Australia for the provision of localised,
collective social services and so the Committee has recommended increased
funding to the Department of Human Services in order to expand its co-location
site trials and increase its local service provision activities. It has also
recommended that the Government examine options for locating government
departments or functions of government departments into regional areas to
increase regional employment opportunities.
Support for small business is particularly important during these periods and, as
such, the Committee believes that the Small Business Advisory Service should
continue to operate beyond its current two-year funding commitment. Small
business can be further assisted by an increase in the number of AusIndustry
representatives in regional Australia.
The GFC has not been the first, nor will it be the last economic challenge regional
Australia faces. Its ability to respond in the future will depend on individual
regions reaching their growth potential. The Committee believes this will only
occur if local strategies are underpinned by Commonwealth Government policies
focusing on infrastructure, education and businesses support.
The Regional Development Australia network presents the best possible option
through which governments can assist in the development of regional Australia.
Its success will be based in part on its ability to generate region specific
community and economic development planning that is supported by the region;
maintain productive levels of cooperation between the three tiers of government;
and facilitate cooperation between various agencies and government programs in
the regions.
The GFC should be seen as an opportunity to examine the impact of change on
regional Australia and test policy responses. The lessons learned will assist in
strengthening existing regional development policy, which will help regional
Australia withstand future downturns.
Ms Catherine King MP
Chair
Member shi p of t he Commi t t ee
Chair Ms Catherine King MP
Deputy Chair Mr Paul Neville MP
Members Mr James Bidgood (from 17/6/09
until 22/10/09)
Ms Melissa Parke MP (from 19/3/09)
Ms Jodie Campbell MP Mr Brett Raguse MP
Mr Darren Cheeseman MP Mr Don Randall MP
Mr Jason Clare MP (until 15/6/09) Hon Andrew Robb AO MP
Mrs Joanna Gash MP Mr Jon Sullivan MP
Mr Robert Oakeshott MP (from 19/3/09)
viii
Commi t t ee Sec r et ar i at
Secretary Mr Peter Keele (to May 09)
Ms Julia Morris (from May 09)
Inquiry Secretary Mr Michael Crawford
Research Officers Ms Sophia Nicolle
(to June 09)
Ms Adrienne Batts
(from June 09)
Administrative Officers Ms Kane Moir
Ms Alison Wardrop
Ter ms of r ef er enc e
The Committee is to inquire into the impact of the current global financial crisis on
regional Australia and the role of the Commonwealth Government in ensuring
that regional Australia is equipped to respond, with particular focus on:
the encouragement of economic development and employment; and
the development of sustainable essential services and social
infrastructure designed to enhance the liveability of regional Australia.
x
Li st of abbr evi at i ons
ABS Australian Bureau of Statistics
ACC Area Consultative Committee
ADI Authorised Deposit-taking Institution
APRA Australian Prudential Regulation Authority
ASX Australian Stock Exchange
BEC Business Enterprise Centre
BITRE Bureau of Infrastructure, Transport and Regional Economics
CBD Central Business District
CDO Collateralised Debt Obligation
CDS Credit Default Swaps
CMB Canadian Mortgage Bond
CMHC Canadian Mortgage Housing Corporation
DEEWR Department of Education, Employment and Workplace Relations
DHS Department of Human Services
DITRDLG Department of Infrastructure, Transport, Regional Development
and Local Government
GDP Gross Domestic Product
xii
GFC Global Financial Crisis
HECS Higher Education Contribution Scheme
LEC Local Employment Coordinator
LNG Liquefied Natural Gas
NBN National Broadband Network
NHAMBS National Housing Act Mortgage-Backed Securities Program
[Canada]
NSW New South Wales
NT Northern Territory
NUMAP National Unemployment Mortgage Assistance Program
OECD Organisation for Economic Cooperation and Development
QLD Queensland
RBA Reserve Bank of Australia
RDA Regional Development Australia
RET Department of Resources, Energy and Tourism
RMBS Residential Mortgage Backed Security
SA South Australia
TAC Victorian Transport Accident Commission
TQUAL Not an acronym. A competitive funding program formerly
known as the Australian Tourism Development Program
TRAIN Trans-Regional Amalgamated Infrastructure Network
VET Vocational Education and Training
WA Western Australia
Li st of r ec ommendat i ons
2 Impact of the GFC on regional business
Recommendation 1
The Committee recommends that the Government evaluate and report on
the potential use of structural adjustment funds as a response to
economic downturns such as the global financial crisis.
Recommendation 2
The Committee recommends that the Government, in examining the use
of structural adjustment funds, consider the flexibility and ability of
structural adjustment funds to assist small enterprises in addition to
larger companies.
Recommendation 3
The Committee recommends that the Government increase the quantum
of funding for the TQUAL Grants program, while ensuring that regional
tourism businesses receive a proportionate share of the grant funding,
provided the applications adhere to the program guidelines.
Recommendation 4
The Committee recommends that the National Long-Term Tourism
Strategy should consider how states and regions can further improve
their cooperation on identifying key tourism markets and setting
priorities for marketing those locations.
xiv
3 Impact of the GFC on regional populations
Recommendation 5
The Committee recommends that the Government examine in detail the
potential impact of a national unemployment mortgage assistance
program as a means of responding to rising unemployment and
mortgage stress in regional Australia, should unemployment and
mortgage default levels continue to rise.
Recommendation 6
The Committee recommends that the Government evaluate the work of
the Local Employment Coordinators with particular focus on their ability
to act as a conduit between local, state and the Commonwealth
Government to promote coordinated human service provision, with a
view to utilising the evaluation as a basis upon which greater
coordinated action and information sharing about available services can
occur in the future.
Recommendation 7
The Committee recommends that the Government increase funding to
the Department of Human Services in order to expand its co-location site
trials and increase its local service provision activities.
Recommendation 8
The Committee recommends that the Commonwealth Government
examine options for locating government departments or functions of
government departments into regional areas.
5 Strengthening Australia’s regions
Recommendation 9
The Committee recommends that the Government examine the uptake of
its Small Business Support Line and Small Business Advisory Service
with the intention of continuing funding support for this initiative.
Recommendation 10
The Committee recommends that the Commonwealth Government
increase the number of AusIndustry representatives in regional Australia.
xv
Recommendation 11
The Committee recommends that the Government examine the manner
in which various government business support programs worked
together in particular regions during the GFC and the potential role RDA
may play in facilitating greater coordination between business support
programs and integrating them into wider regional development
frameworks in future.
Recommendation 12
The Committee recommends that the regional employment plans of
Local Employment Coordinators should be integrated into the regional
development plans of Regional Development Australia. In those areas
where a Local Employment Coordinator has not been deployed, Regional
Development Australia should be developing regional employment
plans.
xvi
1
The gl obal f i nanc i al c r i si s and r egi onal
Aust r al i a
Regional Australia
1.1 Regional Australia is the ‘economic backbone of the nation’s prosperity.’
1
In 2003, Australia’s non-capital city regions contributed 34.1 per cent of
Australia’s Gross Regional Product worth some $205 billion.
2
Regional
exports such as minerals, forestry products, grain, wool, beef, wine and
tourism drive the nation’s economy and were worth about $65 billion in
2006.
3
These industries also drive the local economies of the regions,
which often depend on major export industries to generate local econ
activity.
omic
1.2 The effects of the global financial crisis (GFC) have been felt around
Australia, from the CBD of Sydney to the CBD of Burnie. This is not
surprising given the pervasive nature of the crisis and the considerable
economic activity that occurs in regional Australia.
1.3 It is the Committee’s role to identify and highlight issues facing regional
Australia. The GFC is certainly one of those issues, and it is the
Committee’s expectation that this report will assist the Government to
better understand how economic downturns affect regional Australia so
1 Department of Foreign Affairs and Trade, about Australia fact sheet: Regional Australia,http://www.dfat.gov.au/facts/regional_australia.html, p. 3, accessed 8 September 2009.
2 2003 State of the Regions,http://dpl/Ejournals/State of theRegionsReport/INDEX.htm,
accessed 17 September 2009.
3 Department of Foreign Affairs and Trade, about Australia fact sheet: Regional Australia,http://www.dfat.gov.au/facts/regional_australia.html, p. 3, accessed 8 September 2009.
2 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
that it will be in a better position to formulate regional development policy
aimed at strengthening the economic resilience of our regions.
The global financial crisis
1.4 In July of 2007, rising interest rates in the United States, combined with a
constricting US economy, led to a rise in home mortgage defaults. Rising
mortgage defaults revealed that the lending practices of some US lenders
were questionable, as money had been lent to people who should have
been ineligible to borrow. Unfortunately, many risky mortgages in the
United States had been bundled into mortgage bonds, rated by ratings
agencies and sold to investors. In some cases, the risk associated with
these bonds was passed on utilising credit default swaps (CDS).
4
1.5 When investors began to lose confidence in the bonds, a liquidity crisis
ensued as the bonds were sold off. A declining derivatives market also
forced major investment banks such as Bear Stearns and Lehman Brothers
to write-down the value of their assets, leading to a greater lack of
liquidity in the market and the collapse of some investment banks.
5
1.6 By the time Lehman Brothers collapsed in September 2008, an American
crisis had become a global financial crisis. The internationalised capital
market was in decline and the lack of liquidity in the banking system
resulted in a lack of available or affordable credit in many countries
including Australia.
1.7 Governments around the world responded to the crisis by providing
billions in funding for banks, credit and consumer markets, and on some
occasions, guaranteeing bank deposits. In Australia, the Government
guaranteed bank deposits up to one million dollars, wholesale term
funding of Australian incorporated banks and authorised deposit-taking
institutions and purchased $4 billion in Residential Mortgage Backed
Securities.
6
4 A CDS is a form of insurance that allows for the transfer of credit risk without the transfer of
an underlying asset, Dr Michael Porter, The economic collapse we did not have to have, Committee
on Economic Development Australia, 25 August 2009,http://www.ceda.com.au/public/research/financial_crisis/porter.html, accessed 25 August
2009.
5 Manningham City Council, Submission No. 32, p. 3.
6 Media Release, Prime Minister of Australia, Global Financial Crisis, 12 October 2008.
THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA 3
1.8 No amount of government intervention could fully negate the effects of
the crisis that rippled through the Australian economy throughout late
2008 and into 2009. The Australian Stock Exchange (ASX) fell and
businesses exposed to the global economy or reliant on credit began to
suffer. Job losses followed and consumer confidence began to wane,
further impacting businesses and jobs. Australia, however, fared better
than many—and continues to do so.
7
1.9 The effects in regional Australia have been similar to those experienced in
the metropolitan areas—declines in business activity, job losses and
resulting social problems. Some regions, heavily reliant on industries such
as mining, tourism and manufacturing, have keenly felt the effects of the
crisis.
8
While some agricultural regions view the crisis as another
challenge to be faced after years of drought, others have experienced
growing economies due to an increase in domestic tourism at the expense
of declining international tourism numbers.
9
Similarly, in regions where
the drought has broken, the financial crisis is of less concern.
10
1.10 The picture that emerges of this crisis in the regions is a mixed one and
serves to highlight the challenges that regional policy makers face when
considering regional development issues generally, and responses to this
crisis specifically. Challenges, however, should not be deterrents, and
while a considerable amount of effort (and money) has been committed in
response to the GFC by government, the Committee, in undertaking this
inquiry, has sought to ensure that regional concerns are heard as
Government formulates responses to the crisis and aids in the
development of regional Australia.
Aim and scope of the report
1.11 There were several challenges the Committee faced in undertaking an
inquiry of this nature. The GFC continues to unfold and so the Committee
has been aware that information it gathered has been regularly
superseded by events. Likewise, official data is reflective of a specific time
7 The impact of the global financial crisis to date has been less severe in Australia than other
OECD countries. See OECD Economic Outlook 85 database.
8 This was most evident in areas the Committee visited such as Broken Hill (mining), the Gold
Coast (tourism) and Geelong (manufacturing).
9 Regarding agriculture see, Department of Agriculture, Fisheries and Forestry, Submission No.
128, p. 3. Regarding tourism see, Mr Robert Wallace, Transcript 21 April 2009, p. 9.
10 Mr Anthony Brun, Transcript 29 April 2009, p. 2.
4 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
period and is not always timely when events are moving quickly. In this
case, business surveys have assisted in providing more timely
information.
1.12 Much of the evidence gathered by the Committee is anecdotal and does
not provide a complete record of the impact of the GFC on regional
Australia, however, the Committee expects that this inquiry will add to
the body of information available regarding the impacts of the GFC in
regional Australia and will assist future research into the crisis once it has
abated.
1.13 The speed of the crisis and the need for governments to respond quickly
has resulted in a situation where the Committee is aware of government
action but not able to comment extensively on the impact of this action
because enough time has not lapsed. The Committee does, however,
examine government programs and stimulus in regional Australia where
appropriate.
1.14 The report is broken into two sections; the first addresses the impact of the
crisis on regional Australia to date and the government response. The
second section examines current and future regional development policy
options targeted at assisting Australia’s regions to grow and withstand
future economic challenges.
Conduct of the inquiry
1.15 The inquiry was advertised in The Australian on 18 February 2009 and in
the 13 February 2009 edition of the Australian Local Government
Association newsletter. A press release was also issued to regional media
outlets on 12 February 2009.
1.16 In addition, the Committee invited submissions from federal Ministers,
state and territory governments, 560 local governments, 49 state and
territory Regional Development Boards, 54 Area Consultative
Committees, as well as a wide range of businesses, and business and
labour organisations, research institutes and social service providers. In
total, the Committee issued 628 submission invitation letters.
1.17 To date, the Committee has received 170 submissions from 164 parties.
These submissions are listed in Appendix A. The Committee also received
31 exhibits which are listed in Appendix B.
THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA 5
1.18 The Committee held public hearings in: Burnie, Launceston, Geelong,
Ararat, Geraldton, Busselton, Mandurah, Sydney, Broken Hill, Beenleigh,
Canberra, Townsville and Darwin. In total, 164 witnesses appeared before
the Committee at these public hearings. Details of the hearings and
witnesses who appeared can be found in Appendix C and a brief
summary of the Canadian Mortgage Bond Scheme is found in Appendix
D.
1.19 Transcripts of the Committee’s public hearings and copies of all written
submissions are available from the Committee Office of the House of
Representatives, the National Library of Australia or on the inquiry
website:http://www.aph.gov.au/house/committee/itrdlg/index.htm
6 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
2
I mpac t of t he GFC on r egi onal busi ness
Introduction
2.1 It is difficult to generalise when discussing the impact of the GFC on
regional Australia. As noted in the previous chapter, the picture which has
emerged throughout the course of this inquiry is a mixed one. Some
regions are worse off than they were before the crisis, others the same or
better.
2.2 Much of this has to do with the economic make-up of various regions.
Those which are heavily reliant on the mining industry, for example, have
suffered as world commodity prices and demand have declined. Yet, in
Queensland, a new coal mine is opening in the Surat Basin, creating more
jobs
1
while declining mineral prices have led to job losses in the Mackay-
Fitzroy-Central West region of Queensland.
2
The tourism industry has
found itself in similar circumstances. Decreasing international tourist
numbers have had a negative impact on cities such as Cairns and the Gold
Coast, while the tourism sector in Tasmania remains strong.
2.3 The differing nature of the crisis is reflected to some degree in the
presentation of the evidence in this report. Rather than itemising the
impact of the crisis on various regions around Australia, the next three
chapters will note the impact of the crisis on business, individuals and
local governments in regional Australia, in each case noting the assistance
provided by the Commonwealth Government.
1 Media report, Surat Basin’s Newest Mine Creates Jobs, ABC Rural, 12 June 2009,http://www.abcnet.au/rural/resource/stories/s2596512.htm, accessed 26 August 2009.
2 See, Government of Queensland, Submission No. 156, p. 3 & Townsville Enterprise, Submission
No. 120, p. 11.
8 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
2.4 This crisis is an economic one and therefore it is logical to begin with its
impact on business in regional Australia, because a constricting economy
affects people, which in turn, affects the government institutions that
assist them.
2.5 As noted, it is not possible for the Committee to present a complete picture
of the impacts of this crisis on the various industries noted in this section,
as the crisis continues and its full impact will not be known for some time.
The first section of this chapter will therefore detail the evidence the
Committee has received to date, noting the major sectors in regional
Australia that have felt the crisis’ effects and ways in which the
Commonwealth Government has responded. These sectors include:
Resources;
Manufacturing;
Tourism;
Retail;
Construction;
Primary industries; and
Banking and lending.
The chapter will conclude with a brief discussion on operating businesses
through economic downturns.
Resources sector
2.6 Australia’s resource sector is export oriented, with much of the exports
going to Asian markets such as China, Japan and the Republic of Korea.
Gross Domestic Product (GDP) in these countries has fallen since the onset
of the GFC and as a result, demand for Australian energy and minerals
commodities has also fallen.
3
Falling demand has led to falling prices. In
turn, falling commodity prices have raised the cost of mining operations
and impacted the ability of resource companies to access financing for
development projects.
4
Accessing credit will be discussed later in this
section; however, it should be noted that mining companies have been
unable to access credit or only at terms which ‘impose a highly risky and
3 Department of Resources, Energy and Tourism, Submission No. 35, p. 9.
4 Department of Resources, Energy and Tourism, Submission No. 35, p. 9.
IMPACT OF THE GFC ON REGIONAL BUSINESS 9
onerous debt burden on them’.
5
The option of on-market equity raising
has been problematic due to the volatility of the share market.
6
2.7 Exploration in the resources sector has also decreased since the beginning
of the GFC. Barring exploration for petroleum, which has increased,
mineral exploration expenditure fell by 3.1 per cent in the December 2008
quarter alone. Exploration budgets have been cut and exploration staff
laid off in order to conserve capital.
7
2.8 All this has resulted in decreasing profits for resource companies with a
corresponding decrease in company share prices. In regional Australia, a
reduction in the demand and price of commodities has meant job losses.
From February 2009, employment in the mining industry fell by 5.2 per
cent—the equivalent of 8,600 people.
8
Combined with a decrease of 7.9 per
cent in the period between November 2009 and February 2009 (13,000
people), it is clear that job losses in the mining sector have been
significant.
9
2.9 Evidence provided to the Committee by the Department of Resources,
Energy and Tourism (RET) indicates that Western Australia (WA), South
Australia (SA) and Queensland (QLD) have been hit particularly hard by
job losses in the resources sector.
10
This is consistent with evidence
gathered by the Committee at its public hearings. In Geraldton, the
Committee was advised that some of the mining companies ‘have either
stopped or reduced production, which has led to downturns and staff
being put off’.
11
In Broken Hill, around 50 positions have been lost at the
CBH mine and 440 at the Perilya mine, resulting in a 30 per cent decrease
in employment across all of Broken Hill.
12
2.10 A 30 per cent decrease in employment in Broken Hill is substantial and the
flow-on effects even more so. In cities such as Broken Hill, mining
companies are often the major employer and driver of local industry. Job
losses at the local mine have a major impact on other businesses which
may be suppliers of mining products or services or depend on the
economic activity generated by mine employees for business. In Burnie,
5 Department of Resources, Energy and Tourism, Submission No. 35, p. 9.
6 Department of Resources, Energy and Tourism, Submission No. 35, p. 9.
7 Department of Resources, Energy and Tourism, Submission No. 35, p. 9.
8 Ms Jane Madden, Transcript 14 August 2009, p. 72.
9 Department of Resources, Energy and Tourism, Submission No. 35, pp. 10 & 11.
10 Ms Jane Madden, Transcript 14 August 2009, p. 72 & Department of Resources, Energy and
Tourism, Submission No. 35, p. 10.
11 Mr Anthony Brun, Transcript 29 April 2009, p. 3.
12 Mr Desmond Bilske, Transcript 7 July 2009, p. 2.
10 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
for example, Caterpillar, an underground mining manufacturer, has been
forced to reduce employment due to a reduction in orders for mining
equipment.
13
The whole Burnie region has suffered as a result. Some
redundant workers have found other work but at lower pay, resulting in
poorer living standards.
14
Local businesses dependant on the Caterpillar
supply chain have also experienced a reduction in orders and profits
leading to multiple job losses:
…there are a couple of other local companies that have supported
Caterpillar. There will be a loss of 20 to 25 per cent of the jobs in
one particular small engineering firm of 20 people. Lots of other
companies have gone back to four-day weeks. They are trying to
hang on and keep their skill base together as an alternative to
making people permanently redundant. The outsourcing habits,
particularly of larger businesses like Caterpillar…are fairly
catastrophic to other small to medium sized businesses in the
region.
15
2.11 In some instances, job losses in the resources sector can impact regions far
removed from the primary operation. In WA, job losses at the Iluka
mineral sands mine in the North West have had an effect as far south as
Busselton. Many of the retrenched Iluka workers were fly-in/fly-out and
based in southern cities such as Busselton. The loss of these jobs impacts
the Busselton community, as unemployed and underemployed workers
are forced to relocate to Perth or elsewhere for work, thereby reducing
economic activity in Busselton.
16
2.12 The Busselton example also highlights the sometimes transient nature of
employment in the resources sector. RET points out that resource job
losses in WA and SA were mitigated by increases in mining industry
employment in Tasmania and Queensland (the opening of a mine in the
Surat Basin has already been noted in this report) in the February 2009
quarter and the Department has advised that mining and contractor
companies are redeploying staff to other areas of their operations.
17
2.13 Reports of staff redeployments and growth in areas of the sector
(Queensland LNG for example) are encouraging. Certainly the resource
industry, while affected by the crisis, has appeared to weather it better to
date than other industries which are discussed in this chapter. RET
13 Caterpillar Underground Mining Pty Ltd., Submission No. 75.
14 Mr Paul Arnold, Transcript 20 April 2009, p. 6.
15 Mr Lee Whitely, Transcript 20 April 2009, p. 20.
16 Mr David Smith, Transcript 30 April 2009, p. 5.
17 Department of Resources, Energy and Tourism, Submission No. 35, pp. 10 & 11.
IMPACT OF THE GFC ON REGIONAL BUSINESS 11
attributes this to the resilience, innovativeness and efficiency of the sector
which has ‘taken steps over the last 10 years to ensure it is well-positioned
for the future’.
18
2.14 Despite the relatively good health of Australia’s resource sector, the
Commonwealth Government has provided assistance to the sector. The
assistance has focused predominantly on employment and education
programs for those who have lost their jobs. Much of this activity occurs
under the auspices of Job Services Australia, which is the Commonwealth
Government’s major employment services program across Australia.
19
At
its public hearing in Canberra, the Department of Education, Employment
and Workplace Relations (DEEWR) advised the Committee that Job
Services Australia is ‘there to assist redundant workers’ and noted that
‘people who lose their jobs as a result of a global economic recession…do
get immediate access to a higher level of service within Job Services
Australia’.
20
2.15 In regards to the mining sector, Job Services Australia providers firstly
attempt to help workers find other employment within the industry. If
other employment is not forthcoming, training designed to develop
alternate skill sets for employment in other sectors is provided.
21
2.16 The Committee accepts and supports the general goals of this service but
did raise concern that in a town such as Broken Hill, when a mine closes
and many people lose their jobs, the ability of the community to absorb
those workers into other professions may be limited.
22
DEEWR noted the
Committee’s concern but pointed out that the Jobs Fund
23
‘will create jobs
in the local communities’.
24
2.17 At the time of writing, the first round of Jobs Fund projects had just been
announced. Broken Hill did not receive a project in that round
25
and
therefore, it is likely that unemployed miners in Broken Hill have been
18 Department of Resources, Energy and Tourism, Submission No. 35, p. 10.
19 Mr Graham Carters, Transcript 14 August 2009, p. 17.
20 Mr Graham Carters, Transcript 14 August 2009, p. 18.
21 Mr Graham Carters, Transcript 14 August 2009, p. 18.
22 Mr Jon Sullivan MP, Transcript 14 August 2009, p. 19.
23 The Jobs Fund is a $650 million dollar fund designed to support and create jobs and improve
skills by funding projects that build community infrastructure and create social in local
communities, DEEWR,http://www.deewr.gov.au/Employment/Pages/JobsFund.aspx,
accessed 25 June 2009.
24 Mr Graham Carters, Transcript 14 August 2009, p. 19.
25 See successful Jobs Fund projects under Round 1 document,http://www.deewr.gov.au/Employment/Documents/Jobs_Fund_projects.pdf, accessed 4
September 2009.
12 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
redeployed, moved to other mining areas for work—as noted by RET in its
evidence to the Committee—or assisted by Job Services Australia.
2.18 The redeployment of skills out of a region may assist in ensuring
continued employment but it does not necessarily benefit the region’s
economy, as skilled employees do not always return. The only other
option for maintaining a region’s skills base is diversifying its economy.
Economic diversification is key to ensuring that regions are better
equipped to withstand economic downturns and the Committee will
discuss this issue in greater detail later in the report.
2.19 The Committee was advised by DEEWR that in addition to the services
provided by Job Services Australia around the country, certain regions
across Australia hit particularly hard by the crisis have been identified as
Local Employment Priority Areas. In these areas, Local Employment
Coordinators (LECs) have been tasked with identifying employment
opportunities for workers who have lost their jobs; working with
community stakeholders to maximise employment and training
opportunities resulting from the Government’s stimulus package; and
developing apprenticeship opportunities and promoting the skills needed
for future economic recovery.
26
There are twenty Local Employment
Priority Areas and several of these cover regions which have been affected
by job losses in the resources sector.
2.20 Direct government financial assistance to the resources sector is much
more limited. The sector has benefited from some of the recent
government stimulus, for example, The Australian Rail Track Corporation
received $580 million from the Commonwealth as part of a larger package
to upgrade the Hunter rail system, thereby benefiting the coal industry.
Commonwealth money has also been provided to various pipeline
projects; however, the mining sector ‘from the Government’s perspective,
is expected to pay for itself’.
27
Manufacturing sector
2.21 The Australian manufacturing sector has been under stress for some time.
Between 2002 and 2008, the high value of the Australian dollar ‘led to a
severe deterioration in the competitiveness of Australian
26 DEEWR,http://www.deewr.gov.au/Employment/Documents/LEC_FactSheet_13_July_2009.pdf,
accessed 4 September 2009.
27 Mr Christopher Stamford, Transcript 14 August 2009, p. 79.
IMPACT OF THE GFC ON REGIONAL BUSINESS 13
manufacturing’.
28
The sector has also been undergoing a period of
mechanisation—leading to a reduction in the workforce and has faced
pressure from overseas competition.
29
The GFC, then, is being viewed by
some manufacturers as the final blow in a ‘perfect storm’ of challenges
facing Australian manufacturing.
30
2.22 In regional Australia, those areas reliant upon manufacturing for the
generation of employment and other economic activity have been
particularly impacted by the GFC. Larger manufacturing centres such as
Geelong and the northern Adelaide region have received much attention
due to job losses in the automobile and textile industries; however, other
cites such as Wodonga have also suffered.
31
Furthermore, in much smaller
towns, a reduction of staff at a local manufacturing business can have an
exponentially larger impact when that business is the major employer in
the region.
32
2.23 The Committee gathered evidence around the country regarding job losses
in the manufacturing sector. Geelong, in particular, served as a valuable
case study for the Committee about the impact of the GFC on
manufacturing in regional Australia. When the Committee visited
Geelong in April 2009, 1000 jobs had already been lost as a result of the
GFC.
33
Like the resources sector, a downturn and subsequent job losses at
major manufacturers affects the entire supply chain and so, in Geelong,
the impact of the GFC on companies such as Ford, Shell, Godfreys and
Alcoa can have a substantial multiplier effect, impacting supply
companies in Geelong and the region.
34
2.24 The Commonwealth Government provides assistance to the
manufacturing sector in two ways. It provides support for small and
medium sized manufacturers through programs such as Enterprise
Connect and AusIndustry’s Small Business Advisory Program. There has
also been support provided to those who have lost their jobs in the sector
through the work of Local Employment Coordinators and Job Services
Australia.
2.25 Specifically, the Government has responded to the needs of Australian
manufacturers on a sectoral basis, establishing various programs and
28 Geelong Manufacturing Council, Submission No. 131, p. 4.
29 The Geelong Chamber of Commerce, Submission No. 129, p. 2.
30 Geelong Manufacturing Council, Submission No. 131, p. 2.
31 City of Wodonga, Submission No. 19, p. 1.
32 Central Murray ACC, Submission No. 100, p. 4.
33 Mr David Sykes, Transcript 22 April 2009, p. 46.
34 Mr David Sykes, Transcript 22 April 2009, p. 47.
14 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
structural adjustment funds targeted at facilitating innovation in
Australia’s manufacturing sector.
35
2.26 In the medium to long-term, entities such as the Pulp and Paper Industry
Group and the Steel Industry Innovation Council are examining ways in
which their industries can grow.
36
These bodies are important and are
expected to assist manufacturers in Australia to adapt to the challenges
they face. To date, the Government has announced six Industry
Innovation Councils:
Automotive (19 December 2008);
Built Environment (2 September 2008);
Future Manufacturing (10 October 2008);
Information Technology (5 May 2009);
Textile, Clothing and Footwear (12 May 2009) and
Steel (30 July 2009).
37
2.27 The Committee was interested, however, to explore how governments can
provide rapid responses and financial assistance to manufacturers during
sharp downturns. The Department of Innovation, Industry, Science and
Research advised that immediate assistance can come in the form of
structural adjustment funds. Funds have previously been set up in
response to Mitsubishi and Electrolux plant closures and the Auspine
mills in Tasmania.
38
2.28 The Geelong Investment and Innovation Fund was also cited and
discussed at the Committee’s hearing in Geelong. The Fund was
established following a decision by Ford Australia to restructure its
Geelong manufacturing operations. The fund is a $24 million package
with the Commonwealth Government contributing $15 million, the
Victorian Government $6 million and Ford Australia $3 million.
39
It is
designed to support new investment in the region which is expected to
35 Mr Stephen Payne, Transcript 14 August 2009, p. 34.
36 Mr Stephen Payne, Transcript 14 August 2009, p. 34.
37 Department of Innovation, Industry, Science and Research, Submission No. 169, p. 1.
38 Mr Stephen Payne, Transcript 14 August 2009, p. 35.
39 GrantsLINK, Geelong Investment and Innovation Fund,http://www.grantslink.gov.au/Info.aspx?NodeID=2&ResourceID=1829, accessed 7
September 2009.
IMPACT OF THE GFC ON REGIONAL BUSINESS 15
lead to sustainable job opportunities,
40
in the neighbourhood of one job
created for every $30,000 to $40,000 spent.
41
The Geelong Manufacturing
Council has noted the ‘significant and positive impact’ the fund has had
on the Geelong region.
42
2.29 Despite anecdotal evidence provided to the Committee about the positive
impact the Geelong Investment and Innovation Fund has had on the
Geelong region, it is too early to tell the extent of the impact. While its
long-term effects may be positive, the use of structural adjustment funds
as a response mechanism to a rapidly declining economic environment
should be tested. The Australian National Audit Office has examined the
administration of previous structural adjustment funds but it is not clear if
they are an effective tool to be employed during economic downturns
such as this. Therefore, the GFC presents an opportunity for the
Government to evaluate the potential use of structural adjustment funds
in response to economic downturns such as the GFC.
Recommendation 1
2.30 The Committee recommends that the Government evaluate and report
on the potential use of structural adjustment funds as a response to
economic downturns such as the global financial crisis.
2.31 The Committee is also concerned that structural adjustment funds are not
sufficiently flexible in nature to account for the challenges facing small
business during times such as these. The manufacturing sector in
Australia has been changing over time as overseas competition has
increased and jobs have been lost to improved methods of production. As
a result, smaller manufacturers in regional Australia have replaced larger
manufacturing companies. It is those smaller manufacturers, and other
small businesses, which have driven economic and employment growth in
regions such as Geelong.
43
40 GrantsLINK, Geelong Investment and Innovation Fund,http://www.grantslink.gov.au/Info.aspx?NodeID=2&ResourceID=1829, accessed 7
September 2009.
41 Mr David Sykes, Transcript 22 April 2009, pp. 49 & 50.
42 Mr David Sykes, Transcript 22 April 2009, p. 48.
43 The Geelong Chamber of Commerce, Submission No. 129, p. 2.
16 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
2.32 Structural adjustment funds are targeted in nature and are intended to
assist in cases where large scale job losses will create massive problems in
communities. They may not, however, assist smaller businesses in
regional Australia that are otherwise successful but have suffered a short,
sharp shock because of the GFC and the nature of the industry they
operate in.
44
2.33 The Committee, therefore, encourages the Government, in examining the
potential use of structural adjustment funds in response to economic
downturns such as the GFC, to consider their flexibility and ability to
assist small enterprises in addition to larger companies.
Recommendation 2
2.34 The Committee recommends that the Government, in examining the use
of structural adjustment funds, consider the flexibility and ability of
structural adjustment funds to assist small enterprises in addition to
larger companies.
Tourism sector
2.35 The tourism industry has certainly felt the impact of the GFC, declining at
a worse rate than the rest of the economy.
45
Data presented to the
Committee in August 2009 indicated that there was ‘real deterioration’ in
the domestic tourism market—the ‘backbone of the Australian tourism
industry’.
46
International visitor numbers were also down nearly two per
cent in the first half of 2009.
47
This has resulted in a marked lack of
profitability for the industry as individuals have delayed holidays and
business travel has been reduced.
48
2.36 It should be noted, however, that the Australian tourism sector is faring
comparatively well when considered against the performance of countries
such as Japan and New Zealand. Around the world, travel is down eight
44 Ms Catherine King MP, Transcript 14 August 2009, p. 35.
45 Mr Evan Hall, Transcript 6 July 2009, p. 67.
46 Ms Jane Madden, Transcript 14 August 2009, p. 72.
47 Ms Jane Madden, Transcript 14 August 2009, p. 72.
48 Tourism Australia, Tourism Forecasting Committee, Forecast 2009: Issue 1, Exhibit No. 29, p. 1.
IMPACT OF THE GFC ON REGIONAL BUSINESS 17
per cent for 2009, while the travel market in Australia has only declined by
1.7 per cent in the same period.
49
2.37 The decline in tourism activity has been particularly felt by regional areas
which have a greater reliance on tourism for employment.
50
Throughout
its public hearings, the Committee canvassed witnesses about the impact
of the GFC on tourism and tourism employment in their region. The
reports it received were mixed.
2.38 On the Gold Coast, tourism contributes approximately $4.2 billion
annually to its economy and generates over 19,000 full-time jobs.
51
In that
region, August 2009 figures indicated that international visitation was
down by 7.8 per cent or 65,000 visitors and domestic overnight visitation
was down 12.8 per cent or 470,000 visitors.
52
This has resulted in declining
operator confidence, cuts to operator marketing and a ‘virtual drying up
of tourism investment and development’ on the Gold Coast.
53
Conversely,
international visitor expenditure and day-trip expenditure has increased
while overnight visit expenditure has decreased.
54
2.39 In the Northern Territory, domestic and international visitation numbers
declined in the 2007/2008 period, as did visitor expenditure, which
decreased by 12.4 per cent in the same period.
55
As elsewhere, the greatest
impact of the GFC on NT tourism has been declining employment
prospects in the tourism and retail related industries—felt most acutely in
regional towns.
56
2.40 Western Australia, outside of Perth, has experienced a decline in tourism
activity.
57
This evidence was supplied to the Committee in July 2009,
indicating that the situation had worsened in South West WA since the
Committee’s public hearings there in April. When in Busselton WA, the
Committee was advised that:
…things are very good at the moment. We are talking about the
immediate vicinity of Busselton and not the whole Busselton shire.
Most businesses benefit in this whole Capes to Capes region either
49 Ms Jane Madden, Transcript 14 August 2009, p. 72.
50 Mr Evan Hall, Transcript 6 July 2009, p. 68.
51 Gold Coast Tourism, Submission No. 166, p. 1.
52 Gold Coast Tourism, Submission No. 166, p. 1.
53 Gold Coast Tourism, Submission No. 166, p. 1.
54 Mr Paul Donovan, Transcript 4 August 2009, p. 32.
55 Northern Territory Government, Submission No. 145, p. 6.
56 Northern Territory Government, Submission No. 145, p. 7.
57 Mr Evan Hall, Transcript 6 July 2009, p. 68.
18 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
directly or indirectly from tourism…The accommodation
providers that are providing for the top end [clientele] are
suffering a bit. The mid-range are not. Our biggest market in this
region for tourism is Perth based metropolitan. We are also getting
more and more overseas visitors. We are actually going the
opposite way to the Australian trend…people in the hospitality
industry, in general, are having the best year that they have had
for many years.
58
2.41 In Victoria, and particularly in Tasmania, discussions surrounding the
tourism sector had a generally positive tone. The Grampians area of
Victoria has noted a decline in international and interstate tourism
numbers, but the region has been buoyed by an increase in intrastate
visitors:
59
We believe that the opportunities for us, even in tough times, are
reasonably good. That is mainly because our biggest market is the
domestic market…We are already finding that we have seen a
tendency for our domestic volume to increase because everyone is
staying at home and not travelling overseas so much. From that
point of view, we see there are some positive signs.
60
2.42 Tasmania, it would appear, has fared better than most. When the
Committee visited Launceston in April 2009, it was advised that ‘tourism
in Tasmania and in Launceston in particular is going extremely well at the
moment’.
61
In Tasmania, like Victoria and perhaps even WA, domestic
tourism has carried the industry during this period:
A very small proportion of our ongoing tourism business is
internationally based or comes from international visitation.
Figures released in the last two weeks show an increase of 12 per
cent in visitation but, more importantly, an increase of 19 per cent
in per visitor spend. To put that into practical language, instead of
people from Sydney and Melbourne, which are our main drawing
areas, going overseas, they are taking a holiday to an island.
62
2.43 The Committee often received conflicting reports during the course of this
inquiry and particularly relating to tourism. Part of this has to do with the
rapidly changing and available data, as figures or evidence relayed in the
58 Mr Peter Gordon, Transcript 30 April 2009, p. 38.
59 Mr Glen Davis, Transcript 23 April 2009, p. 23.
60 Mr Ross Hatton, Transcript 23 April 2009, p. 35.
61 Mr Robert Wallace, Transcript 21 April 2009, p. 9.
62 Mr Robert Wallace, Transcript 21 April 2009, p. 9.
IMPACT OF THE GFC ON REGIONAL BUSINESS 19
first half of 2009 did not always match data released in the latter part of
the year. It also reflects the difference between national data and region
specific data. There are always challenges when interpreting data,
however, the story which emerged from the written and oral evidence was
varied enough to warrant follow-up discussion.
2.44 The Committee raised this issue with the Tourism and Transport Forum
during its public hearing in Sydney and was advised that Tasmania, South
Australia and Victoria were performing well in the domestic tourism
market and that the strength of the industry in different regions was
‘determined largely by how dependent [a region is] on domestic versus
international tourism’.
63
2.45 The Tourism and Transport Forum also argued that ‘most people are
mistaking volume for yield’.
64
The tourism industry, the Committee was
advised, has been dramatically cutting profit margins and prices which
has resulted in good volume but poor yield. Once discounting has
occurred, the only other place to cut costs is in labour and that is why
employment numbers are down in the tourism industry.
65
2.46 Employment numbers are down in those regions reliant on international
tourism. Far North Queensland and the Northern Territory in particular
are heavily reliant on international tourism and in Far North Queensland,
August 2009 employment figures indicated that the rate of unemployment
there was the highest in the country at nearly 10 per cent.
66
2.47 Differentiating between domestic and international tourism helps account
for some of the mixed messages received by the Committee. As RET
points out, often tourism is referred to as ‘almost an amorphous single
entity’ but in fact it is a sector with a range of components. In addition to
leisure tourism, there are business events, major events and study tourism
as well.
67
As a result, ‘some parts of the industry can be performing quite
strongly and well while other parts are having particularly difficult
times’.
68
2.48 The Committee heard that this is why the Government has responded to
the crisis with a suite of measures which apply to a range of industries and
63 Mr Evan Hall, Transcript 6 July 2009, p. 71.
64 Mr Evan Hall, Transcript 6 July 2009, p. 71.
65 Mr Evan Hall, Transcript 6 July 2009, p. 71.
66 Tourism and Transport Forum, Media Release: Tourism Needs a Shot in the Arm, 3 September
2009.
67 Ms Jane Madden, Transcript 14 August 2009, p. 75.
68 Ms Jane Madden, Transcript 14 August 2009, p. 75.
20 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
a range of sector sub-sets. In regards to the tourism sector, it has been a
‘net beneficiary’ of the Government’s cash stimulus and the Committee
has been advised that the ‘injections of fiscal stimulus into the economy
have been flowing through some tourism establishments’.
69
The
Government’s second stimulus package targeting infrastructure spending
is also expected to have ‘some benefit for tourism’.
70
2.49 Likewise, the Regional and Local Community Infrastructure Program is
funding projects ‘targeted primarily at improved tourism infrastructure’
71
and the Jobs Fund has supplied money for tourism related projects.
2.50 More specifically, tourism businesses have access to the TQUAL Grants
funding program administered by AusIndustry. TQUAL Grants support
initiatives that:
develop innovative product, services or systems within the tourism
industry;
contribute directly to long-term economic development in the host
region; and
develop or support high quality visitor services and experiences.
72
2.51 The TQUAL Grants program opened in early 2009 and RET reports that
over four hundred applications were received:
It was massively oversubscribed for the amount that is available
There was $8.5 million available for two years. We had 491 bids.
The total, if all bids were to be considered, would be many
hundreds of millions of dollars. And of course it is a highly
competitive process. But it shows the need, the interest and the
enthusiasm in regional and rural Australia for having some
support to help them develop further the tourism product and
service in the areas.
73
2.52 The Committee notes the strong demand for the TQUAL Grants program
and recommends that the Government consider increasing the quantum of
funding for the Program, while ensuring that regional tourism businesses
69 Ms Jane Madden, Transcript 14 August 2009, p. 78.
70 Ms Jane Madden, Transcript 14 August 2009, p. 78.
71 Western Australia Local Government Association, Submission No. 71, p. 7.
72 AusIndustry, TQUAL Grants,http://www.ausindustry.gov.au/Tourism/TQUALGrants/Pages/TQUALGrants.aspx,
accessed 8 September 2009.
73 Ms Jane Madden, Transcript 14 August 2009, p. 77.
IMPACT OF THE GFC ON REGIONAL BUSINESS 21
receive a proportionate share of the grant funding provided the
applications adhere to the program guidelines.
Recommendation 3
2.53 The Committee recommends that the Government increase the quantum
of funding for the TQUAL Grants program, while ensuring that regional
tourism businesses receive a proportionate share of the grant funding,
provided the applications adhere to the program guidelines.
2.54 Tourism businesses also have access to other government programs
administered by various departments. For example, small and medium
sized tourism businesses have been among the major beneficiaries of the
Export Market Development Grants Scheme, administered by Austrade.
74
RET advised the Committee that it has recently secured agreement that
regional tourism organisations can bid for these grants. This will help
those organisations to market offshore.
75
2.55 Like each of the industries discussed in this chapter, employees in the
tourism sector who have lost their jobs as a result of this downturn have
access to support through Job Services Australia and the services of Local
Employment Coordinators assigned to regions reliant on tourism—
particularly Far North Queensland.
2.56 The tourism industry comprises a broad range of businesses and
employees, and as such, government assistance for the sector has been
equally broad. While the tourism sector has received assistance through a
variety of programs, the Committee is concerned that the funding is not
being directed in a manner which will ensure a particular outcome.
Certainly, the money is supporting jobs and assisting business through a
tough period but looking forward, it is important that there is
coordination in the strategic planning, as there are ‘so many diverse
players within tourism, all of whom need to act together cooperatively to
create the one experience for the tourist’.
76
2.57 The Tourism and Transport Forum has suggested that destination
planning is the appropriate approach. For example:
74 Ms Jane Madden, Transcript 14 August 2009, p. 79.
75 Ms Jane Madden, Transcript 14 August 2009, p. 79.
76 Mr Evan Hall, Transcript 6 July 2009, p. 78.
22 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
You might say, ‘We’re going to build up the Gold Coast and the
hinterland of South-East Queensland as a nature based destination
attracting markets from the Middle East and India.’ That would be
quite a legitimate strategy to pursue. How do you actually
implement that? That comes down to things like planning in
Surfers Paradise to make sure that three- or four-bedroom
apartments are being built.
77
2.58 Destination planning requires a high level of cooperation between federal,
state and local governments, various industries and across government
portfolios,
78
but it may avoid scenarios whereby a grant for the private
sector in a particular tourism destination ‘is not totally inconsistent with
the branding, marketing and future direction’
79
of that destination.
2.59 The Committee has been advised that RET is ‘very mindful of trying to
work across the whole raft of government programs’
80
and there is
precedence for this type of cooperation. The National Landscapes
Program:
…provides a framework for regional and cross-jurisdictional
collaboration to ensure that the visitor experience promised by the
destination brand is delivered to the target market.
81
The TQUAL Grants process will encourage cooperation between state and
federal governments as state tourism organisations have been asked to
assess applications as part of the process.
82
The Committee is also aware
that coordination between government and the private sector has been a
primary consideration when developing the National Long-Term Tourism
Strategy.
83
2.60 Given the current levels of cooperation between federal, state and local
governments and the current levels of stimulus being provided by
governments, now would be an ideal time to encourage greater
coordinated planning in the tourism sector.
2.61 The Tourism and Transport Forum has suggested that coordinated
planning should come in the form of prioritisation:
77 Mr Evan Hall, Transcript 6 July 2009, p. 78.
78 Mr Evan Hall, Transcript 6 July 2009, pp. 78 & 79.
79 Mr Evan Hall, Transcript 6 July 2009, p. 80.
80 Ms Jane Madden, Transcript 14 August 2009, p. 79.
81 RET, Submission No. 35, p. 26.
82 Mr Evan Hall, Transcript 6 July 2009, p. 80.
83 Ms Jane Madden, Transcript 14 August 2009, p. 77.
IMPACT OF THE GFC ON REGIONAL BUSINESS 23
If you do a little bit all over the place you do not raise the quality
of a destination, which means you get no extra people going there
and they are certainly spending no more for a better experience. If
you concentrate that effort in one destination, you change the
nature of the destination, you get more people in and they spend
more. That is not to say that you should ignore everywhere else,
but we have, I think, 80 tourism regions for which we have
separate marketing campaigns. We can identify 20 that account for
90 per cent of tourism expenditure. Not all regions are the same. If
you started focusing on those 20, first of all you would be getting a
lot more bang for your buck.
84
2.62 Denying funding to projects in areas which are not considered a priority
will result in some regions missing out on funding that creates jobs and
boosts local economies. It may also deny some regions the opportunity to
grow and develop as tourist destinations. However, regions which already
have a strong focus on tourism could benefit from a coordinated planning
approach.
2.63 The Committee is aware that state, territory and the Commonwealth
Government tourism ministers have been working towards a ‘more
coordinated relationship…across government’.
85
The Committee supports
greater coordination between the tourism departments of state, territory
and the Commonwealth Government and believes that the Development
of the National Long-Term Tourism Strategy provides an opportunity to
consider how states and regions can further improve their cooperation on
identifying key tourism markets and setting priorities for marketing those
locations.
Recommendation 4
2.64 The Committee recommends that the National Long-Term Tourism
Strategy should consider how states and regions can further improve
their cooperation on identifying key tourism markets and setting
priorities for marketing those locations.
2.65 Strategic cooperation, it has been suggested, may also lessen the impact of
the GFC on the regional tourism industry through the introduction of a
84 Mr Evan Hall, Transcript 6 July 2009, p. 80.
85 Ms Jane Madden, Transcript 14 August 2009, p. 77.
24 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
joint industry and government marketing campaign to be used where
there is matching funding provided by industry or state tourism bodies:
…a joint industry/government tactical marketing fund of up to
$40 million per year over two years communicating Australian
tourism’s price competitiveness to international visitors is an
appropriate response to market conditions...It would be used for
‘tactical’ campaigns marketing competitive tourism packages, such
as airline and hotel discounts. In the short-term, this would be
more effective than general destination promotion, driving
bookings and expenditure and supporting jobs. A $40 million fund
would generate $80 million in matched co-operative marketing.
86
2.66 Central to this recommendation is the notion that, at present, targeted
marketing campaigns are more effective than general destination
promotion. This point was echoed by Gold Coast Tourism which is
concerned about the kind of marketing activities undertaken by Tourism
Australia:
Woolworths do not promote the history of tomatoes or the sun in
which they grow. They promote tomatoes, the kilo price and
where you go and buy them…we are calling for less esoteric and
aspirational marketing, getting down to things which people can
relate to, where they can see value for money, see what the price is
and see how they get there.
87
2.67 The Committee supports the use of a more strategic approach to tourism
marketing, especially during times of acute economic stress in the
industry. Tourism Australia should, therefore, consider a strategic
approach to its campaigns to ensure priority is given to markets affected
by the GFC and those that will deliver the best return for the taxpayer’s
marketing dollar.
Retail sector
2.68 The retail sector, like tourism, accounts for a wide range of businesses and
therefore, the impact of the GFC on the retail sector has varied. The retail
sector has also been affected to varying degrees depending on the region
in question.
2.69 Those regions which have suffered downturns as a result of poor
conditions in sectors such as mining, manufacturing or tourism have
86 Tourism and Transport Forum, Submission No. 155, p. 6.
87 Mr Paul Donovan and Mr Martin Winter, Transcript, 4 August 2009, p. 38.
IMPACT OF THE GFC ON REGIONAL BUSINESS 25
experienced corresponding downturns in their retail sectors. Job losses in
Broken Hill’s mining sector, for example, account for the evidence
received by the Committee there suggesting that ‘retail has been hit
heavily, especially in the discretionary spending’.
88
2.70 Businesses which rely on discretionary spending have felt the effects more
than others in the retail sector. A witness in Busselton noted:
Not surprisingly it depends almost entirely on how discretionary
the spending is. Food and beverage sales are having their best year
yet. Some of our hotels, pubs and supermarkets are doing well,
but our discretionary spending shops are really struggling now
and beginning to lay off staff. It is quite a mixed picture.
89
Indeed, when discretionary spending is separated from total sales figures,
the indication is that discretionary spending has been weak since March
2008.
90
2.71 The retail sector has also experienced periods of highs and lows during the
2008/09 financial year. Initial, sharp declines in retail sales during the
latter half of 2008 were followed by increases in retail spending during the
Christmas 2008 period—largely due to the Government’s pre-Christmas
stimulus package.
91
Recent figures suggest that the impact of the stimulus
package has begun to wash through the economy and customers are now
retreating from stores.
92
2.72 It is also interesting, and somewhat perplexing to note that in September
2009, retail spending was in a decline, while business confidence was at a
six-year high, with particular improvement showing in the retail sector
amongst others.
93
Each new survey and index reveals a different and
changing picture, which has been one of the challenges inherent in this
inquiry. It is safe to surmise, however, that the GFC has negatively
impacted the retail sector, particularly those businesses relying on
discretionary spending.
2.73 The primary action undertaken by the Government in support of the retail
sector has been the distribution of bonus payments to households across
Australia as part of the Government’s economic stimulus plan. To date, it
88 Mr Robin Edgecumbe, Transcript 7 July 2009, p. 14.
89 Councillor Steve Harrison, Transcript 30 April 2009, p. 9.
90 Property Australia, Value the new Mantra in the retail sector, 1 July 2009.
91 See for example survey respondents’ comments in Economic Development Australia,
Submission No. 110.
92 The Courier Mail, Dramatic Fall in Retail Spending, 10 September 2009.
93 ABC News, Business confidence hits six-year high, 8 September 2009.
26 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
would appear that these payments ‘have done something to hold up retail
demand’;
94
however, the retail trade remains weak.
95
Construction sector
2.74 Perhaps more than any other sector of the economy discussed in this
section, the construction industry can be ‘notably affected by the economic
cycle’
96
and particularly the economic conditions created by the GFC. The
lack of available credit resulting from the crisis has impacted on heavily
geared sectors such as commercial and medium-density property
construction,
97
and the declining output from the nation’s mines, factories,
office blocks and shopping centres means that the ‘incentive to construct
additional capacity is weak’.
98
2.75 Lower capacity utilisation rates are also coinciding with a decline in
business investment, resulting in a decrease in construction activity to
expand productive capacity. A direct result of this decreasing activity is
unemployment and it has been forecast that employment in the
construction sector ‘may decline by 8.2 per cent over the next three
years’.
99
At the end of August 2009, the sector had registered its 17
th
consecutive month of declining employment.
100
2.76 There are some positive figures that have come out of this sector to date.
Housing construction activity is low but has remained resilient. In the
July/August 2009 period, the Housing Industry Association Performance
of Construction Index rose 2.9 points, indicating an improvement in house
building and a stabilisation in the decline of apartment construction.
101
It
is expected that population demands and low interest rates will result in
‘an improvement in the number of housing starts’.
102
94 Mr Glen Stevens, Transcript 28 September 2009, Senate Economics References Committee,
Government Economic Stimulus Initiatives reference, p. 12.
95 Mr Greg Evens, Transcript 28 September 2009, Senate Economics References Committee,
Government Economic Stimulus Initiatives reference, p. 57.
96 Access Economics, Construction industry: Economic drivers and outlook, 27 July 2009, p. 5.
97 Access Economics, Construction industry: Economic drivers and outlook, 27 July 2009, p. 9.
98 Access Economics, Construction industry: Economic drivers and outlook, 27 July 2009, p. 9.
99 Access Economics, Construction industry: Economic drivers and outlook, 27 July 2009, p. 6.
100 ABC News, Construction decline continues but eases, 7 September 2009,http://www.abc.net.au/news/events/global-financial-crisis/, accessed 13 October 2009.
101 ABC News, Construction decline continues but eases, 7 September 2009.http://www.abc.net.au/news/events/global-financial-crisis/, accessed 13 October 2009.
102 Access Economics, Construction industry: Economic drivers and outlook, 27 July 2009, p. 16.
IMPACT OF THE GFC ON REGIONAL BUSINESS 27
2.77 Engineering construction has slowed but there is indication that certain
projects in the mining, oil and gas and ports and energy sectors, coupled
with government spending will assist in maintaining a strong project
agenda, albeit at lower levels than previous years.
103
Commercial
construction is generally down but the Commonwealth Government’s
Education Revolution spending program is driving building in the health
and community services sector of commercial construction.
104
2.78 This Australia-wide snapshot is consistent with the evidence received by
the Committee in regional Australia. Commercial construction in regional
Australia has slowed. In Townsville, Myer intended to spend $150 million
on a new store but that plan has been shelved for two years, as has a mall
project worth about $200 million and a cruise ship terminal
development.
105
In WA, very little commercial construction activity was
occurring in Geraldton in April 2009;
106
however, the Oakajee deep water
port project is expected to generate ‘numerous jobs in construction’ in the
area.
107
2.79 Residential construction drives the economy of many regions in Australia.
Those visited by the Committee, particularly South West WA and the
Gold Coast have suffered from serious downturns in their property
development sectors. In Busselton, the Committee was advised that:
The impact on the residential construction industry [has been]
immediate. I think people forget how important that is as an
industry in rapid growth areas. For instance, I would estimate that
in the greater Bunbury area residential construction has gone
down by about 70 per cent, which has probably caused the loss of
about 1,500 jobs from bricklayers, plasterers, tilers and so on.
108
2.80 On the Gold Coast, commercial and residential construction has dropped
significantly as a result of the crisis. Indeed, the Gold Coast felt the effects
of the crisis earlier than most parts of Australia, impacting severely on all
of its economy and particularly its construction sector, which virtually
ceased:
…at the beginning of 2007…the secondary financial market that
had built on the Gold Coast collapsed. That was funding early
103 Access Economics, Construction industry: Economic drivers and outlook, 27 July 2009, pp. 14 & 15.
104 Access Economics, Construction industry: Economic drivers and outlook, 27 July 2009, p. 13.
105 Mr Colin Dwyer, Transcript 3 September, p. 17.
106 Mr Anthony Brun, Transcript 29 April, p. 3.
107 Mid West Development Commission, Submission No. 143, p. 6.
108 Mr David Smith, Transcript 30 April, p. 4.
28 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
stage development projects which were underpinning the
construction sector…What we saw in January, February and
March 2007 was no money in the city because the financial sector,
the providers of funds to developers and the construction sector,
dried up…and a significant cash shortage [ensued] around March,
April, May. This created an immediate outflow of
employment…The rest of Australia started to move into it around
September, October, but we were there nearly nine months
earlier.
109
2.81 Housing construction on the Gold Coast has slowed but the ‘dwelling
sector is probably the most robust because there is still a demand for that
type of housing generated in part by incentives for first home buyers’.
110
Construction on community infrastructure has, as a result of government
stimulus, also helped maintain construction activity in the regions.
111
2.82 In much the same way that the Government’s cash payments to
households helped the retail sector through the first part of 2009,
government support provided through the Nation Building Economic
Stimulus Plan has assisted the construction sector and filled the gap left by
the private sector when it exited the market.
2.83 There are four components of the Nation Building Economic Stimulus
Plan that directly affect the construction sector:
Education;
Community infrastructure;
Road and rail; and
Housing.
2.84 The Building the Education Revolution program is expected to provide
builders and associated tradespeople with work constructing and
rebuilding primary and secondary school infrastructure throughout
Australia. The construction of other community infrastructure, such as
community halls and recreation centres, has commenced with funding
provided directly to local governments around Australia through the
Regional and Local Community Infrastructure Program. The Government
has also increased and brought forward funding for roads, rail and
community housing in response to the crisis.
109 Mr John Witheriff, Transcript 4 August, pp. 4 & 5.
110 Mr John Witheriff, Transcript 4 August, p. 5.
111 See for example, Southern Inland Queensland ACC, Submission No. 114, p. 2.
IMPACT OF THE GFC ON REGIONAL BUSINESS 29
2.85 Much of the initial evidence taken by this Committee was done so in the
early part of 2009. At that point, it was still unclear to some in the regions
how some parts of this stimulus package would affect them. In a
submission received by the Committee in early April, businesses in the
Central Murray region of Australia noted that ‘a number of components of
the stimulus packages (Community Infrastructure Program and Building
Education Revolution) have not yet had any impact and are unlikely to for
another 3 to 12 months.’
112
2.86 By mid year, evidence is suggesting that these stimuli have assisted in
slowing the decline in the construction sector and of equal importance,
evidence provided to this Committee suggests that the Nation Building
Economic Stimulus Plan is having a positive effect on employment in the
construction industry:
If these capital works programs continue to operate over a number
of years, they will greatly assist the City of Mandurah to maintain
its infrastructure provision role, which in turn will maintain
employment in the construction sectors. This in turn will have a
positive flow-on effect to other industry sectors;
113
and
The $21,000 first home buyers grant "has saved a lot of people
from being out of work".
114
Primary industries
2.87 The Committee received evidence from three primary industry sectors,
which will be discussed in this section:
Agriculture;
Forestry; and
Fisheries.
Agriculture
2.88 The GFC
has occurred at a time when resilience in parts of regional
Australia is ‘at an all-time low’ as a result of prolonged drought.
115
The
drought has significantly reduced yields and farm incomes and as a result,
112 Central Murray ACC, Submission No. 100, p. 9.
113 City of Mandurah, Submission No. 49, p. 8.
114 ACC-Mackay Region, Submission No. 45, p. 7.
115 National Farmers Federation, Submission No. 41, p. 3.
30 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
‘the effect of the drought has, to date, been a more significant factor than
the global financial crisis’.
116
2.89 Nevertheless, the GFC has had short and long term impacts on the sector.
Commodity prices, particularly of discretionary items such as wool and
dairy, decreased immediately at the onset of the GFC and are expected to
be volatile for some time.
117
The departure from the market of non-bank
lenders has led to credit access problems for some farmers, particularly in
Tasmania.
118
Buyers have also been troubled by limited access to credit,
thereby creating uncertainty in the international trading environment and
lowering farmers’ returns.
119
2.90 Conversely, the GFC did depreciate the Australian dollar (against the
American) thereby providing support for commodity export earnings and
lower interest rates have provided some relief to farmers.
120
As the GFC
continues, the agricultural sector is expected to be impacted by increased
protectionist measures as countries support buy domestic campaigns. The
initial retreat in discretionary commodity prices is being borne out by
decreased demand for premium products in the market and a move
towards cheaper staples. The National Farmers Federation is also
concerned that rural land values may decrease.
121
Forestry
2.91 Much of Australia’s forestry products are exported to countries such as
Japan, the Republic of Korea and China. Downturns in those economies as
a result of the GFC led to an immediate decrease in demand for forestry
products. In the export woodchip market, for example:
…it was immediate from Japan. We had boats told they were not
coming. There were boats that were scheduled to come in and take
woodchip off the docks, and they said these boats would not be
coming. It was that immediate.
122
2.92 Domestic sales have also decreased with reduced demand for solid wood
products as wholesalers reduce their inventory.
123
In Victoria, falling
116 Department of Agriculture, Fisheries and Forestry, Submission No. 128, p. 3.
117 National Farmers Federation, Submission No. 41, p. 4 & Department of Agriculture, Fisheries
and Forestry, Submission No. 128, p. 6.
118 Mr Charles McElhone, Transcript 14 August 2009, p. 51.
119 National Farmers Federation, Submission No. 41, p. 6.
120 National Farmers Federation, Submission No. 41, p. 6.
121 National Farmers Federation, Submission No. 41, p. 8.
122 Ms Eva Down, Transcript 21 April 2009, p. 63.
123 Ms Eva Down, Transcript 21 April 2009, p. 58.
IMPACT OF THE GFC ON REGIONAL BUSINESS 31
international demand for woodchips coincided with falling investor
demand for managed investment schemes used to fund forest plantations,
resulting in the collapse of companies such as Great Southern at a
considerable loss to investors.
124
2.93 Investors have lost money and employees have lost jobs as a result of the
downturn in the forestry sector. In April 2009, mills in Tasmania shut
down for ten days to avoid unnecessary redundancies. Despite this,
timber mills have downsized in North East Tasmania with several
hundred jobs lost.
125
Fisheries
2.94 The Committee received very little evidence regarding the impact of the
GFC on the fisheries sector. Only in Geraldton was the Committee able to
discuss the fisheries sector, and in that instance it related directly to the
lobster industry. Lobster is a discretionary product, so it is little surprise
that the lobster fishery has experienced a contraction in demand. Many of
the Geraldton Fisherman’s Coop’s markets were in the United States,
Japan and Western Europe, all of which have been severely impacted by
the downturn.
126
As a result, people in Geraldton ‘cannot remember…a
situation this bad in the marketplace’.
127
2.95 What has been described as a ‘short-term squeeze’
128
is coinciding with
longer-term structural adjustment that is taking place in the industry. In
much the same way that the manufacturing sector has undergone
adjustment over time, the lobster fishery has experienced a long period of
rationalisation whereby the technological capacity of the fleet was
increased while the size of the fleet has decreased—almost by half.
129
The
GFC has effectively meant that a reduced, but efficient fleet now waits to
see if lobster markets will return.
2.96 While lobster fishermen in WA ride out this difficult period, the
Commonwealth Government is offering a variety of assistance programs
to primary industries in Australia. The Department of Agriculture,
Fisheries and Forestry detailed for the Committee a number of programs
already in place to support the agricultural sector in particular. These
124 Mr Jim Cooper, Transcript 23 April 2009, p. 58.
125 ACC Tasmania, Submission No. 80, p. 8.
126 Mr Wayne Hosking, Transcript 29 April 2009, p. 46.
127 Mr Wayne Hosking, Transcript 29 April 2009, p. 45.
128 Mr Wayne Hosking, Transcript 29 April 2009, p. 50.
129 Mr Wayne Hosking, Transcript 29 April 2009, p. 49.
32 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
programs are focused on increasing productivity and investment in the
sector and preparing it for climate change. In direct response to the GFC,
the Government cites its Nation Building and Jobs Plan as well as the
Rural Financial Counselling Service and the Farm Management Deposits
Scheme as programs which will assist the agricultural sector through this
difficult period. Direct cash stimulus payments are also expected to be of
assistance.
130
2.97 Most importantly, from an industry perspective, is the boost in investment
in regional infrastructure which is expected as part of the Government’s
Nation Building Economic Stimulus Plan. Many representatives of
regional economies that rely, in part, on primary industries cited greater
infrastructure spending by government as the primary form of assistance
required during this period and into the future:
The economic infrastructure investment—we are talking about
roads, rail, ports, telecommunications and water infrastructure—is
an incredibly key element in enabling agriculture to extend its
contribution to the Australian economy, particularly to capitalise
on the opportunities that we think are there and will continue to
escalate over the medium to long term.
131
2.98 In Busselton, representatives of the South West region stressed repeatedly
the need for increased transport infrastructure spending to expand the
economic capacity of the region:
I am going to sound like a broken record…at our board level there
has been this coalescing of views, whether you are the shire
president of Donnybrook-Balingup, the shire of Collie or the shire
of Capel, with regard to the significance of the port, the capacity to
expand the port in a timely way and to ensure connectivity.
132
2.99 Those from the forestry sector who spoke with the Committee support the
Government’s efforts to combat the effects of the GFC, but noted:
If Tasmanian timber can be used in schools and new housing, if
the earth-moving equipment of forest contractors can be
redeployed for roads and if we can encourage small businesses to
take up new investments, this could lessen the impact.
133
130 Department of Agriculture, Fisheries and Forestry, Submission No. 128, pp. 9-11.
131 Mr Charles McElhone, Transcript 14 August 2009, p. 53.
132 Mr Matt Granger, Transcript 30 April 2009, p. 57.
133 Ms Eva Down, Transcript 21 April 2009, p. 55.
IMPACT OF THE GFC ON REGIONAL BUSINESS 33
2.100 Certainly, the Government’s investment in regional schools, community
and transport infrastructure is expected to do just that. In NSW, the
Business Chamber had initial concerns that local contractors may miss out
on work related to the government stimulus package but later confirmed
that no chamber members have had that experience.
134
Banking and lending sector
Introduction
2.101 Australia is lucky in that the GFC has impacted its banking sector less than
in other countries. This has much to do with the strong regulation of the
banking industry by the Australian Prudential Regulation Authority
(APRA), whose close supervision and strong approach to risk
management has resulted in an Australian banking sector that is more
stable than those in overseas countries. Nevertheless, Australia’s lending
institutions have not entirely escaped the effects of the GFC. Its impact has
been felt by banks, non-bank lenders, mutual ADIs
135
and the businesses
that utilise their services.
Impact of the GFC on the regional banking and lending sector
2.102 Representatives of the Australian banking sector advised the Committee
that despite tough economic conditions internationally:
Australian banks have remained well capitalised, with strong
lending books, as well as being profitable. They have also
continued to lend despite tight and volatile credit markets and
increased costs of funds.
136
2.103 Despite these assurances, the Committee has received evidence from
around Australia which suggests that banks’ lending criteria have become
more stringent since the onset of the GFC:
…Many local residents are more careful about their borrowings as
are the banks with their lending practices (i.e. Loan to Valuation
Ratios (LVR) have been reduced by most major banks for both
residential and commercial loans).
137
134 Mrs Louise Southall, Transcript 6 July 2009, p. 58.
135 Authorised Deposit Taking Institutions
136 Mr David Bell, Transcript 6 July 2009, p. 44.
137 Goulburn Mulwaree Council, Submission No. 113, p. 2.
34 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
2.104 It is difficult for the Committee to confirm the veracity of these claims but
the Committee has received enough anecdotal evidence to suggest that
banks’ risk profile may have changed as a result of the crisis. The banks do
admit that ‘there is a limit to the amount of risk and debt the banking
industry can provide to a business’
138
and there have been highly geared
companies which, as a result of the GFC, have been unable to secure
additional credit.
2.105 Part of the perception that banks have reduced access to credit for
business in regional Australia may be related to confusion about the
definition of a bank. In Geelong, for example, evidence received by the
Committee (and partially quoted above) noted that manufacturing
businesses are ‘finding it difficult to get any financial accommodation
from the banks’, however, that evidence goes on to state that ‘GE
Commercial Finance has really tightened its requirements’.
139
2.106 GE Commercial Finance is not a bank, it is a non-bank lender. Non-bank
lenders have been hit particularly hard by the GFC. Their inability to raise
reasonably priced money on wholesale funding markets has resulted in
increased credit costs for their customers
140
and in some cases, non-bank
lenders have exited the market altogether.
141
2.107 Mutual ADIs (authorised deposit-taking institutions) are perhaps the most
prevalent lending institutions in regional Australia.
142
Mutual ADIs are
financial institutions owned by their customers and include credit unions,
building societies and friendly societies. Mutual ADIs rely heavily on
deposits for funding in order to function but, over time, they have
increased their mortgage lending ‘by tapping securitisation markets’
which ‘virtually closed down’ as a result of the GFC.
143
2.108 Mutual ADIs are active in regional Australia but they do very little
business lending; however like the banks, mutual ADIs report that they
have not contracted their business lending as a result of the GFC:
…commercial lending is not a major feature of our operations, but
those who do it are particularly located. They have not reported to
us that they have contracted their lending at all, but nor are they
seeking to widely expand that lending either. Those who are
138 Mr Stephen Carroll, Transcript 6 July 2009, pp. 52-53.
139 Mr Lawrie Miller, Transcript 22 April, p. 18.
140 National Farmers’ Federation, Submission No. 41, p. 6.
141 Mr David Bell, Transcript 6 July 2009, p. 47.
142 Abacus, Submission No. 136, p. 1.
143 Abacus, Submission No. 136, p. 4.
IMPACT OF THE GFC ON REGIONAL BUSINESS 35
operating in the communities in which they have always operated
and provided that commercial or small business lending are
continuing to do so…
144
2.109 The availability of credit is vital to the continuing prosperity of the
Australian economy. The Commonwealth Government, therefore, moved
quickly at the onset of the GFC to support Australia’s lending institutions
during this period. On 28 November 2008, the Government implemented
the Bank Guarantee Scheme for a period of three years to protect the funds
of financial institutions and to engender confidence and stability in the
banking sector.
2.110 Under this voluntary scheme, deposits over $1m per customer and
wholesale funding liabilities are guaranteed by the Government upon
payment of a fee based on the credit rating of the institution. The lower
the credit rating the higher the fee charged. Institutions such as banks with
the higher AAA credit rating are charged a lesser fee than the lower rated
credit unions and building societies. For example, institutions that are
AAA to AA rated, such as banks, are charged 70 basis points to access the
scheme. Lower A+ to A rated institutions are charged 100 basis points and
BBB+ and below (and unrated) institutions are charged 150 basis points.
2.111 Although the Bank Guarantee Scheme is providing a level of stability and
security across the banking sector, the Committee has heard concerns that
the differential pricing structure has meant that mutual ADIs that have not
opted to utilise the Government Bank Guarantee Scheme are finding it
difficult to attract large deposits, because depositors are seeking
institutions that have the security of the Government backing.
145
2.112 The Scheme also demands that users have a credit rating—something
which most mutual ADIs do not have. The mutuals are concerned that an
agency rating will become a requirement for them and if their rating is
lower than a banks, competition may be stifled in the marketplace as
consumers choose to work with higher rated agencies.
146
2.113 Competition, or the lack of it, is being cited by mutual ADIs as the
primary concern surrounding the Government’s Bank Guarantee Scheme.
They argue that competition in the banking sector has diminished, with
less market share being experienced by the credit unions, building
societies and regional banks despite the departure of non-bank lenders
from the market. Mutual ADIs report that it is the major banks that have
144 Mr Mark Degotardi, Transcript 6 July 2009, p. 36.
145 Abacus, Submission No. 136, p. 6.
146 Abacus, Submission No. 136, pp. 5-6.
36 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
increased their market share because of the cost benefit they derive from
the Government’s Bank Guarantee Scheme.
147
2.114 The Committee is aware that the Senate Economics References Committee
tabled a report on 17 September 2009, in which differential pricing within
the Government’s Bank Guarantee Scheme was examined. In that report,
the Senate Committee found that the markets were not pricing all
guaranteed debt identically and therefore the Government should ‘review
the need to apply differential premia for ADIs with different ratings’.
148
2.115 The Committee also understands that the Government has advised the
mutual ADI sector that its Bank Guarantee Scheme is ‘under constant
review’.
149
Representatives of the mutual ADI sector observe that:
…we are yet to see any movement, although we are actively
making suggestions to the government about ways we believe
funding could be adjusted to better serve the interests of
competition.
150
2.116 Given the degree to which regional Australia relies on mutual ADIs, the
Committee is concerned about the potential for decreased competition in
the regional banking sector. Like its Senate colleagues, this Committee also
encourages the Government to review its differential pricing structure
within its Bank Guarantee Scheme.
2.117 Competition in the banking sector has suffered as a result of the GFC. As
Treasury states, ‘the global financial crisis has affected the competitive
dynamics of the banking system’:
151
…with investor demand for residential mortgage-backed securities
(RMBS) drying up in late 2007 and early 2008, smaller lenders
have found it more difficult to raise funds with which to finance
new lending at competitive rates of interest. As a result, from mid-
2007, a number of smaller financial institutions were forced to exit
the market, merge with stronger entities, or relinquish market
share to entities with more diversified sources of funding.
152
147 Mr Mark Degotardi, Transcript 6 July 2009, p. 35.
148 Senate Economics References Committee, Government measures to address confidence concerns in
the financial sector – The Financial Claims Scheme and the Guarantee Scheme for Large Deposits and
Wholesale Funding, September 2009, p. 19.
149 Ms Louise Petschler, Transcript 6 July 2009, p. 34.
150 Ms Louise Petschler, Transcript 6 July 2009, p. 34.
151 Treasury, Submission No. 167, p. 1.
152 Treasury, Submission No. 167, p. 1.
IMPACT OF THE GFC ON REGIONAL BUSINESS 37
2.118 Prior to the GFC, the securitisation markets allowed smaller lenders to
‘better manage their capital base and to continue to increase home lending
and compete with the major banks.’
153
The GFC effectively closed these
markets, and in response, the Government committed to investing up to
$16 billion in residential mortgage backed securities (RMBS) to ‘support
continued competition from smaller authorised deposit-taking institutions
and non-ADI lenders throughout the GFC’.
154
2.119 To ensure a continued supply of affordable credit for smaller lenders once
the Government has completed its RMBS purchasing round, some
participants of this inquiry have recommended the introduction of an
Australian mortgage bond program or regional housing bond scheme
similar to Canada’s Mortgage Bond (CMB) Program.
155
(A brief outline of
the Program can be found in Appendix D).
2.120 Participants of this inquiry have argued that a similar scheme for Australia
and perhaps regional Australia only, would assist Australians ‘to access
home loans throughout economic cycles’.
156
It is suggested that an
Australian program would operate in a similar fashion to the Canadian
one, whereby an accredited lender (perhaps in regional Australia, say
Bendigo Bank) writes loans (with very tight criteria) to home buyers. That
lender would then take those loans and “warehouse” them with another
facility—perhaps a larger lending institution. The Australian Government
would then use those loans to create bonds, with a government guarantee
attached, and sell them to investors. It is anticipated that the bonds would
be insured by either a government or private insurer. The sale of the
bonds to investors creates the funds which are made available to lenders
to write more loans.
157
2.121 The argument for introducing a similar program in Australia focuses on
creating greater competition in the lending market through the increased
availability of funds for smaller lenders and the generation of lower costs
for lenders and borrowers.
158
When queried on the Canadian Scheme and
its implications for introduction in Australia, the Treasury advised the
Committee that there is evidence which suggests that the Canadian
153 Ms Louise Petschler, Transcript 6 July 2009, p. 34.
154 Treasury, Submission No. 167, p. 3 & ABC News, Swan announces $8b mortgage market
investment, 11 October 2009.
155 Genworth, Submission No. 157, p. 4 & Abacus, Ms Louise Petschler, Transcript 6 July 2009, p.
34.
156 Genworth Financial, Submission No. 157, p. 4.
157 Mr Peter Hall, Transcript 6 July 2009, p. 12.
158 Genworth cites a KPMG audit of Canada’s scheme which notes decreased lender and
borrower costs as a result of the scheme, see Genworth Financial, Submission No. 157, p. 5.
38 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
scheme has resulted in cost savings for larger lenders.
159
Treasury noted
however, that there has been no substantive evidence to suggest that
Canadian mortgage borrowers have benefited from reduced interest
rates.
160
Indeed, the Reserve Bank of Australia (RBA) notes that the
Canadian scheme did not stop Canadian mortgage interest rates from
rising following the onset of the GFC.
161
2.122 Most importantly, the RBA found evidence that:
…smaller lenders may have retained the small cost-savings from
the program as increased margins rather than passing them on to
borrowers.
162
2.123 The Treasury has also raised concerns that a similar scheme in Australia
could have ‘the potential to create moral hazard’ because a higher than
optimal degree of risk taking may be encouraged.
163
Furthermore,
permanent government support for the RMBS market ‘has the potential to
distort price signals in financial markets and the efficient allocation of
capital’
164
meaning a less risky investment would be more attractive to
investors. Evidence from the Canadian scheme indicates that the
government-backed securities sector has grown at the expense of the
corporate and securitisation sectors of the Canadian bond market.
165
2.124 Of course, the other way to drive down cost is through competition.
ABACUS believes that the introduction of a Canadian mortgage bond
style scheme in Australia would assist in supporting competition in the
banking sector—particularly in regional Australia.
166
Evidence regarding
Canada’s scheme as an effective facilitator of competition is mixed.
Evaluation of the scheme reveals that [the scheme]:
…increased the availability of mortgage funding for smaller
lenders in the five years following its introduction in
2001…[and]…played an important role in maintaining smaller
lenders’ access to funds throughout the turbulence in international
159 Canada Mortgage Bonds Program Evaluation: Final Report, prepared by KPMG LLP, June 2008,
cited in Treasury, Submission No. 167, p. 5.
160 Canada Mortgage Bonds Program Evaluation: Final Report, prepared by KPMG LLP, June 2008,
cited in Treasury, Submission No. 167, p. 5.
161 RBA cited in Treasury, Submission No. 167, p. 5.
162 RBA cited in Treasury, Submission No. 167, p. 5.
163 Treasury, Submission No. 167, p. 6.
164 Treasury, Submission No. 167, p. 7.
165 Treasury, Submission No. 167, p. 7.
166 Ms Louise Petschler, Transcript 6 July 2009, p. 34.
IMPACT OF THE GFC ON REGIONAL BUSINESS 39
capital markets, and may have even facilitated the entrance of new
smaller players over this period.
167
2.125 Conversely, the Treasury notes that ‘Canada continues to have a highly-
concentrated banking sector…notwithstanding two decades of
government intervention’.
168
When the Committee queried smaller lenders
about declining competition in regional Australia, it was advised that
Australian mutual ADIs had had a marginal decline in market share since
the onset of the GFC, but had not been able to take up any of the excess
capacity that was available when non-bank lenders exited the market.
169
It
is suggested that Australian mutual ADIs have been growing but not at
the rate of the larger banks.
170
2.126 The Committee also notes comments by the RBA made in a submission to
the House of Representatives Standing Committee on Economics
regarding the need for government intervention in the RMBS market to
foster competition:
While it is true that lenders relying on securitisation have lost
market share in recent months, it has always been the case that
some phases of the economic cycle favour some forms of financing
more than others. Securitisation has been strongly favoured over
the previous five years of very low global interest rates; now it is
at a disadvantage. Our view of recent events is that they are
cyclical in nature rather than a permanent change to the structure
of the market, in the sense that when market conditions settle,
securitisation will pick up again. As such, it would be premature
at this stage to embark on proposals such as the setting up of new
government bodies to support certain forms of financial activity.
171
2.127 In analysing this issue, the Committee is cognisant of the needs of regional
Australians. The Committee would only support the introduction of
such a scheme in Australia if there was clear evidence that regional
Australians were worse off because of smaller lenders’ access to funds
(resulting in higher mortgage borrowing costs for regional Australians)
over the long-term economic cycle.
167 Canada Mortgage Bonds Program Evaluation: Final Report, prepared by KPMG LLP, June 2008,
cited in Treasury, Submission No. 167, p. 4.
168 Treasury, Submission No. 167, pp. 4-5.
169 Mr Mark Degotardi, Transcript 6 July 2009, p. 35.
170 Mr Mark Degotardi, Transcript 6 July 2009, p. 35.
171 RBA, Submission No. 44, pp. 2-3, House of Representatives Standing Committee on Economics
Inquiry into competition in the banking and non-banking sectors.
40 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
Accessing credit in regional Australia
2.128 Most businesses need credit. In a growing economy the demand for credit
is often driven by a desire for growth. In a slowing economy credit is
required for cash flow.
172
This downturn has been somewhat unique
because the GFC has resulted in a general lack of liquidity which has
impacted the availability and cost of credit for individuals and business.
This section will specifically examine credit issues for business.
2.129 Throughout this inquiry, the Committee has received evidence suggesting
that businesses in regional Australia are experiencing difficulties accessing
credit.
173
The NSW Business Chamber, for example, conducted a survey of
its members, which noted that in the three month period to March 2009, 30
per cent of respondents, most of whom are in regional NSW, thought it
had become harder to access credit.
174
2.130 The difficulty lending institutions have faced accessing wholesale credit
markets has clearly had a flow-on effect for businesses, as available credit
has constricted. The GFC has also curtailed lenders’ appetite for risk, and a
as result, ‘some loans that would have been offered prior to the GFC are
no longer readily available.’
175
2.131 Banking institutions provide credit, but so too do other businesses and
during this crisis, suppliers have reduced their payment terms thereby
putting further pressure on regional businesses.
176
Where lenders have
been willing to provide credit, the cost has also increased.
2.132 The increased cost of credit in the form of higher interest rates or increased
collateral has been a common experience facing business owners in
regional Australia. Thirty three per cent of respondents to a NSW Business
Chamber’s survey found that ‘credit had got more expensive to access’.
177
The Committee has also heard that interest rates being charged are so high
that the viability of some projects is threatened.
178
2.133 Credit costs for businesses have increased because lending institutions are
changing the way they handle risk
179
and because some non-bank lenders
have exited the market:
172 Mr Richard Snabel, Transcript 14 August 2009, p. 36.
173 Tamworth Regional Council, Submission No. 9, p. 1.
174 NSW Business Chamber, Submission No. 122, p. 3.
175 National Farmers’ Federation, Submission No. 41, p. 5.
176 Mr Alan Berechree, Transcript 20 April 2009, p. 43.
177 NSW Business Chamber, Submission No. 122, p. 3.
178 Mr Lee Whitely, Transcript 20 April 2009, p. 24.
179 Mr Richard Snabel, Transcript 14 August 2009, p. 37.
IMPACT OF THE GFC ON REGIONAL BUSINESS 41
Those non-bank lenders who would have, say, lent money to
people who we would not have now exited. That means there are
a group of businesses and institutions that are not getting money.
That is because prior to the global financial crisis they would not
have met banks’ risk profiles and banks would not have lent to
them.
180
2.134 Australian Bureau of Statistics (ABS) research shows that business lending
fell by just under 15 per cent between January and February this year,
which may in part be attributed to banks tightening their lending
criteria.
181
Although the banks and other ADIs such as credit unions and
building societies have asserted that they are still lending,
182
the
experience of business owners in regional Australia seems to contradict
this:
Certainly they tell us that they are finding it very difficult to get
any financial accommodation from the banks since the global
financial crisis became evident. The banks say that that is not the
case; that there is plenty of money around, and they will lend. But
the bank staff themselves, on a confidential basis, will tell you that
their lending criteria have changed dramatically and they require
a much more rigorous assessment of projects, particularly
development projects.
183
2.135 The higher cost of obtaining credit has not only limited the capacity of
many small and medium sized businesses to weather this global
downturn, but in some cases has been the catalyst to cease trading. The
Government has acknowledged this and taken the following action:
establishment in March 2009 of a small business complaints clearing
house within the office of the Minister for Small Business, Independent
Contractors and the Service Economy. Complaints about access to and
cost of bank finance are referred for resolution through the Australian
Bankers Association to senior management at the particular bank
concerned;
184
and
180 Mr David Bell, Transcript 6 July 2009, p. 47.
181 ABC News, Big drop in business lending, 15 April 2009,http://www.abc.net.au/news/stories/2009/04/15/2543093.htm, accessed 1 September 2009.
182 Mr David Bell, Transcript 6 July 2009, p. 47 & Mr Mark Degotardi, Transcript 6 July 2009, p. 36.
183 Mr Laurie Miller, Transcript 22 April 2009, p. 18.
184 Media release by the Hon Dr Craig Emerson, Minister for Small Business, Independent
Contractors and the Service Economy, ‘Banks to maintain funding to small business sector’, 6
March 2009.
42 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
activation from 1 September 2009 of Ozcar, a taxpayer-funded financing
scheme to provide liquidity support to car dealer financiers.
185
2.136 The Committee was advised by the Australian Bankers Association (in
July), that the use of the small business complaints line in the Minister for
Small Business’ office has been ‘extremely low…somewhere in the order
of 57 to 60 contacts’, which would indicate that ‘either people do not know
about it or that the incidence of credit problems is low’.
186
2.137 Given the volume of anecdotal evidence received by the Committee
suggesting that credit has become more difficult to access, the Committee
is inclined to believe that people have not been adequately informed about
the existence of the Small Business Credit Complaints clearing house
phone line. When queried about the lack of knowledge in the community
regarding the complaints line, the Department of Innovation, Industry,
Science and Research conceded that more publicity should lead to a
greater level of response.
187
Greater response is more likely to occur now
that the complaints line is being made accessible through the Small
Business Support Line, which acts as a link to information and referral
services on a wide range of business issues.
188
2.138 Awareness of government assistance was also an issue raised in relation to
Ozcar. Business representatives in Broken Hill advised the Committee that
car dealers there found information about Ozcar ‘not easily understood’.
189
The Committee understands that it will always be a challenge for
government to ensure that information about its programs is being
adequately communicated and understood in the community. However,
communication is an important component of any government program
and therefore, the Committee expects that the Government is making
every effort to educate the public about the assistance available to them,
particularly during a period of crisis such as currently being experienced.
2.139 The need for a program such as Ozcar illustrates the credit problem facing
businesses throughout Australia. Ozcar was designed to assist car dealers
as non-bank lenders such as GE Credit exited the market after the onset of
the GFC. When the Australian Bankers’ Association advised the
185 Media release by the Hon Wayne Swan, Treasurer, ‘Activation of car dealership financing
special purpose vehicle (‘Ozcar’)’, 28 August 2009.
186 Mr David Bell, Transcript 6 July 2009, p. 47.
187 Ms Sue Weston, Transcript 14 August 2009, p. 37.
188 Business.gov.au, Small Business Support Line, 3 September 2009,http://www.business.gov.au/Business+Entry+Point/News/Small+Business+Support+Line.h
tm, accessed 4 September 2009.
189 Mr Robin Edgecumbe, Transcript 7 July 2009, p. 16.
IMPACT OF THE GFC ON REGIONAL BUSINESS 43
Committee that their members have ‘continued to lend despite tight and
volatile credit markets’
190
this does not contradict evidence the Committee
has received around Australia suggesting that credit has been hard to
access. Credit from traditional lending institutions, such as banks and
other authorised ADIs may have increased in cost and they may be less
likely to assume greater risk, but it is the lack of alternate credit sources,
which may account for the apparent lack of available credit in regional
Australia.
Business and downturns
2.140 Many business operators in regional Australia have never run a business
during a downturn or have never experienced one of this magnitude.
191
Suddenly, they have been forced to respond to a rapid decline in demand
for products and services as well as a sudden lack of available credit
which has traditionally assisted businesses through cyclical downturns or
ensured ongoing cash flow:
Previously when we have been through these experiences before it
has not affected the financial institutions—they have always been
willing to see businesses through by extending their overdrafts
and things like that because they know that, in a cycle of about
five years or so, the zinc and lead prices will go through their
normal cycle and people will be able to repay their commitments.
But this time it is more than that and financial institutions are very
reluctant to come to the aid of businesses.
192
2.141 The response from business in regional Australia has varied. Each
business is attempting to survive in its own way with some common
trends emerging. Labour cost is often the first issue to be examined and
certainly employment figures suggest that businesses are reducing their
labour force and/or the hours worked.
193
However, some are looking to
future-proof their business by ‘re-negotiating supply terms, implementing
staff training and increasing marketing outputs’.
194
2.142 Some of this activity is occurring independently, but the Committee has
received sufficient evidence to suggest that many businesses in regional
190 Mr David Bell, Transcript 6 July 2009, p. 44.
191 Mrs Louise Southall, Transcript 6 July 2009, p. 59 & City of Wangaratta, Submission No. 23, p. 6.
192 Mr Robin Edgecumb, Transcript 7 July 2009, p. 15.
193 ABC News, Jobless figures weaken rate rise case, 10 September 2009.
194 Advance Cairns, Submission No. 160, p. 2.
44 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
Australia are seeking and receiving advice from business advisory
services:
…there is a real hunger out there for information about how to
focus on numbers, in particular—keeping an eye on your cash
flow, keeping an eye on making sure that you are paying bills and
bills are coming. There are those sorts of issues. That has been a
large part of our events program for this year, and it has been very
popular with our members.
195
2.143 Government has a strong role to play alongside industry groups in
assisting regional businesses through this period. This chapter has noted
some of the Commonwealth Government programs which provide
business mentoring and support. Some, such as Enterprise Connect and
the Business Enterprise Centres (BECs), were not designed as a response
to the GFC, yet have taken a direct role in assisting firms during the
crisis.
196
For example, BECs and other registered business organisations
have received additional funding for the Small Business Advisory Service
which is intended to ‘enhance access to information and advice on issues
important to sustaining and/or growing small business in response to the
current global financial crisis’.
197
2.144 The Small Business Advisory Service is being complemented by the Small
Business Support Line which:
…provides small business with advice and to put them in touch with
specialist advisers on matters such as obtaining finance, cash flow
management, retail leasing, personal stress and hardship counselling and
promotion and marketing advice.
198
To date, over 2220 people have utilised the Small Business Support Line
and 90 per cent of those surveyed have expressed satisfaction with the
service.
199
2.145 Likewise, Enterprise Connect offers a range of business services (noted in
Submission 169) and through the Innovative Regions and Remote
Enterprise Centres, supported by Enterprise Connect, regional and remote
Australia also has access to business support services.
200
195 Mrs Louise Southall, Transcript 6 July 2009, p. 59.
196 Department of Innovation, Industry, Science and Research, Submission No. 169, p. 3.
197 Ms Sue Weston, Transcript 14 August 2009, p. 28.
198 Ms Sue Weston, Transcript 14 August 2009, p. 28.
199 Minister Emerson, Media Release, Small business support line get the thumbs up, 20 October 2009.
200 Department of Innovation, Industry, Science and Research, Submission No. 169, p. 2.
3
I mpac t of t he GFC on r egi onal popul at i ons
Introduction
3.1 There is a personal aspect to this crisis that is often overlooked in
reporting on the GFC. It is easy to talk about manufacturing, retail and
tourism figures and the end of a mining boom. Unemployment figures can
be up, down or steady but these figures couch, in different terms, the
reality that people have been affected by this downturn. Jobs have been
lost and homes have been lost as a consequence of the GFC and social
services around the country have been strained. This chapter seeks to
highlight the human impact that this crisis has had on regional Australia.
Job losses in regional Australia
3.2 One of the most critical impacts of the GFC has been the loss of jobs. In the
first half of 2009, 87.5 per cent of regions recorded an increase in their
unemployment rate
1
and it is little surprise that those parts of regional
Australia dependent upon industries that have been adversely impacted
by the GFC have experienced corresponding job losses. What has been
different during this downturn is the rise in underemployment. Statistics
indicate that full-time employment has decreased while part-time
employment increased.
2
As one news source has reported, ‘the shedding
of work hours is far more pronounced than the shedding of jobs’.
3
This is
borne out in anecdotal reporting from around the country. In Ballarat, for
1 Department of Education, Employment and Workplace Relations, Australian Regional Labour
Markets June Quarter 2009.
2 Australian Bureau of Statistics, Labour Force, Australia, August 2009.
3 ABC News, Working hour erosion tells the real story, 6 August 2009.
46 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
example, local businesses affected by the GFC have negotiated with staff a
reduction in work hours in order to preserve jobs.
4
3.3 The Government has responded to the increasing levels of unemployment
in regional Australia in a number of ways. Its Keep Australia Working
strategy includes the support provided to business as part of the Nation
Building Economic Stimulus Plan. In addition to the creation of jobs
through economic stimulus, the Government is focusing efforts on three
areas:
Unemployment assistance;
Community assistance; and
Skills development.
3.4 Unemployed Australians are being provided support through the Job
Services Australia program. Under arrangements which commenced on 1
July 2009, job seekers ‘will receive an individual Employment Pathway
Plan, which can include literacy and numeracy programs, work
experience, help with resumes, trade equipment and training’.
5
3.5 Communities in regional Australia are being assisted through the
introduction of the Jobs Fund, which ‘supports community projects in
regions hardest hit by the downturn’.
6
The Government has also identified
20 Local Priority Employment Areas, in which Local Employment
Coordinators have been employed to ‘work with employers and not-for-
profit groups to identify new job opportunities and help match
employment and training opportunities with Government services and
funding’:
7
…the local employment coordinators have been tasked with going
around to meet with people and talk to them to make them aware
of the fact that there will be an opportunity for round 2 of the Jobs
Fund to have developed proposals.
8
In addition, Keep Australia Working Forums have been held in priority
areas as a means of facilitating discussion amongst business leaders, local
governments, employers and training and Job Services Australia
providers.
4 ABC News, Downturn prompts offers to cut work hours, 16 September 2009.
5 Keep Australia Working, Interim Report, p. 15.
6 Keep Australia Working, Interim Report, p. 17.
7 Keep Australia Working, Interim Report, p. 17.
8 Mr Graham Carters, Transcript 14 August 2009, p. 25.
IMPACT OF THE GFC ON REGIONAL POPULATIONS 47
3.6 Skills development is particularly important in regional Australia because
the growth of regional economies is dependant on the retention of skilled
labour in regional communities:
…we have seen people leaving the industry …[it is a] key
challenge and concern for the [marine] industry, because our
indicators are that as demand comes back, with the improvement
in economic circumstances and people’s household budgets
allowing for the expenditures which they previously enjoyed, that
demand will be picked up by imports rather than by domestic
product.
9
3.7 The Committee was concerned that regions do not lose their skills base
and as such, queried participants at each of its regional public hearings
about the retention of skilled labour in their regions. In many cases,
community representatives were not aware of what had happened to
those who had lost jobs in their regions.
10
In one instance, the Committee
received evidence suggesting that the Queensland State Government had
been able to track some redundant workers in Townsville through their
rapid response task force and their hotline;
11
however, the majority of the
Committee’s evidence suggests that despite the actions of the
Commonwealth Government, local governments were not across the
range of strategies being employed to keep redundant workers engaged in
their regions.
3.8 The evidence does reveal that three scenarios have been playing out in
regional Australia. In some areas, previous skills shortages have ensured
that some redundant employees have been able to pick up work in other
sectors and remain in the same location:
…probably over half were re-employed in the region. That was
probably a function of the really critical skills shortage we had
there for a while.
12
3.9 In other cases, notably in WA’s mining sector, fly-in/fly-out workers have
been able to find work on other sites and are either continuing their
commute from metropolitan centres or relocating their families back to
those centres—a prospect that does not bode well for regional
economies.
13
In some regional centres, there is no opportunity for skilled
9 Mr Donald Jones, Transcript 4 August 2009, pp. 16-17.
10 For example see Mr Anthony Brun, Transcript 29 April 2009, p. 11.
11 Dr Lisa McDonald, Transcript 3 September 2009, p. 30.
12 Dr Lisa McDonald, Transcript 3 September 2009, p. 30.
13 Mr Anthony Brun, Transcript 29 April 2009, pp. 11-12.
48 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
workers to find alternative work in their field and there is a danger that
they will be forced to relocate.
14
3.10 Finally, evidence suggests that some companies are ‘working hard to
retain skilled workers’
15
and unlike previous economic downturns,
employers are reducing staff hours rather than laying staff off.
16
Some of
this activity may be in recognition of the need to retain skilled workers for
the eventual recovery. This is particularly important in regional Australia,
where the loss of a skilled workforce can have a significant impact on the
regional economy.
3.11 Governments and industry are trying to retain skills within regional
communities. In addition to immediate government support offered to the
unemployed, education and training offer the greatest opportunity to
equip the unemployed with the necessary skills to ensure that they are
able to source alternative work within their communities:
…we are doing a lot of [training] work with workers who are
displaced from the manufacturing sector…I think I can confidently
put up my hand and say that all levels of government have
recognised that and are doing terrific work…
17
…I think that, with the changes that are being made by the state
government and also the introduction of the Australian technical
colleges—we have a campus that has just been opened here—we
are well on the way to ensuring that we can respond.
18
…there is a strong commitment to retaining apprentices and
trainees within existing industry. I think industry has learnt from
the experience of the last few years and where possible is
maintaining a commitment to training to look at the future options
for being able to pick up on labour supply.
19
3.12 Skills development is being progressed in a number of ways. The
Government has increased the number of Vocational Education and
Training (VET) places in acute skills shortage areas and is increasing the
number of places available at higher education facilities. Additional
training is being provided to the long-term unemployed and extra money
has been provided to apprentices to assist them to continue or complete
14 Mr Rodney Greene, Transcript 20 April 2009, p. 12.
15 Mackay Region ACC, Submission No. 45, p. 3.
16 ABC News, Jobless figures weaken rate rise case, 10 September 2009.
17 Mr Grant Sutherland, Transcript 22 April, p. 13.
18 Mr Rodney Greene, Transcript 20 April 2009, p. 14.
19 Mr Donald Punch, Transcript 30 April 2009, p. 30.
IMPACT OF THE GFC ON REGIONAL POPULATIONS 49
their training during this period.
20
In response to the Keep Australia
Working Report, the Jobs Fund has been adjusted to include a new
Apprentice Kickstart Package ‘to accelerate the take-up of apprenticeships
in order to support the availability of trade skills in crucial sectors of the
economy’.
21
3.13 Skills will be retained if the right kind of training is provided. People
should be trained in skills for which there are jobs available now and into
the future.
22
The Committee has been advised that in the past, the typical
training provider approach, in the manufacturing sector for example, may
have meant going to Ford and signing up workers for a certificate in some
automotive category even though, in reality, there probably wasn’t going
to be any work for someone with those skills.
23
They should also be
provided with training that will increase and develop their skills, making
them more employable when the economy recovers:
When Caterpillar comes back they are going to want to grow their
employment pretty quickly but with more skilled employees than
the people who are losing their jobs now. We need to get
tradespeople up to university degrees and people who are
unskilled into at least trade diploma or advanced diploma stage.
They are the sorts of things we need to be moving on within the
next few months to take advantage of the lull, if you like, before
the economic growth that will come at the end of this crisis.
24
3.14 The recently announced National Resource Sector Employment Taskforce
is intended, in part, to examine the skills needed in the resource sector and
plan for the education and training necessary to fill those skilled
positions.
25
The evidence noted here, suggests that there is need for similar
workforce planning in other sectors of the economy. The National
Resource Sector Employment Taskforce effectiveness has yet to be tested,
however, should resource sector-specific, Commonwealth Government
workforce planning prove successful, then there may be scope for similar
planning to occur in other sectors of the economy, notably the
manufacturing sector.
20 Keep Australia Working, Interim Report, p. 15.
21 DEEWR website,http://www.deewr.gov.au/Employment/KeepAustraliaWorking/Pages/home.aspx,
accessed 21 October 2009.
22 Professor Sue Kilpatrick, Transcript 22 April 2009, p. 31.
23 Mr Grant Sutherland, Transcript 22 April, p. 13.
24 Mr Paul Arnold, Transcript 20 April 2009, p. 6.
25 Media Release, The Hon Gary Gray AO MP, Gray to Head Up Resource Jobs Taskforce, 2 October
2009.
50 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
Mortgage stress in regional Australia
3.15 There is a direct link between unemployment and mortgage stress and as
unemployment and underemployment rise, Australians become
increasingly concerned about losing their jobs and their homes. This is
equally true in regional Australia where almost 40 per cent of people
could only continue to keep paying their mortgages for one to three
months if they or their partner lost a job.
26
3.16 In late 2008 and early 2009, when unemployment in the regions was rising
precipitously, unemployment and underemployment was accounting for
the majority of hardship applications received by mortgage insurers:
27
In the first quarter of 2009, more than 500 hardship applications
were approved as a result of employment related factors. The total
number of arrears and mortgages in possession…as at May 2009
for regional areas was 672, which represents a significant increase
since May 2008. In May 2009, the nationwide delinquency rate was
0.60 per cent. Some of the key regional areas of concern which
were above the national delinquency average included, for
example, the Hunter Region in New South Wales, which had a
delinquency rate of 0.79 per cent; the Illawarra in the south-eastern
region of New South Wales, which had a delinquency rate of 1.25
per cent; the northern far west, north-west region in New South
Wales, which had a delinquency rate of 0.70 per cent; the north
and west region in Queensland, which had a delinquency rate of
0.98 per cent; and the Mornington Peninsula, which had a
delinquency rate of 0.96 per cent.
28
3.17 The Committee visited some of the areas cited by mortgage insurers as
being of particular concern. In Broken Hill, mine closures have resulted in
a situation whereby people have:
…refinanced and remortgaged when employed, substantially in
mining activities, only to be faced with a sharp decrease in the
value of their mortgage property, unanticipated unemployment
when there were recent closures in the mines, and the consequent
inability to service those mortgages. Forced repossession by the
financiers has been the result and/or the inability to sell the
mortgage property for an amount equal to the mortgage liabilities.
26 Ms Kristen Foster, Transcript 6 July 2009, p. 3.
27 Ms Kristen Foster, Transcript 6 July 2009, p. 3.
28 Ms Kristen Foster, Transcript 6 July 2009, p. 3.
IMPACT OF THE GFC ON REGIONAL POPULATIONS 51
In the majority of cases the forced sale has realised a figure
substantially less than the amount of the liability.
29
3.18 A financial counsellor speaking with the Committee in Broken Hill
advised that ‘clients with mortgage stress have increased by 60 per cent’.
30
In the most extreme of circumstances, some have simply abandoned their
mortgaged premises.
31
3.19 In April 2009, the Commonwealth Government announced an agreement
between itself and Australia’s four major banks to assist borrowers
experiencing mortgage stress as a result of the GFC.
32
The agreement
reached focused on principles which placed obligations on the four major
banks to provide temporary relief to borrowers and provide assistance
options. The agreement was subsequently extended to building societies
and credit unions. In it, lenders agreed to:
in relation to mortgages, postponement for up to 12 months the dates
on which payments are due under the contract (with interest to be
capitalised into the loan);
an extension of the period of the contract and a reduction in the amount
of each payment due under the contract;
interest-only breaks on loan repayments; and
fee waivers.
33
3.20 At its hearing in Sydney, Genworth, a mortgage insurance provider,
welcomed the agreement between the Government lenders but argued for
greater assistance in the form of a national unemployment mortgage
assistance program (NUMAP).
34
Under such a scheme:
Where the borrower cannot meet his repayments because he is
unemployed, he can apply to the federal government…along the
lines of a HECS style program where he gets the funding to keep
the mortgage up to date. The expectation would be that the lender
would convert the loan to an interest-only loan—in other words,
the borrower is not profiting from their demise—but the
29 Ms Rebecca McIlveen, Transcript 7 July 2009, p. 49.
30 Mrs Sherrie Wilkins, Transcript 7 July 2009, p. 51.
31 Ms Rebecca McIlveen, Transcript 7 July 2009, p. 49.
32 The Hon Wayne Swan, Media Release, Relieving Mortgage Stress, The Principles: A Common
Approach For Assisting Borrowers Facing Financial Hardship, 5 April 2009.
33 The Hon Wayne Swan, Media Release, Relieving Mortgage Stress, The Principles: A Common
Approach For Assisting Borrowers Facing Financial Hardship, 5 April 2009.
34 Ms Kristen Foster, Transcript 6 July 2009, p. 3.
52 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
repayment would then come from this federal government
authority or body, would be paid directly to the lender’s account
to keep the loan up-to-date and at the same time the consumer
would enter into an agreement, similar to HECS, so that once he is
back in the workforce he would repay the lender, which happens
to be the federal government, the repayments the government has
made on his behalf.
35
3.21 Genworth also advocated for the introduction of an industry funded
mortgage stress helpline for borrowers experiencing problems with their
mortgage repayments.
36
While funded by industry, it was proposed that
the helpline operate independently of industry in order to reduce potential
conflicts in seeking advice from organisations from which assistance is
also being sought.
37
3.22 The Committee canvassed with various stakeholders the potential for an
industry funded mortgage assistance helpline. The responses were not
overwhelmingly supportive. In NSW, there is already a Credit and Debt
Hotline operated by the Consumer Credit Legal Centre and the
establishment of another hotline would not be very helpful ‘because it can
be very confusing for consumers to work out where to go for advice’.
38
3.23 It was noted, however, that other states and territories might not have
access to a similar service, in which case, a hotline would be helpful
provided that it:
…be seen to be independent and for it to be operated by a body
such as a specialist community legal centre, a legal aid commission
or some other independent body so that consumers can have
confidence that the advice they are getting is appropriate and
tailored to their needs. And it should involve accommodation of
legal assistance and financial counselling.
39
3.24 Australia’s banks were less supportive:
…I am not sure what value that would add because we have
already set up hotlines…so from a bank point I am not sure
whether that would actually help; in fact, it might have the effect
of diverting someone to a hotline whereas they might be better off
speaking to their bank. It may be of assistance for other lenders
35 Mr Peter Hall, Transcript 6 July 2009, p. 7.
36 Ms Kristen Foster, Transcript 6 July 2009, p. 4.
37 Mr Peter Hall, Transcript 6 July 2009, p. 9.
38 Mr Alan Kirkland, Transcript 6 July 2009, p. 20.
39 Mr Joseph Catanzariti, Transcript 6 July 2009, p. 22.
IMPACT OF THE GFC ON REGIONAL POPULATIONS 53
outside the mainstream, but I think for banks, and possibly for
mutuals as well, what we should be promoting is that people
should be contacting their bank in the first instance. So I am not
convinced it is a good idea.
40
3.25 A debt counsellor in regional Australia was of the opinion that a mortgage
stress hotline was ‘better than nothing’ but, in general, believed that
advice lines are ‘limited in terms of the services that they can provide’
because clients need to discuss issues on a face-to-face basis.
41
3.26 In the case of NUMAP and the mortgage assistance hotline, Genworth
recommends establishing a federal government task force to monitor
mortgage stress triggered by unemployment and analyse the impact of a
national unemployment mortgage assistance program.
42
3.27 In September 2009, the unemployment rate remained high (5.8%)
43
, but
steady and was not moving rapidly towards Treasury’s earlier prediction
that the unemployment rate could reach 8.5%.
44
There is also evidence that
Australian mortgage delinquencies are on a downward trend. Fitch
Ratings notes that peak arrears were reached in the fourth quarter of 2008
and have been decreasing in 2009, due in part to the reduction in official
interest rates and the relative strength of Australian employment levels.
45
3.28 Despite the relatively positive indicators at present, the Committee is
concerned that unemployment could continue to rise, leading to increased
delinquencies. If this occurs, regional Australia will be disproportionately
affected— 15 of the Government’s 20 Local Employment Priority Areas
are in regional Australia. Close monitoring of unemployment figures and
levels of arrears will be necessary, with any rise in these figures indicating
a need for further action. Evidence collected by this Committee does not
strongly support the introduction of a mortgage assistance helpline;
however, the Committee does believe that the Government should
examine in detail the potential impact of a national unemployment
mortgage assistance program as a means of responding to rising
unemployment and mortgage stress in regional Australia.
40 Mr David Bell, Transcript 6 July 2009, p. 46.
41 Ms Rebecca McIlveen, Transcript 7 July 2009, p. 51.
42 Ms Kristen Foster, Transcript 6 July 2009, p. 4.
43 Australian Bureau of Statistics, Labour Force, Australia, August 2009.
44 Mr Peter Hall, Transcript 6 July 2009, p. 6.
45 ABC News, Delinquent mortgages continue declining: Fitch, 10 September 2009.
54 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
Recommendation 5
3.29 The Committee recommends that the Government examine in detail the
potential impact of a national unemployment mortgage assistance
program as a means of responding to rising unemployment and
mortgage stress in regional Australia, should unemployment and
mortgage default levels continue to rise.
The impact of the GFC on social services in regional Australia
3.30 The GFC has left some people in regional Australia unemployed or
underemployed and struggling to pay their bills. As a result, demand for
social services has increased. The Committee acknowledges that
governments and private service providers are responding to that demand
as best they can, but in many cases, resources are stretched. Greater
funding and resourcing for social services is an ongoing concern and will
assist to alleviate some of the pressure felt by providers. There are,
however, additional service provision models being tested which could
also have a positive impact on the provision of social services in regional
Australia.
3.31 Evidence provided to the Committee from around Australia, particularly
in the first part of 2009, indicated a substantial rise in demand for social
services. The Department of Human Services (DHS) indicated that ‘all
Centrelink’s service channels have seen a significant increase in demand
from people testing their eligibility for government assistance and income
support’
46
and Newstart and Youth Allowance claims over the past year
have also increased.
47
In May 2009, the Centrelink office in Mandurah, was
experiencing long queues often stretching out the door past 5 o’clock.
48
Private service providers in Mandurah were also indicating increased
demand. The Salvation Army there was seeing in excess of ’12 new
families per week’ contacting their office.
49
Community legal centres in
regional NSW were seeing:
… a significant increase in inquiries relating to credit/debt issues.
In addition, advice is being sought in areas of previous low
demand, such as repossessions, bankruptcy and mortgage issues.
There has also been a significant increase in the demand for
46 Department of Human Services, Submission No. 154, p. 4.
47 Department of Human Services, Submission No. 154, p. 4.
48 Mayor Patricia Creevey, Transcript 1 May 2009, p. 15.
49 Peel Community Development Group, Submission No. 142, p. 1.
IMPACT OF THE GFC ON REGIONAL POPULATIONS 55
financial counselling services attached to community legal
centres.
50
3.32 The increase in demand has exposed some service delivery problems.
Evidence suggests that non-profit service providers are lacking the staff
and finances required to respond to large-scale increases in
unemployment. In the Peel region, for example:
…welfare organisations themselves have a finite monetary and
staff resource base. They are either donation based or minimally
funded and are currently being put under greatly increased
financial and volunteer staffing pressure…there is no current
increase in resources for our Peel Region welfare organisations yet
the numbers seeking assistance continue to rise.
51
3.33 Public legal assistance services struggled to meet demand prior to the
GFC.
52
The crisis has exacerbated that situation, particularly in regional
Australia:
Public legal assistance services in regional areas are not well
placed to meet existing demand on services, let alone the increase
in demand resulting from the GFC.
53
3.34 It would appear that Centrelink too has suffered from a lack of available
service delivery staff in some instances. In Mandurah it was claimed that
Centrelink staff were ‘overwhelmed’ as a result of reductions in staff
numbers:
…as unemployment went down, the staff were cut…the staff are
very overwhelmed. There are long queues. Previously Centrelink
would go to places where redundancies were happening and
provide that information. That is not happening now. I think that
is because of the staffing and the pressures that Centrelink are
under. It is not the individual staff. The system is slow to
respond.
54
3.35 Some evidence has also suggested that increasing demand is not always
being met at Centrelink call centres. In the Central Murray, the Committee
is advised that the Centrelink call centre number was ‘constantly busy’.
55
50 NSW Legal Assistance Forum, Submission No. 148, p. 3.
51 Peel Community Development Group, Submission No. 142, p. 2.
52 NSW Legal Assistance Forum, Submission No. 148, p. 6.
53 NSW Legal Assistance Forum, Submission No. 148, p. 6.
54 Mayor Patricia Creevey, Transcript 1 May 2009, p. 41.
55 Central Murray ACC, Submission No. 100, p. 9.
56 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
In addition, many in the community are not aware of Centrelink’s various
eligibility requirements, having never accessed them before:
When they get their redundancy package, apparently the system
in place at Centrelink at the moment is that they actually have to
spend their holiday pay and their redundancy package before they
can start to get Centrelink benefits. So we are seeing people that
are selling off their hard-earned assets that they have worked for
as a family. That has huge ramifications.
56
3.36 A rapid rise in unemployment will put a strain on service delivery. One
way to overcome access and lack of knowledge problems is to access
worksites where staff are being made redundant before they leave, in
order to advise them of the services available and the guidelines
surrounding those services. There is indication that this has been
occurring. In Burnie, for example, Centrelink staff were at the Caterpillar
factory for three weeks having interviews with all of the employees as
they went out the door.
57
3.37 The coordination of services is also an important mechanism for assisting
people during times of crisis. In regional Australia, as in the rest of the
country, there is no one service provider and ‘making sure that people
have access to the full range of services is a challenge’.
58
The Committee is
aware that in response to the GFC, Centrelink has been working with the
Community Response Task Force, local Job Services Australia providers
and Local Employment Coordinators as well as providing referrals to
social workers for long-term assistance.
59
Centrelink has also begun
trialling a series of co-location sites between Centrelink and Medicare in
order to explore ways in which it can ‘work more effectively with other
service providers’.
60
3.38 The NSW Legal Assistance Forum is a proponent of integrated service
delivery. It cited the West Heidelberg Community Legal Centre in
Victoria, which is co-located with a health service, as a good example of
the successful integration of social services.
61
In the field of legal aid, the
Mortgage Distress Legal Aid NSW initiative has been set up to provide
legal assistance and financial counselling and will be ‘working very
closely with Centrelink and Job Services Australia providers to try to pick
56 Ms Donna Selby, Transcript 1 May, p. 40.
57 Mr Paul Arnold, Transcript 20 April 2009, p. 14.
58 Ms Catherine Rule, Transcript 14 August 2009, p. 41.
59 See Transcript 14 August 2009, pp. 39-50.
60 Ms Catherine Rule, Transcript 14 August 2009, p. 41.
61 Mr Alan Kirkland, Transcript 6 July 2009, p. 29.
IMPACT OF THE GFC ON REGIONAL POPULATIONS 57
up people at the point that they become unemployed or register as
unemployed’.
62
3.39 The combination of collectivised service provision and the use of a
localised, place-based approach will further enhance the response of social
service providers during crises. As this report has noted, the GFC has
affected different regions differently. Therefore, the social services
required by a region will vary across the country. Centrelink has had
experience employing localised solutions to service provision:
…it is not looking at service delivery for the same people across
the board delivered in the same way. As an example of that I will
talk about Cooma. It is very small and some people may think it is
close to Canberra and able to access services. We are doing a
project about young carers and house support. Young carers are
people still at school caring for sick parents. It is just looking at
how we might be able to act as a connector of services for a group
that is not or have not been able to access it—looking at what is
available, what needs to be available to keep them in school, in
education, to support them and all sorts of things.
63
3.40 Moves towards greater collective service provision, tailored to local needs
is an important step forward and has the potential to assist regional
Australia at all times, but in particular during times of crisis. The evidence
cited here suggests that the Commonwealth Government has attempted to
coordinate the provision of its services during the GFC
64
, and while this
may be occurring between other levels of government, the Committee has
not received evidence demonstrating an awareness of the full range of
human services provided in the regions or a high level of integration
between those services.
3.41 As a national provider, the Commonwealth Government has a role to play
in promoting and encouraging local, coordinated service provision
between the three tiers of government. The Local Employment
Coordinators have been working closely with local government, the not-
for-profit sector, employers and providers during this crisis
65
and
although they are limited to specific regions around the country, their
work warrants further examination. An evaluation of their ability to act as
a conduit between local, state and the Commonwealth Government to
62 Mr Alan Kirkland, Transcript 6 July 2009, p. 29.
63 Ms Moya Drayton, Transcript 6 July 2009, p. 44.
64 See also Ms Stephanie Foster, Transcript 14 August 2009, p. 9.
65 Mr Graham Carters, Transcript 14 August 2009, p. 20.
58 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
promote coordinated human service provision could provide the basis
upon which greater coordinated action and information sharing about
available services can occur in the future.
Recommendation 6
3.42 The Committee recommends that the Government evaluate the work of
the Local Employment Coordinators with particular focus on their
ability to act as a conduit between local, state and the Commonwealth
Government to promote coordinated human service provision, with a
view to utilising the evaluation as a basis upon which greater
coordinated action and information sharing about available services can
occur in the future.
3.43 In addition, the DHS co-location site trials, while a promising step in the
right direction, are small and, like the LECs, limited in their geographic
coverage. The trials are also expensive to undertake. DHS is attempting to
overcome the financial impost of these trials by exploring more efficient
and effective service delivery mechanisms in order to alleviate resources
needed for local services—this should be encouraged.
66
However, the GFC
has demonstrated a need in regional Australia for the provision of
localised, coordinated and collective social services.
Recommendation 7
3.44 The Committee recommends that the Government increase funding to
the Department of Human Services in order to expand its co-location
site trials and increase its local service provision activities.
3.45 In addition to the benefits derived from coordinated service provision, the
Committee received evidence in Mandurah and Geelong citing the
importance of locating government departments in regional centres to
increase employment opportunities, thereby strengthening regional
Australia’s ability to withstand economic downturns:
66 Ms Moya Drayton, Transcript 6 July 2009, p. 49.
IMPACT OF THE GFC ON REGIONAL POPULATIONS 59
The relocation of the Victorian Transport Accident Commission
(TAC) to Geelong has been a major success both for the G21
Region and for the TAC. For the region, it has broadened the base
of professional skills making it easier for such staff to consider
working in the region because they still have career options. Such
organisations are not directly affected by problems such as the
GFC, thereby providing a more stable base of employment and
reducing the impact of external shocks. The larger pool of
expertise also assists in attracting other professional organisations
to the region. For the TAC, it has reduced their cost base and
should reduce staff turnover and absenteeism, well established
characteristics of regional workforces. The overall response of staff
relocated with the TAC has been positive, with recognition of
advantages such as lower housing costs and an excellent lifestyle.
67
3.46 The Committee agrees that an increased government presence in the
regions would be of great value. On several occasions, state government
offices have been successfully relocated to regional areas—TAC being one
example—and the Committee recommends that the Commonwealth
Government examine options for locating government departments or
functions of government departments into regional areas.
Recommendation 8
3.47 The Committee recommends that the Commonwealth Government
examine options for locating government departments or functions of
government departments into regional areas.
67 G21, Submission No. 33, pp. 6-7.
60 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
4
I mpac t of t he GFC on l oc al gover nment
4.1 Local governments across Australia have been affected by the GFC.
Indirectly, by its impact on local economies, and directly by its impact on
council revenues. Specifically, councils have suffered from:
decreases in income as property development slows;
decreases in rates revenue; and
reduced income from poorly performing investments.
1
4.2 These effects have not been felt evenly across all local governments. In a
similar manner to its impact on business, the GFC has disproportionately
affected local governments in areas dependent on housing growth and
single industries. It has also substantially impacted the balance sheets of
local governments in NSW and WA that had council money invested in
collateralised debt obligations (CDOs).
2
4.3 Local governments source their income from rates, the sale of goods and
services, government grants and various other sources.
3
There is an
indication that rate revenue has slowed
4
and in some cases declined
dramatically:
…rates have been declining rapidly as a result of a significant
slowing in the housing market for Mandurah. The City's 2007/08
interim rates revenue was $1.11m; however, 2008/09 Budget
1 Department of Infrastructure, Transport, Regional Development and Local Government,
Submission No. 153, p. 5.
2 Mr Adrian Beresford-Wylie, Transcript 14 August, p. 65.
3 Australian Local Government Submission to Productivity Commission study into local
government sources revenue, July 2007.
4 National Sea Change Task Force, Submission No. 43, p. 13 & City of Townsville, Submission No.
68, p. 13.
62 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
forecasts have been reduced to $550,000 (Original budget $1.05m -
48% reduction).
5
4.4 Building and planning fees have, in some cases, been hit particularly hard.
In Mandurah, where building activity has been strong for some time, their
revenue from building and planning fees halved:
Our building application fees are about $1.8 million a year. They
have dropped to about half a million dollars a year. Our planning
fees were about $800,000 a year previously. They have dropped to
about $400,000 a year… at an inert waste disposal site, which takes
just building rubble, where we were getting $600,000 a year in
revenue from it, we are getting about $150,000 this year. So that is
an indicator, again, of the lack of building activity that is
occurring. Probably this financial year, there will be about a $3
million impact on 2008-09. We suspect it will be $4 million or $5
million next year.
6
A similar situation has occurred on the Gold Coast, another high growth
area, where a range of cancelled developments has led to a reduction in
council income.
7
Revenue reductions amounting to millions of dollars has
a substantial impact on a council’s operations.
4.5 The Shire of Busselton has found itself faced with a choice between
decreasing services or increasing its rate structure. It has also considered
cutting back on infrastructure spending and employee numbers.
8
Neighbouring shires have considered spending less on tourism and visitor
servicing, ceasing staff appointments and instigating a wage freeze for the
2009-10 financial year.
9
4.6 In an attempt to assist local governments around Australia weather the
GFC, the Commonwealth Government brought forward a portion of
2010’s Financial Assistance Grants payment ‘to help councils manage cash
flow’.
10
It is also expected that the Nation Building and Jobs Plan,
Community Infrastructure Program and the Jobs Fund will stimulate local
5 City of Mandurah, Submission No. 49, p. 4.
6 Mr Mark Newman, Transcript 1 May 2009, pp. 7-8.
7 Mr Grayson Perry, Transcript 4 August 2009, p. 13.
8 Councillor Wesley Hartley, Transcript 30 April 2009, pp. 2-3.
9 Mr Dean Unsworth, Transcript 1 May 2009, pp. 4-5.
10 Department of Infrastructure, Transport, Regional Development and Local Government,
Submission No. 153, p. 5.
IMPACT OF THE GFC ON LOCAL GOVERNMENT 63
economies, thereby assisting local governments to maintain revenue
streams.
11
4.7 In addition to the Commonwealth Government support provided to local
communities, some councils have chosen to increase rather than reduce
spending in the face of declining revenue. Gold Coast City Council has
introduced a stimulus package to ‘engender confidence within the local
economy’.
12
Its stimulus spending is designed to target ‘those projects that
are “shovel ready” and will deliver on job creation, retention and
economic growth’.
13
4.8 Few local governments, however, have the luxury of introducing
significant stimulus spending measures during economic downturns.
Indeed, many councils have found that the money they already had is no
longer contributing returns, as a result of declining interest rates and
losses from investments.
4.9 The Committee received evidence indicating that some councils in
Western Australia and NSW had exposure to investments which have
declined considerably since the onset of the GFC because the investments
were linked to the sub-prime mortgage market in the United States.
Investment in CDOs, in particular, has been the main cause of the mark-
to-market book losses of some councils in these states. CDOs are best
explained by Michael Cole, author of the 2008 Review of NSW Local
Government Investments report, commissioned by the NSW Government
in response to council losses:
CDOs are a type of structured Asset Backed Security (ABS) that
gain exposure to the credit of a portfolio of fixed income assets
and divides the credit risk among different tranches, each with a
different level of risk and return: senior tranches (rated AAA),
mezzanine tranches (AA to BB), and equity tranches (unrated).
The collateral for CDOs includes [mortgage-backed securities]
MBS, ABS, leveraged loans and corporate bonds. By combining
low rated sub-prime MBS with high rated collateral, originators
were able to create highly rated CDOs that could be widely
distributed to traditionally conservative investors such as
commercial banks, insurance companies and pension funds.
14
11 Department of Infrastructure, Transport, Regional Development and Local Government,
Submission No. 153, p. 5.
12 Gold Coast City Council, Submission No. 74, p. 16.
13 Gold Coast City Council, Submission No. 74, p. 16.
14 Michael Cole, Review of NSW Local Government Investments: Final Report, April 2008, p. 7.
64 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
4.10 Evidence provided to this inquiry regarding council investment losses has
come predominantly from NSW regional councils. Broken Hill City
Council has had to write-down its investments in the last financial year by
just over $2 million and there is a probability that this financial year, the
council will need to write-down the face value of its investments another
$1.5 million to $2 million.
15
4.11 This will have a substantial impact on the Council’s service provision:
…we have had to defer some of our capital programs. We have set
ourselves a long-term capital expenditure level of just over $5.6
million, whereas last year and this year we spent or are aiming to
spend over $7.6 million. We have had to wind that back
significantly for the future based on our ability to finance the
works.
16
4.12 Councils sought out investments with the ‘highest return available’, so
long as they were consistent with the restrictions imposed by the NSW
Local Government Minister’s 2005 Ministerial Investment Order.
17
The
councils in question were also ‘aggressively sold these complex
investment products’ by suppliers, who, in some cases, were distributing
the products as well as acting as advisers to councils.
18
Lehman Brothers,
in particular, were active in the WA and NSW markets.
19
4.13 It should be noted that these investment products were highly rated by
ratings agencies and did adhere to the Minister’s Investment Order.
Councils, however, are ‘governed by their fiduciary responsibility as
trustees for the prudent investment of public funds’
20
and therefore,
should have been less willing to accept the risk/return trade-off associated
with these products.
21
Councils in NSW would have also been aware of
Circular No. 06-70 issued in November 2006, which stated that:
Ratings in no way guarantee the investment or protect an investor
against loss. Councils should not misinterpret prescribed ratings
as an implicit guarantee of investments or entities that have such
ratings.
22
15 Mr Desmond Bilske, Transcript 7 July 2009, p. 6.
16 Mr Desmond Bilske, Transcript 7 July 2009, p. 6.
17 Michael Cole, Review of NSW Local Government Investments: Final Report, April 2008, p. 9.
18 Michael Cole, Review of NSW Local Government Investments: Final Report, April 2008, p. 10.
19 Mr Adrian Beresford-Wylie, Transcript 14 August, p. 65.
20 Michael Cole, Review of NSW Local Government Investments: Final Report, April 2008, p. 10.
21 Michael Cole, Review of NSW Local Government Investments: Final Report, April 2008, p. 11.
22 NSW Department of Local Government, Circular to Councils No. 06-70: Investment Requirements
for NSW Councils, 27 November 2006, pp. 2-3.
IMPACT OF THE GFC ON LOCAL GOVERNMENT 65
4.14 Stated responsibilities and advice from state governments was not
sufficient in guiding council staff, who did not always take great care in
examining investment products:
...if people had read the 50 to 100 pages of information that was
provided behind each of the investment products, there would
have been some concerns, generally, from staff in their advice to
take on the higher-rate return on investments.
23
4.15 The Cole report, presented in April of 2008, agreed, citing eight
recommendations intended to strengthen and clarify the investment order
provided to NSW councils. The final recommendation in the report called
on the NSW Department of Local Government to release investment
policy guidelines similar to those issued in February 2008 by the Western
Australian Department of Local Government in response to council losses
in WA.
24
4.16 The NSW Government accepted all eight of Cole’s recommendations,
issued a revised Ministerial Investment Order in August 2008 and has
drafted investment policy guidelines for local councils in NSW.
25
The
Committee expects that revised investment guidelines issued in WA and
NSW, will lead to a more conservative investment regime and help
councils in both states.
4.17 The Committee is concerned, however, that within the draft NSW
investment guidelines there is no guidance similar to that issued by the
Director-general of the Department of Local Government under Circular
to Councils No. 06-70, citing the danger of relying too heavily on the
rating of an investment product. Perhaps this omission reflects a
consistent policy. Within the same circular, it is suggested that despite the
need for caution when assessing investment ratings, ‘ratings provide the
best independent information available’.
26
The role of rating agencies in
the GFC should serve to highlight a need for policy change. At the very
least, any new investment guidelines should encourage caution when
assessing an investment product’s rating.
23 Mr Desmond Bilske, Transcript 7 July 2009, p. 6.
24 Michael Cole, Review of NSW Local Government Investments: Final Report, April 2008, p. 6.
25 See NSW Department of Local Government, Draft Investment Policy Guidelines, May 2009,http://www.dlg.nsw.gov.au/DLG/DLGHome/documents/Information/draft investmen
t%20policy%20guidelines.pdf, accessed 24 September 2009.
26 NSW Department of Local Government, Circular to Councils No. 06-70: Investment Requirements
for NSW Councils, 27 November 2006, p. 3.
66 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
4.18 The WA and NSW experience should also serve as a reminder to councils
in other states. Although none were affected, the need to properly handle
risk in investing public money is a lesson that should be heeded by
councils across the country.
5
St r engt heni ng Aust r al i a’s r egi ons
5.1 The GFC is one event in a history of continual demographic,
environmental and economic change in Australia’s regions. Various
governments have responded to these changes by implementing policies
designed to develop the regions into strong, vibrant places to live. The
GFC may be seen as an opportunity to examine the impact of change on
regional Australia and test policy responses. The lessons learned will
assist in strengthening existing regional development policy, which will
help regional Australia withstand future downturns.
5.2 This chapter will apply some of the evidence noted in the previous
chapters by framing the Committee’s position on regional development
policy within a discussion about current policy settings and possible
future direction.
Regional development policy in Australia
5.3 Governments in Australia and around the world have long recognised the
importance of regional communities within the fabric of their societies.
Since the beginning of the 20
th
century, regional policy has undergone
several ideological progressions. This section will only note Australia’s
regional development experience from the mid-1980s until the present—
what has been described by the Bureau of Transport and Regional
Economics (now Bureau of Infrastructure, Transport and Regional
Economics (BITRE) as the post-trade liberalisation era.
1
It will then discuss
current policy settings before concluding with an outline of the
Committee’s preferred approach to regional development policy.
1 Bureau of Transport and Regional Economics, Working Paper 55, Government Interventions in
Pursuit of Regional Development: Learning from Experience, June 2003, p. 17.
68 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
Regional development and the post-trade liberalisation era
5.4 Regional Australia was sheltered from global trends and international
market conditions until the mid-1980s when the Australian Government
began a policy of trade liberalisation. BITRE explains that this new policy
‘meant that regional disparities [could] be felt more sharply in regions
particularly vulnerable to the pressures of international competitiveness
and global market shocks’.
2
Certainly the GFC has confirmed this
assertion.
5.5 The Commonwealth Government responded to the disparate effects of
trade liberalisation in regional Australia by introducing regional
development policies aimed at encouraging community driven solutions,
private sector participation and reduced unemployment through business
incubators and regional employment initiatives and incentives. These
initiatives were undertaken by the Country Centres Project and the Office
of Labour Market Adjustment.
3
5.6 Nevertheless, persistent unemployment in Australia’s regions remained.
The Commonwealth Government responded with an expanded Regional
Development Programme, which provided funding for regional
infrastructure projects and the establishment of community based
Regional Development Organisations supported by Area Consultative
Committees.
4
5.7 These policies were a reflection of regional development theory which
stressed rapid regional growth through:
a relatively large stock of capital;
a highly educated population; and
an economic environment that favoured knowledge–intensive
industries.
5
5.8 This approach to regional development remained relatively consistent
throughout the 1990s until 2001, when the Commonwealth Government
2 Bureau of Transport and Regional Economics, Working Paper 55, Government Interventions in
Pursuit of Regional Development: Learning from Experience, June 2003, pp. 17-18.
3 Bureau of Transport and Regional Economics, Working Paper 55, Government Interventions in
Pursuit of Regional Development: Learning from Experience, June 2003, p. 24.
4 Bureau of Transport and Regional Economics, Working Paper 55, Government Interventions in
Pursuit of Regional Development: Learning from Experience, June 2003, p. 24.
5 Bureau of Transport and Regional Economics, Working Paper 55, Government Interventions in
Pursuit of Regional Development: Learning from Experience, June 2003, pp. 24-25.
STRENGTHENING AUSTRALIA’S REGIONS 69
released a regional policy statement titled Stronger Regions, A Stronger
Australia which outlined the following broad goals for regional Australia:
strengthen regional economic and social opportunities;
sustain productive natural resources and environment;
deliver better regional services; and
adjust to economic, technological and government–induced change.
6
5.9 One of the strategies for achieving these goals included taking a whole-of-
government approach to regional development that promoted
‘coordination between departments and agencies in implementing
Commonwealth programmes’.
7
This approach was taken in recognition of
the benefits which could be derived from coordinating regional policy
across the federal government.
5.10 For the remainder of the period prior to 2007, regional development policy
promoted partnerships between communities, industry and government
under programs such as Regional Partnerships. The Area Consultative
Committees, established in 1994 to develop local training, eduction and
employment initiatives
8
, gained a more prominent role, focusing on the
‘dissemination of information on Government priorities and programmes
for the benefit of business and the community’.
9
5.11 After 2007, regional development policies began to mix previous theory
with some new approaches. Like its predecessors, the current government
continues to stress the importance of delivering quality regional services,
while enhancing the economic viability of regional communities.
5.12 Education has once again been highlighted as an important driver of
regional development as has the provision of ‘nation-building’
infrastructure, including a national broadband network. A whole-of-
government approach to regional development is supported but the
philosophy has been extended to include cooperation between federal,
state/territory and local governments as well as intra-departmental
cooperation at the federal level. Local government, in particular, has been
6 Bureau of Transport and Regional Economics, Working Paper 55, Government Interventions in
Pursuit of Regional Development: Learning from Experience, June 2003, p. 25.
7 Bureau of Transport and Regional Economics, Working Paper 55, Government Interventions in
Pursuit of Regional Development: Learning from Experience, June 2003, p. 25.
8 Bureau of Transport and Regional Economics, Working Paper 55, Government Interventions in
Pursuit of Regional Development: Learning from Experience, June 2003, p. 24.
9 Regional Development Australia website, About the ACC Network,http://www.rda.gov.au/about_the_acc_network/index.aspx, accessed 25 September 2009.
70 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
singled out as playing an important role in the development of Australia’s
regions. This has best been displayed by the direct funding provided to all
local governments through the Regional and Local Community
Infrastructure Program, increased funding through existing programs and
the establishment of the first Australian Council of Local Government.
5.13 The Area Consultative Committees (ACC) have been dissolved and
replaced by the Regional Development Australia (RDA) network. Like the
ACCs, RDA will continue to advise regional communities about
government programs and promote those programs in the regions. It will
also:
provide advice to both Governments about regional issues;
provide strategic input into Australian and NT government programs;
help to coordinate regional planning and regional development
initiatives; and
establish links and cooperative alliances as appropriate by closely
working with other regional development organisations, neighbouring
RDA committees and local governments to promote regional
development.
10
Three pillars of regional development policy
5.14 The Commonwealth Government was engaged in a significant re-
alignment of regional development policy at the onset of the GFC. The
crisis has highlighted the importance of regional development in abating
the effects of economic downturns on regional communities and has made
apparent the importance of continuing Commonwealth Government
programs and policies that build infrastructure, encourage education and
support the growth of business in regional Australia.
5.15 The Committee is supportive of a regional development policy
underpinned by three pillars:
Infrastructure;
Education; and
Business.
10 The Hon Maxine McKew MP, Media Release, Regional Development Australia – NT
Appointments,http://www.minister.infrastructure.gov.au/mm/releases/2009/July/mm019_2009.htm,
accessed 25 September 2009.
STRENGTHENING AUSTRALIA’S REGIONS 71
5.16 In employing the pillar metaphor—a common approach to articulating
regional development strategy—the Committee is concerned that a pillar
in this context does not become synonymous with a silo. Each of the three
pillars noted above should not operate in isolation from one another,
rather they should be viewed as the foundation of an integrated policy
platform allowing government to coordinate and adapt a suite of regional
development programs. Nor should these pillars form the basis of a series
of programs under which the regions become passive recipients. Recent
regional development approaches stress the importance of encouraging
‘each individual region to reach its growth potential from within’
11
:
Greater growth occurs when regions are able to mobilise their own
local assets and resources, rather than depend on support from the
national government.
12
By presenting a range of programs focused on key economic drivers
(pillars), the Government will act as a catalyst for local action as regions
discover ways to harness the benefits of government programs to advance
their own endogenous assets. This is a process which is expected to take
time, but if executed correctly, will have a positive impact on regional
communities and national output.
13
Infrastructure
5.17 Amongst OECD countries, investment in public infrastructure has been a
key policy response to the GFC
14
and there is evidence to suggest that the
stimulatory effect of ‘quick-starting mid-scale’
15
infrastructure spending in
Australia has been of assistance in maintaining employment and business
income during this period.
16
5.18 If there are benefits to be derived from the GFC, one may be the increased
investment in regional infrastructure by the Commonwealth Government.
Shortfalls in infrastructure can have profound effects on the economic
viability and liveability of a region.
17
Social infrastructure protects the
11 OECD, Policy Brief: How Regions Grow, March 2009, p. 5.
12 OECD, Policy Brief: How Regions Grow, March 2009, p. 5.
13 OECD, Policy Brief: How Regions Grow, March 2009, p. 5.
14 OECD, Policy Brief: How Regions Grow, March 2009, p. 6.
15 Dr Steven Kennedy, Australia’s Response to the Global Financial Crisis: A speech to the Australia
Israel Leadership Forum, 24 June 2009, p. 11.
16 Mr Greg Evans, Senate Economics References Committee, Reference: Government Economic
Stimulus Measures, Transcript 28 September 2009, p. 54.
17 Andrew Beer, Alarci Maude & Bill Pritchard, Developing Australia’s Regions: theory and practice,
UNSW Press, 2003, p. 199.
72 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
living standards of people in regional Australia and ensures the future
viability of regional communities by attracting and retaining individuals
and businesses.
18
Hard infrastructure, such as roads, railways, ports,
airports and power stations, contributes directly to the functioning of the
economy. Investment in hard infrastructure in regional Australia can
improve competitiveness by reducing capacity constraints and making
regions more attractive places to do business.
19
The provision of
educational infrastructure serves both purposes, simultaneously raising
the living standards of regional Australians and the competitiveness of
regional businesses by improving access to education.
5.19 The Committee has witnessed first hand how infrastructure can increase
economic activity and protect regions from sharp economic declines. The
Northern Territory has been impacted less by the GFC than other areas of
the country. There are several reasons for this, one of which is the
Territory’s investment in strategic infrastructure prior to the GFC:
…we have been developing strategic infrastructure for a number
of years in terms of East Arm Port, the railway, the business park
and bulk mineral loading. The government has been investing in
key infrastructure to grow our trade capacity…for a small
jurisdiction that is a real leap of faith particularly going back 10
years ago when we were looking at spending $200 million on a
port where we had small trade areas. It was one of those ‘build it
and they will come’ projects and they certainly have…there has
been that investment to ensure that we were able to grow during
the good times, which we certainly have.
20
5.20 Evidence from around Australia points to the important role
infrastructure provision plays in the development of regions. For example,
access to high-speed broadband has been cited as a ‘fundamental element
to the attraction and retention of individuals and industry migrating to
rural and regional areas’:
…Critical services including emergency management, health
services, and education are increasingly provided 'online'…For
regional communities, broadband encourages innovation through
development of new industries, encourages new investment as it
18 Mid-Western Regional Council, Submission No. 60, p. 3.
19 Andrew Beer, Alarci Maude & Bill Pritchard, Developing Australia’s Regions: theory and practice,
UNSW Press, 2003, p. 199; and Mayor David Smith, Transcript 30 April 2009, pp. 5-6;
Councillor Steven Dilley, Transcript 30 April 2009, p. 7; Councillor Steven Harrison, Transcript
30 April 2009, p. 9; Councillor Wesley Hartley, Transcript 30 April 2009, p. 18.
20 Mr Jeff Steward, Transcript 28 September 2009, p. 3.
STRENGTHENING AUSTRALIA’S REGIONS 73
becomes viable for existing industries to move to areas outside
metropolitan centres therefore creating new jobs. Broadband
allows regional businesses access to new (world) markets and
assists in addressing population decline by enabling services such
as education and training to be delivered anywhere, anytime. This
allows people to remain well skilled and able to move freely and
work (telecommuting) whenever they wish from wherever they
are, meaning people do not have to reside in major cities for
employment.
21
5.21 In Geraldton, access to high-speed broadband may help the community
secure a bid to build the world’s largest radio telescope array. If they are
successful, the project is expected to grow the region through the creation
of more industry and enhanced competitiveness:
Broadband… is critical for us…there is the proposal for the square
kilometre array radio telescope, which is proposed to be the
largest radio telescope array in the world [SKA project]. That is to
be built 350 kilometres east of here…[but]…needs connectivity
back to Perth. Our broadband is pretty well non-
existent…[and]…there is an opportunity to actually connect us to
the rest of the world via Western Australia, and that can lever off
the SKA project and make us more competitive. Broadband is very
important. The SKA, for us, is one of those other elements in terms
of creating a new industry here. It is all based on scientists, new
technology and creative people. If you ever had a classic study on
how to diversify an economy, then that project is it for us.
22
5.22 The call for high-speed broadband was echoed by numerous witnesses
and submitters to the inquiry throughout Australia, many of whom
acknowledged the importance of the Government’s National Broadband
Network (NBN) initiative. The Committee understands that the NBN is
‘expected to include a significant number of premises located in rural and
regional Australia’
23
with those people who may not have access to the
NBN, having ‘access to the best new fixed, wireless and satellite
technology’.
24
This is a significant step towards growing Australia’s
regions and the Committee wishes to reiterate the importance of
telecommunications infrastructure, and specifically access to high-speed
21 Municipal Association of Victoria, Submission No. 26, p. 11.
22 Mr Anthony Brun, Transcript 29 April 2009, pp. 14-15.
23 Department of Broadband, Communications and the Digital Economy, Submission No. 25, p. 2.
24 Department of Broadband, Communications and the Digital Economy, Submission No. 25, p. 4.
74 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
broadband services, to the growth and sustainability of regional
Australia.
5.23 Continued investment in regional infrastructure by all levels of
government will assist in the development of Australia’s regions, but
infrastructure alone ‘has no impact on regional growth unless regions are
endowed with adequate levels of human capital and innovation’.
25
As one
OECD policy brief succinctly states:
…infrastructure is a necessary, but insufficient, condition for
growth.
26
In other words, one pillar is unlikely to support an entire platform. More
will be required. Education, therefore, represents the second pillar and the
path to increasing the levels of human capital and innovation in
Australia’s regions.
Education
5.24 All levels of education need to be supported regionally and nation-wide,
however, it has been found that regions with a low rate of tertiary
education uptake amongst their population are less economically vibrant
than those with a high rate.
27
This may be because regional universities are
‘makers of place’ that have a role in ‘actually constructing communities
and bringing [them to] life’.
28
They are:
…centres of critical mass because intellectual inquiry and industry
centres around them…they attract skilled people to [a] region,
they promote innovation and…they are lubricants and catalysts of
social endeavour.
29
5.25 This evidence was consistently presented by regional universities around
Australia. Deakin University advised that regional universities:
generate economic activity;
build skills for the future of their regional economies;
form a connection to national and international ideas and knowledge
and serve as a catalyst for innovation, and
25 OECD, Policy Brief: How Regions Grow, March 2009, p. 6.
26 OECD, Policy Brief: How Regions Grow, March 2009, p. 6.
27 OECD, How Regions Grow: trends and analysis, 2009, p. 69.
28 Professor Andrew Vann, Transcript 3 September 2009, p. 14.
29 Professor Andrew Vann, Transcript 3 September 2009, p. 14.
STRENGTHENING AUSTRALIA’S REGIONS 75
contribute to the cultural and civic life of regional Australia.
30
5.26 Regional universities are employers that create full-time and part-time
jobs and their infrastructure spending injects capital into the regions,
helping to boost local economies.
31
They provide sporting and cultural
facilities that are available to the public and contribute to the human
capital of a region through the development of local skills and a better
educated workforce
32
by strategically engaging with regional industry and
government. Deakin University, as a member of the Committee for
Geelong and G21
33
, engages on regional planning and development issues
in order to ‘meet current and future regional skills needs through offering
relevant courses’
34
and has linked with the Commonwealth Government
on a number of skills development projects.
35
In Townsville, James Cook
University is working collaboratively with the TAFE and VET sectors as
well as local schools in order to raise participation rates and enhance the
skills of the region.
36
5.27 There cannot be a substantial university campus in every community
across Australia; therefore, the development of partnerships between
various education sectors also serves to deliver the benefits of a university
to smaller communities, where there may be a TAFE presence. That is why
Deakin University is in the process of developing study centres with a
number of regional campuses that will deliver associate degrees.
37
5.28 These kinds of collaborations may increase participation rates in regional
universities as students are given study options which focus on local
needs and allow them to stay in regional centres.
38
Participation rates in
higher education by students in regional and remote areas have worsened
in the last five years
39
and this decline needs to be arrested. In addition to
30 Deakin University, Submission No. 11, pp. 1-2.
31 Mr Colin Dwyer, Transcript 3 September 2009, pp. 13-14.
32 Professor Sue Kilpatrick, Transcript 22 April 2009, p. 23.
33 G21 is a company established in 2003 by an alliance of five local government authorities (City
of Greater Geelong, Colac Otway Shire, Golden Plains Shire, Borough of Queenscliffe and Surf
Coast Shire) with the support of the State Government of Victoria and a wide range of local
organisations. Membership spans all three levels of government, non-government
organisations, commercial companies and community groups.
34 Deakin University, Submission No. 11, p. 2.
35 See Deakin University, Submission No. 11, p. 2.
36 Professor Andrew Vann, Transcript 3 September 2009, p. 15.
37 Professor Sue Kilpatrick, Transcript 22 April 2009, p. 24.
38 Professor Andrew Vann, Transcript 3 September 2009, p. 21.
39 Review of Higher Education: Final Report, p. 31,http://www.deewr.gov.au/highereducation/review/pages/reviewofaustralianhighereducati
onreport.aspx, accessed 21 October 2009.
76 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
the benefits students derive from a higher education, increased
participation rates grow regional universities, making them viable entities
which can contribute to the development of regions. For example, ‘regions
where universities, business and industry collaborate are more likely to be
innovative and prosper’.
40
Several regional universities, including the
University of Ballarat, have technology parks or precincts which further
enhance regional innovation and skills leading to the creation of industry
and jobs:
…some 1,350 people are employed in the Technology Park, half of
whom hold University of Ballarat degrees. The strong associations
between the University and prominent industry tenants—iconic
tenants include IBM Ballarat; Emergency Services
Telecommunication Authority; Rural Ambulance Australia; State
Revenue Office; Global Innovation Centre; ID Research; IBM
Regional Software Solutions Centre; etc—has won for Ballarat a
national reputation as a telecommunication and IT hub. In this
direct and very practical association with the development and
application of needed skills, is found the strongest expression of
regional, dual-sector education: it offers academic competency;
vocational opportunity; skills-based applicability, community
engagement; social responsibility; and economic leadership…in a
regional setting.
41
5.29 The Commonwealth Government recognises the economic and social
contribution of regional universities to Australian communities:
Sustainable higher education provision, which is responsive to the
specific needs of regional Australia, is essential to Australia’s
social and economic prosperity. Institutions have a vital role to
play in local communities and economies, and students who study
in regional areas are much more likely to stay in those areas,
providing a vital skilled workforce in the regions.
42
5.30 The Government is undertaking a series of higher education reforms,
some of which are intended to strengthen regional education provision—a
positive step supported by the Committee; however, some commentators
have suggested that ‘there needs to be a much stronger link between the
40 Deakin University, Submission No. 11, p. 3.
41 University of Ballarat, Submission No. 77, p. 5.
42 Department of Education, Employment and Workplace Relations, Strengthening Regional
Higher Education Provision,http://www.deewr.gov.au/HigherEducation/Documents/PDF/Pages from A09-
303%20Budget%20Fact%20Sheets-11_webaw.pdf, accessed 6 October 2009.
STRENGTHENING AUSTRALIA’S REGIONS 77
resolution of issues about tertiary education provision and delivery in
regional Australia with state and federal government policy on regional
development’.
43
5.31 This will occur once there is a recognition of the various ways in which
universities contribute to the wellbeing and development of regional
Australia. The Committee acknowledges the importance of education to
regional development and strongly urges the Government to view
higher education reform as part of its regional development objectives.
Regional leadership education
5.32 The growth of regional education also aids in the development of effective
leadership. ‘Leaders need realistic visions and these, in turn, require an
understanding of situation, process, opportunity and competition’ which
can be gained through education.
44
5.33 Community leaders can be found in a range of different quarters from
local government and regional development associations to educational
institutions and industry. Their presence and activity within communities
is vital to the development of a region. For example, in Western Victoria a
growing tourism industry has the potential to expand the economic
viability of the region but is lacking the leadership to do so:
…one of the gaps that we have is leadership…Across the industry,
we have a lot of networks that relate to local tourist organisations.
There is a network of event managers. There are local town tourist
organisations. At the moment, despite their best endeavours, they
are often lacking leadership and also an understanding of the big
picture and where they are meant to be paddling to. We are
certainly looking at opportunities to provide leadership and
governance training so that, as a total industry, we have a capacity
to raise our professionalism, to have far more of our total
population resource base going in the same direction and to have
the tools that we need.
45
5.34 Local Government is often viewed as the logical body to provide
leadership within communities, particularly small ones. Many local
governments have regional development staff and participate in regional
collaborative bodies intended to grow and diversify a particular region.
43 Professor David Battersby, False start for national university, Campus Review, 3 August 2009.
44 Professor Tony Sorensen, Parliamentary Library, Research Paper 26: 1999-2000, Regional
Development: Some Issues for Policy Makers, 27 June 2000, p. 10.
45 Mr Chris Burchett, Transcript 23 April 2009, p. 40.
78 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
The capacity of local governments to provide the necessary regional
development leadership varies, and therefore the Commonwealth
Government has helped establish the Centre of Excellence for Local
Government. The Centre will deliver leadership and development
training
46
and encourage a focus on ‘regionalisation, regional approaches
and collaboration between councils’.
47
A consortium of organisations
including several regional universities has been chosen to establish the
Centre, which will provide its courses and services across urban, rural and
regional Australia.
5.35 The establishment of the Centre of Excellence for Local Government is a
positive step towards enhancing leadership capacity in the regions, but
will need to be augmented by local leadership development opportunities.
The Committee is aware that in at least one region, the Commonwealth
Government, through the local RDA has partnered with local government
to offer a community leadership program designed to enhance the
leadership skills of people active in the sectors of environment, youth,
sport and recreation, cultural or community development.
48
Local
programs such as this are important and the Committee encourages the
state, territory and Commonwealth Government, through RDA to
continue promoting leadership development opportunities.
Business
5.36 In the early 1990s, Burnie lost a pulp mill, Tioxide, the North West Acid
plant, Tasmeats and Blue Ribbon. Four thousand jobs were lost.
49
The
same region now faces a loss of about 800 jobs as Caterpillar scales back its
workforce. While a substantial amount, 800 jobs is not 4000 jobs. What has
changed in Burnie between the recession of the early 1990s and the GFC
that has reduced the impact of economic downturns on the region?
5.37 Representatives in Burnie attribute the comparatively reduced impact of
the GFC on their community to economic diversification and a more
skilled workforce.
50
Evidence suggests that the impact of the GFC has
been lessened in areas where either the major industries have not been
46 Prime Minister of Australia, Media Release, New Australian Centre of Excellence for Local
Government, 24 June 2009.
47 Mr Adrian Beresford-Wylie, Transcript 14 August 2009, p. 64.
48 The program is offered by Volunteering Queensland and is supported by the City of Ipswich
and RDA SEQ West. See, www.qorf.org.au/_.../CLP%20Nomination%20Form%202009.pdf,
accessed 22 October 2009.
49 Mr Paul Arnold, Transcript 20 April 2009, p. 2.
50 Mr Rodney Greene and Mr Paul Arnold, Transcript 20 April 2009, p. 7
STRENGTHENING AUSTRALIA’S REGIONS 79
stand a
affected or where the region has a diverse enough economy to with
downturn in one sector.
5.38 In order to diversify a regional economy, existing businesses in a region
must grow and expand and new businesses need to emerge. The
Committee’s third pillar of regional development supports regional
communities through the growth and diversification of regional business.
5.39 Expansion and diversification of business in regional Australia can occur
organically as various entrepreneurs seek to grow their businesses or
create new ones. By limiting the amount of available credit to these
entrepreneurs, the GFC has revealed that private enterprise alone may not
sufficiently drive business growth and diversification in regional
Australia, proving there is a role for government in supporting regional
business.
5.40 This is a lesson that was not lost on Burnie’s local government after the
recession of the early 1990s. There, the local council undertook a series of
actions designed to stimulate the local economy and increase the
liveability of the city:
We had no cinema. The cinema we did have had failed; the private
marketplace had failed miserably, so we built a cinema. We leased
it out and then we sold it off. After we built it and operated it for a
couple of years, we sold it off. We tried to stimulate the local
economy with some entrepreneurial activities. For example, we
got involved and bought the local airport and generated a lot of
industrial land sales off that. In fact, the Vestas renewable energy
company was based out there. We did everything we could to
facilitate growth of opportunity—business, commercial,
whatever.
51
5.41 State and Territory governments have a number of business support
programs and so too does the Commonwealth Government. This report
has already noted some of the past and current Commonwealth
Government programs intended to assist small, medium and large
enterprises in regional Australia. As part of its deliberations, the
Committee canvassed witnesses about Commonwealth Government
support for businesses in their area, in an attempt to measure the
effectiveness of government support. In response, the Committee was
advised that the services offered by Enterprise Connect and the BECs were
valued but in need of extension, particularly in light of the current
situation:
51 Mr Paul Arnold, Transcript 20 April 2009, p. 10.
80 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
We have a good working relationship with the Innovative Regions
Centre, for example, which has been excellent to deal with, but it is
a matter of getting more resources on the ground.
52
5.42 In Broken Hill, the BEC ‘works in really well with the ACC/RDA,
Business Broken Hill, the community foundation and the other partnering
organisations’ but it is not considered ‘the direct linkage into business that
[Broken Hill] needs’.
53
Business Broken Hill has suggested that while the
BEC there is supportive of new businesses, it does not have the capacity to
assist existing small businesses during this period.
54
5.43 The Committee discussed the coverage of various business support
programs with the Department of Innovation, Industry, Science and
Research at its public hearing in Canberra. It highlighted the concerns
noted above, particularly regarding support for small business, and was
advised by the Department that support for business in regional Australia
is provided by many different agencies across government and industry.
55
5.44 That may be so, but the Committee is aware that some small businesses
may have problems accessing government business support programs.
For example, tailored advisory services from Enterprise Connect cost a
business $20,000—an amount many small business owners are not able to
produce.
56
The inability to access business support services may lead to a
problem whereby some regional businesses that are either very small or
not in a particular industry are able to receive support while others are
not.
5.45 AusIndustry offers five programs designed to address the needs of small
business, and of those five programs, three are targeted towards the
commercialisation of innovative products, the clothing, footwear and
textile industry or IT skills development.
57
Only the Small Business
Advisory Service and the Small Business Support Line are sufficiently
general enough in their coverage to address the needs of a range of small
businesses in regional Australia and both programs have been instigated
as a result of the GFC. The Small Business Advisory Service, for example,
has a two-year funding commitment. If it can be shown that there is a high
demand for this service and the Support Line, then funding support for
52 Dr Andrew Scott, Transcript 22 April 2009, p. 19.
53 Robin Edgecumbe, Transcript 7 July 2009, p. 23.
54 Robin Edgecumbe, Transcript 7 July 2009, p. 24.
55 Mr Paul Sexton, Transcript 14 August 2009, p. 30.
56 Mr Clyde Humphries, Transcript 23 April 2009, p. 32.
57 Seehttp://www.ausindustry.gov.au/SmallBusiness/Pages/home.aspx, accessed 21 October
2009.
STRENGTHENING AUSTRALIA’S REGIONS 81
these initiatives should be continued. Therefore, the Committee
encourages the Government to examine the uptake of its Small Business
Support Line and Small Business Advisory Service with the intention of
continuing funding support for these initiatives.
Recommendation 9
5.46 The Committee recommends that the Government examine the uptake
of its Small Business Support Line and Small Business Advisory Service
with the intention of continuing funding support for this initiative.
5.47 Programs offered by AusIndustry provide various kinds of assistance to
businesses ranging in size and across different industries. In regional
Australia, AusIndustry has 15 representatives deployed to ‘provide
information, provide assistance awareness of AusIndustry business
assistance programs’.
58
Nevertheless, not all are aware of the
Commonwealth Government support available for small business.
59
This
may be a result, in part, of the limited number of government
representatives, such as those from AusIndustry, working in regional
Australia.
60
5.48 The Department of Innovation, Industry, Science and Research observed
that AusIndustry representatives, operate in a manner intended to
‘leverage off multiplier agencies’:
61
We do not do it alone; we also work with Austrade, IP Australia,
state government agencies, Enterprise Connect people who are on
the ground. So we are providing a whole-of-government
approach…
62
5.49 Furthermore, the Department noted that it could always be argued that
there should be two or three [AusIndustry] people rather than one, but the
current representatives ‘do a fairly comprehensive job, given the funding
[the Department] has’.
63
58 Mr Paul Sexton, Transcript 14 August 2009, p. 30.
59 See for example, Mr Peter Gordon, Transcript 30 April 2009, pp. 43-44.
60 Dr Andrew Scott, Transcript 22 April 2009, p. 19.
61 Mr Paul Sexton, Transcript 14 August 2009, p. 30.
62 Mr Paul Sexton, Transcript 14 August 2009, p. 30.
63 Mr Paul Sexton, Transcript 14 August 2009, p. 30.
82 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
5.50 The Committee does not question the comprehensive efforts undertaken
by the existing AusIndustry representatives, however, given that there are
almost two million small businesses in Australia and 85 per cent of them
are in regional Australia
64
, it is questionable whether 15 representatives
can provide the necessary coverage.
Recommendation 10
5.51 The Committee recommends that the Commonwealth Government
increase the number of AusIndustry representatives in regional
Australia.
5.52 While the Government has acknowledged the importance of a whole-of-
government approach to business support, it would be worthwhile
ascertaining the degree upon which that support was coordinated in the
regions as part of their regional development plans. Like higher education
reform, business support in regional Australia will be more effective if it is
undertaken within the framework of regional policy objectives.
5.53 In conjunction with a review into the success of the Small Business
Support Line and Small Business Advisory Service and an increase in the
number of AusIndustry representatives, the Government may also wish to
examine the manner in which various government business support
programs worked together in particular regions during the GFC and the
potential role RDA may play in facilitating greater coordination between
business support programs and integrating them into wider regional
development frameworks in future.
64 Mr Paul Sexton, Transcript 14 August 2009, p. 30 & ACC – South East NSW, Submission No. 117,
p. 3.
STRENGTHENING AUSTRALIA’S REGIONS 83
Recommendation 11
5.54 The Committee recommends that the Government examine the manner
in which various government business support programs worked
together in particular regions during the GFC and the potential role
RDA may play in facilitating greater coordination between business
support programs and integrating them into wider regional
development frameworks in future.
Facilitating regional cooperation
5.55 A recent OECD policy brief asked the question: how can regional policies
mitigate the effects of the financial crisis?
65
Its answer stressed the
importance of integrated regional policies based on ‘well-developed
mechanisms for co-ordination between the central and sub-national levels’
that align local and national priorities.
66
5.56 The question then for Australia is: how does the Commonwealth
Government coordinate its infrastructure, education and business support
programs on the ground in regional Australia and how does it ensure that
those programs are working in collaboration with local and state
objectives? One possible solution may be the better utilisation of Regional
Development Australia.
5.57 The GFC has highlighted the importance of having a mechanism such as
RDA, which can be used to facilitate better coordination between various
government programs to achieve regional development objectives.
Throughout the crisis, Commonwealth Government programs have been
rolled out across Australia but administered by various departments.
5.58 In Canberra, the Committee was advised that cooperation amongst the
departments responsible for regional programs is occurring. DEEWR is
hosting an interdepartmental committee comprised of departments with
funding programs, with the intention of ‘pulling into one place
information about all of the federal programs’ so that the Department’s
LECs can relay that information in the regions.
67
The Department of
65 OECD, Policy Brief: How Regions Grow, March 2009, p. 6.
66 OECD, Policy Brief: How Regions Grow, March 2009, pp. 6-7.
67 Ms Stephanie Foster, Transcript 14 August 2009, p. 9.
84 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
Infrastructure, Transport, Regional Development and Local Government
(DITRDLG) has been running a forum ‘which puts together all of the
federal agencies with regional programs to share information’ and a
similar forum is being coordinated between state and federal deputy
secretaries to ‘agree on some priorities and ways of working together’ to
make sure that programs are being maximised.
68
5.59 In the regions, departmental representatives such as LECs and
AusIndustry managers have been working with local and state
organisations and each other to raise awareness about federal programs
and available assistance.
69
The picture which emerged as the Committee
spoke with representatives from various federal departments was one
whereby their regional staff—be they a LEC, AusIndustry manager or
Centrelink officer—were working with each other and local and state
representatives to ensure that the regions had access to the assistance
offered by government agencies.
5.60 While their efforts are an attempt to coordinate a whole-of-government
response to the GFC, they do not represent a coordinated response of
integrated regional policies that align local and national priorities beyond
those brought on by the GFC. Indeed, it is the Committee’s view that some
of their activities are the antithesis of what needs to be occurring in
regional Australia. The role of the LEC is a good example.
5.61 The Committee was advised that the LECs:
…have been tasked with developing a local employment plan for
their region and, as part of that, they have been tasked with setting
up a group within the local area to work together. They want
representation on that group from various different bodies that
would make it a functioning group within a region, who would
then be able to work together to develop that plan. Some of the
regional development aspects will be key to developing that plan.
70
5.62 Rather than viewing regional development goals as a key component of a
local employment plan, the Committee would argue that the local
employment plan should be one component of an integrated development
policy for the region. An approach of this nature requires a regional
mechanism by which policies and programs can be coordinated to achieve
68 Ms Stephanie Foster, Transcript 14 August 2009, pp. 9-10.
69 Mr Graham Carters, Transcript 14 August 2009, p. 20.
70 Mr Graham Carters, Transcript 14 August 2009, p. 20.
STRENGTHENING AUSTRALIA’S REGIONS 85
specific outcomes. RDA is well placed to be that mechanism because it
brings all three tiers of government together.
71
5.63 The need for such a mechanism predates the GFC. All around the country,
local, state and federal representatives have long identified key priorities
of development. In the North/East border region of Queensland and
NSW, for example, 25 years of studies into the infrastructure needs of the
region had not resulted in a coordinated plan. In the absence of a structure
such as RDA, a consortium of 10 local governments from NSW and
Queensland have finally ‘aligned their objectives to pursue a cohesive and
agreed regional plan’
72
called the Trans-Regional Amalgamated
Infrastructure Network (TRAIN) project, which has the backing of state
and federal members of parliament.
5.64 Similarly, transport in the Northern Territory has been identified as a key
development issue and has been the focus of much state and shire
planning; however, until the formation of RDA NT, there was not an
opportunity to coordinate the plans into one Territory-wide strategy upon
which to engage the Commonwealth Government.
73
5.65 The tourism industry is seeking to engage in destination planning that
requires the cooperation of federal, state and local governments across
various industries and government portfolios.
74
The RDA network has the
potential to be the gateway for coordinated planning of this nature.
5.66 RDA can also bring together different agencies and levels of government
offering assistance to meet regional specific outcomes. In response to
economic downturns, this could mean facilitating cooperation between the
different agencies on the ground, rolling out the economic stimulus
programs of the levels of government.
5.67 At the time of writing, the RDA network was in the process of being
finalised nationwide. Its stated objective is to ‘provide a strategic
framework for economic growth in each region’ and is underpinned by
four key functions:
provide advice on consultation and community engagement;
regional planning;
71 Ms Stephanie Foster, Transcript 14 August 2009, p. 1.
72 Mr Mark Salmon, Transcript 4 August 2009, pp. 63-64.
73 Mr Damien Ryan, Transcript 28 September 2009, p. 30.
74 Mr Evan Hall, Transcript 6 July 2009, pp. 78-79.
86 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
promoting whole-of-Government programs, policies and initiatives;
and
community and economic development.
75
5.68 The Committee is supportive of these objectives and encourages the
Government to utilise RDA in generating region specific community and
economic development planning that is supported by the region;
maintaining productive levels of cooperation between the three tiers of
government; and facilitating better cooperation between various agencies
and government programs in the regions.
5.69 While the network has yet to fully function, indications to date suggest
that RDA is intended to perform in a manner similar to the Committee’s
expectations. The Committee has been advised that ‘RDA is meant to be a
ground up initiative… [with]…the ability…to identify what is important
in the community as part of [its] work program’. It is not intended to be
‘rigorously prescriptive’ and will allow regional development objectives to
be ‘tailored regionally as is appropriate, given different economic and
social circumstances’.
76
5.70 RDA has led to increased cooperation with the states, territories and local
governments
77
, which are ‘genuinely seeking to find arrangements which
will incorporate federal interests.’
78
This level of cooperation must
continue and be constantly reassessed to ensure that no one level of
government dominates the agenda of an RDA board.
5.71 There will also be a challenge in ensuring that RDA, as regional
representatives, are able to facilitate better cooperation between
Commonwealth Government programs in the regions. DITRDLG has
recognised that coordination amongst Commonwealth Departments is a
challenge
79
but noted that there have been ‘very positive responses from
the other departments about their capacity to use RDA’:
80
There have been some discussions about the location of LECs
potentially with RDAs. Broadband have been speaking to us about
various program initiatives that can be assisted by the RDA
75 Role of RDA,http://www.rda.gov.au/index.aspx, accessed 8 October 2009.
76 Mr Marcus James, Transcript 14 August 2009, p. 5.
77 Ms Stephanie Foster, Transcript 14 August 2009, p. 6 & Mr Adrian Beresford-Wylie, Transcript
14 August 2009, p. 62.
78 Ms Stephanie Foster, Transcript 14 August 2009, p. 6.
79 Mr Marcus James, Transcript 14 August 2009, p. 10.
80 Ms Stephanie Foster, Transcript 14 August 2009, p. 10.
STRENGTHENING AUSTRALIA’S REGIONS 87
network, because it will be a national network that will be
available to help with programs.
81
5.72 It would appear that some departments view RDA as an entry point into
the regions. As a national network, RDA can be a useful tool through
which various Commonwealth Government programs can access regional
Australia. This should not, however, be its only role. RDA should be
utilised to facilitate better cooperation between various government
departments in the regions to further local and national objectives.
5.73 Having RDA undertake a facilitating role will ensure better coordination
of government programs for region specific outcomes over the long term.
For example, LECs have a two-year mandate to undertake their work and
once that two-year period is up, it is not clear what will happen to the
regional employment plans they have created, or the Keep Australia
Working Advisory Committees they have established.
82
The Committee
believes that the creation of employment opportunities in regional
Australia should be closely linked to the ongoing business development
and diversification plans of a region, and although RDA representatives
sit on Keep Australia Working Advisory Committees,
83
there is a danger
that LEC initiatives will lapse in two years time. In order to avoid this, the
regional employment plans of LECs should be integrated into the regional
development plans of specific RDAs, thereby allowing RDA to capitalise
on the work of LECs well into the future. In those areas where a LEC has
not been deployed, RDA should be developing regional employment
plans.
Recommendation 12
5.74 The Committee recommends that the regional employment plans of
Local Employment Coordinators should be integrated into the regional
development plans of Regional Development Australia. In those areas
where a Local Employment Coordinator has not been deployed,
Regional Development Australia should be developing regional
employment plans.
81 Mr Marcus James, Transcript 14 August 2009, p. 10.
82 Local Employment Coordinator Fact Sheet,http://www.deewr.gov.au/Employment/Pages/JobsFund.aspx, accessed 19 October 2009.
83 Keep Australia Working, Final Report, p. 17,http://www.deewr.gov.au/Employment/KeepAustraliaWorking/Pages/home.aspx,
accessed 19 October 2009.
88 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
Conclusion
5.75 The GFC is a reminder of the importance of regional development policy.
Regions which grow and diversify their economies and provide the social
conditions which lead to greater liveability are in a better position to
withstand the effects of a crisis such as this.
5.76 A regional development policy which focuses on building infrastructure,
encouraging education and supporting the growth of business will assist
in this regard and will be most effective if the Commonwealth
Government can coordinate its infrastructure, education and business
support programs in regional Australia in a way which ensures that those
programs are working in collaboration with local and state objectives.
5.77 The GFC has highlighted the importance of having a mechanism such as
RDA, which can be used to facilitate better cooperation between various
government programs to achieve regional development objectives. If this
occurs and regional policy is sufficiently coordinated across all three tiers
of government, then there is real scope for growth in Australia’s regions.
Catherine King MP
Chair
November 2009
A
Appendi x A – Li st of Submi ssi ons
1 Mr Bruce Evans
2 Murweh Shire Council
3 District Council of Karoonda East Murray
4 Mid North Coast Regional Development Board
4.1 Mid North Coast Regional Development Board Supplementary
5 ACC - Mid West Gascoyne
6 ACC - North Queensland
7 The Brolga Project
8 Narromine Shire Council
9 Regional Council Tamworth
10 School of Behavioural, Cognitive & Social Science
11 Deakin University
12 Mr Wally Lenyszyn
13 Corangamite Shire
14 VECCI Invigorating Business
15 Committee for Geelong
16 Wujal Wujal Aboriginal Shire Council
17 ACC - Peel
18 Geofabrics Australasia Pty Limited
19 City of Wodonga
90 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
20 Horsham Rural City Council
21 Hughenden Chamber of Commerce Inc.
22 Central Darling Shire
23 Rural City of Wangaratta
24 Southern Cross University
25 Department of Broadband, Communications & the Digital Economy
26 Municipal Association of Victoria
27 Australian Bankers' Association Inc.
28 Southern Cross University
29 Growcom
30 Southern Councils Group
31 Southern Mallee District Council
32 Manningham City Council
33 G21 - Geelong Region Alliance
34 ACC - Illawarra
35 Department of Resources, Energy & Tourism
36 Peel Development Commission
37 Latrobe City Council
38 Shire of Yilgarn
39 City of Albany
40 Glenelg Shire Council
41 National Farmers' Federation
42 RMIT University
43 National Sea Change Taskforce
44 Shire of Strathbogie
45 ACC - Mackay Region
46 Hurstville City Council
47 Qantas Airways Limited
APPENDIX A – LIST OF SUBMISSIONS 91
48 Albury City
49 City of Mandurah
50 Goldfields-Esperance Development Commission
51 Burnett Mary Regional Group
52 Central Goldfields Shire Council
53 Kempsey Shire Council
54 Urana Shire Council
55 Regional Aviation Association of Australia
56 Australia's Premier Peace Advocate
57 Toowoomba Regional Council
58 ACC - VIC Central Highlands
59 National Growth Areas Alliance
60 Mid-Western Regional Council
61 Shire of Dumbleyung
62 Wyong Shire Council
63 Upper Lachlan Shire Council
64 Greater Shepparton City Council
65 Wakefield Group
66 Darwin City Council
67 City of Wanneroo
68 City of Townsville
69 Northern Rivers Regional Development Board Inc.
70 The City of Newcastle
71 Western Australian Local Government Association
72 Shellharbour City Council
73 Richmond Shire Council
74 Gold Coast City Council
75 Caterpillar Underground Mining Pty Ltd.
92 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
76 Oberon Council
77 University of Ballarat
78 Gosford City Council
79 Gippsland Local Government Network
80 ACC - Tasmania
80.1 ACC - Tasmania Supplementary
81 Shoalhaven City Council
82 Wide Bay Burnett ROC
83 Broken Hill City Council
84 InvestWEST Alliance of Councils
85 Alexandrina Council
86 Limestone Coast Regional Development Board
87 Far Western Regional Development Board
88 Shire of Flinders
89 ACC - NT
90 District Council of Cleve
91 Organising Principles Group
92 BREAZE Inc.
93 Sunshine Coast Regional Council
94 ACC - Sunshine Coast
95 Rockhampton Regional Development Limited
96 Interface Councils
97 ACC – Kimberley
98 ACC - Northern Rivers (NSW)
99 Ozeconomics Consulting
100 ACC - Central Murray
101 Wentworth Shire Council
102 Minerals Council of Australia
APPENDIX A – LIST OF SUBMISSIONS 93
103 ACC - Orana
104 ACC - Greater Brisbane
105 ACC - Gippsland
106 Southern Grampians Shire Council
107 Local Government of Queensland
108 Griffith City Council
109 ACC - Ipswich & Regional
110 Economic Development Australia
110.1 Economic Development Australia Supplementary
111 Moree Plains Shire Council
112 Regional Economic Development Corporation
113 Goulburn Mulwaree Council
114 ACC - Southern Inland Queensland
115 Strathfield Council
116 Shire of York
117 ACC - South East NSW
118 CONFIDENTIAL
119 Nexus Consulting (Aust) Pty Ltd
120 Townsville Enterprise Limited
121 The Chamber of Minerals and Energy of Western Australia
122 NSW Business Chamber
123 Tasmanian Department of Economic Development and Tourism.
124 Wellington Shire Council
125 Australian Local Government Association
126 Mortlake Employment Services
127 ACC - Riverina
128 Department of Agriculture, Fisheries and Forestry
129 Geelong Chamber of Commerce
94 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
130 TAFE NSW - North Coast Institute
131 Geelong Manufacturing Council
132 Ararat Rural City Council
133 Grampians Pyrenees Regional Development Board
134 Grampians Tourism Inc.
135 Gunnedah Shire Council
136 Abacus - Australian Mutuals
137 Mr David Smith
138 Department for Environment, Water, Heritage and the Arts
139 Diamantina Shire Council
140 Bunbury Wellington Economic Alliance
141 Barcoo Shire Council
142 Peel Community Development Group
143 Mid West Development Commission
144 Barwon Darling Alliance
145 Northern Territory Government
146 NSW Government
147 Migration Institute of Australia Limited
148 NSW Legal Assistance Forum
148.1 NSW Legal Assistance Forum Supplementary
149 Eurobodalla Shire Council
150 Mount Isa Chamber of Commerce
151 Mildura Rural City Council
152 ACT Government
153 Department of Infrastructure, Transport, Regional Development & Local
Government
153.1 Department of Infrastructure, Transport, Regional Development & Local
Government Supplementary
APPENDIX A – LIST OF SUBMISSIONS 95
153.2 Department of Infrastructure, Transport, Regional Development & Local
Government Supplementary
154 Department of Human Services
155 Tourism and Transport Forum (TTF Australia)
156 Queensland Government
157 Genworth Financial
158 Business Broken Hill
159 Far West Community Legal Centre
160 Advance Cairns Limited
161 Mrs Sherrie Wilkins
162 Ms Margaret Kelly
163 Ms Rebecca McIlveen
164 ASPO Australia
165 Logan City Council
166 Gold Coast Tourism
167 Department of the Treasury
168 Nation Building Australia Pty Ltd.
169 Department of Innovation, Industry, Science & Research
170 Department of Education, Employment and Workplace Relations
96 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
B
Appendi x B – Li st of Ex hi bi t s
1 The Brolga Project
"The Brolga Project"
(Related to Submission No. 7)
2 VECCI Invigorating Business
2008 Regional Business Convention Summary of Recommendations
(Related to Submission No. 14)
3 VECCI Invigorating Business
Policy Papers Skills, Education and Innovation
(Related to Submission No. 14)
4 VECCI Invigorating Business
Policy Papers - Climate Change and Water
(Related to Submission No. 14)
5 VECCI Invigorating Business
Policy Papers - Liveability and Leadership
(Related to Submission No. 14)
6 VECCI Invigorating Business
98 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
Policy Papers - Infrastructure and Investment
(Related to Submission No. 14)
7 Central Darling Shire
Remote control communities
(Related to Submission No. 22)
8 ASPO Australia
An argument for greater priority to be given to spatial analysis on regional
rail policy-making
9 RMIT University
(Related to Submission No. 42)
10 RMIT University
(Related to Submission No. 42)
11 RMIT University
(Related to Submission No. 42)
12 RMIT University
(Related to Submission No. 42)
13 Gold Coast City Council
Gold Coast Northern Growth Corridor
(Related to Submission No. 74)
APPENDIX B – LIST OF EXHIBITS 99
14 University of Tasmania
Innovation: The European Journal of Social Science Research
15 Timber Communities Australia Tasmanian State Office
16 Launceston Ratepayers Association Incorporated
17 Tasmanian Small Business Council
Presentation Notes - Launceston Public Hearing
18 Deakin University
Economic modelling of improved funding and reform arrangements for
Australian Universities
(Related to Submission No. 11)
19 Area Consultative Committee - Geelong
Gross revenue from sales
20 City of Bunbury
Western Australia Auslink State Strategic Corridors
(Related to Submission No. 137)
21 City of Mandurah
22 Tourism and Transport Forum
Hotel job losses
(Related to Submission No. 155)
100 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
23 Business Broken Hill
Travel to Outback NSW
(Related to Submission No. 158)
24 Tourism and Transport Forum (TTF Australia)
25 NSW Business Chamber
Business Conditions Survey - July 2009
(Related to Submission No. 122)
26 Gold Coast City Council
27 Chamber of Commerce & Industry Queensland
General Comments - Global Financial Crisis
28 Mr David Kemp
29 Department of Resources Energy & Tourism
Forecast - Tourism Forecasting - 2009 Issue 1
30 Australian Local Government Association
Australian Local Government Association State of the Regions
Supplementary Report 2008-09
31 Department of Resources, Energy & Tourism
Cairns Watch 2009
(Related to Submission No. 35)
C
Appendi x C – Li st of Wi t nesses & Publ i c
Hear i ngs
Monday, 20 April 2009 - Burnie
Advance Burnie
Mr Peter Symonds, Director
Mr Lee Whiteley, Director, Deputy Chairman
Australian Paper
Dr David Ryder, Group General Manager
Burnie Chamber of Commerce and Industry
Mr Andrew Barry, President
Mr Alan Berechree, Vice-President
Mr David Dwyer, Member
Burnie City Council
Mr Paul Arnold, General Manager
Mr Rodney Greene, Director, Community & Economic Development
Central Coast Council
Mr Michael Downie, Mayor & Councillor
Cradle Coast Authority
Mr Roger Jaensch, Executive Chairman
Kentish Council
Mr Don Thwaites, Mayor
102 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
Latrobe Council
Mr Michael Gaffney, Mayor
Tasmanian Regional Arts/Burnie Arts Council
Mrs Lynne Price, Vice President
The Advocate Newspaper Pty Limited
Mr Rodney Tremayne, General Manager & Chairman
University of Tasmania
Ms Janelle Allison, Director - Institute for Regional Development
Tuesday, 21 April 2009 - Launceston
ACC - Tasmania
Mr Simon Boughey, Board Director
Dr Tim Cory, Chair
Mr Michael Gordon, Board Director
Mrs Ally Mercer, Board Director
Mr Craig Perkins, Chief Executive Officer
Mr Gil Sawford, Board Director
Dorset Council
Mr John Martin, General Manager
Mr Peter Partridge, Mayor
Launceston Chamber of Commerce & ACC - Tasmania
Ms Louise Clark, Executive Officer (Chamber) & and Deputy Chair (ACCT)
Launceston City Council
Mr Francis Dixon, General Manager
Mr Albert van Zetten, Mayor
Launceston Ratepayers Association Incorporated
Mr Lionel Morrell, President
APPENDIX C – LIST OF WITNESSES & PUBLIC HEARINGS 103
Northern Tasmania Development
Mr Michael Steele, Director
Mr Robert Wallace, Chief Executive Officer
Northern Tasmania Regional Development Board
Mr Des King, Chair
St Helens & District Chamber of Commerce
Mrs Natacha Bennett, President
Mr Glen McGuinness, Member of Executive Committee
Tasmanian Small Business Council
Mr Geoff Fader, Chair
Timber Communities Australia Tasmanian State Office
Ms Eva Down, Northern Tasmanian Co-ordinator
Mrs Karen Hall, Member and North East Tasmania Branch Vice President
Wednesday, 22 April 2009 - Geelong
ACC - Geelong
Mr John Hansen, Executive Officer
City of Greater Geelong
Mr Terry Demeo, Co-ordinator, Statutory Planning
Committee for Geelong
Mr Peter Dorling, Executive Director
Deakin University
Professor Sue Kilpatrick, Pro Vice-Chancellor, (Rural & Regional)
G21 - Geelong Region Alliance
Dr Andrew Scott, Chief Executive Officer
Geelong Chamber of Commerce
Ms Lawrie Miller, Executive Director
104 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
Geelong Manufacturing Council
Mr David Sykes, Chairman
Geelong Otway Tourism
Mr Roger Grant, Executive Director
Golden Plains Shire
Mr David Spear, Manager Executive Projects
Gordon Institute of TAFE
Mr Grant Sutherland, Chief Executive Officer
Thursday, 23 April 2009 - Ararat
Individual
The Hon David Hawker, MP
AME Systems
Mr Christian Carthew, General Manager
Ararat Rural City Council
Councillor Gwenda Allgood, Mayor
Mr Stephen Chapple, Chief Executive Officer
Mr Clyde Humphries, Manager, Economic Development
Committee for Portland
Ms Anita Rank, Executive Officer
Grampians Pyrenees Regional Development Board
Ms Angela Hunt, Executive Officer
Grampians Tourism
Mr Chris Burchett, Chief Executive Officer
Grampians Tourism Inc.
Mr Ross Hatton, Board Chairman
Greater Green Triangle - ACC
Mr David Francis, Executive Officer
APPENDIX C – LIST OF WITNESSES & PUBLIC HEARINGS 105
Horsham Rural City Council
Mr Tony Bawden, General Manager of Corporate Services & Economic
Development
Cr Bernard Gross, Mayor
Northern Grampians Shire Council
Mr Glen Davis, Chief Executive Officer
Councillor Kevin Erwin, Mayor
Port of Portland Pty Ltd.
Mr Jim Cooper, Special Projects Manager
Mr Peter Gracias, Manager, Business Development
Mr Scott Paterson, Chief Executive Officer
Pyrenees Shire Council
Councillor Robert Vance, Mayor
Wednesday, 29 April 2009 - Geraldton
Central West TAFE
Mr Bert Beevers, Managing Director
City of Geraldton-Greenough
Mr Anthony Brun, Chief Executive Officer
Mr Ian Carpenter, Mayor
Geraldton Fisherman's Cooperative Ltd.
Mr Wayne Hosking, Chief Executive Officer
Mid-West Gascoyne RDA
Mrs Karen Godfrey, Executive Officer
Mid-West Development Commission
Mr Stephen Douglas, Chief Executive Officer
Mid-West Gascoyne – ACC
Mr Ian Wheatland, Committee Member
106 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
Shire of Northampton
Mr George Parker, Shire President
Thursday, 30 April 2009 - Busselton
Bunbury Wellington Economic Alliance
Mr Matt Granger, Chief Executive Officer
Busselton Chamber of Commerce and Industry
Mr Peter Gordon, President
Mr Ray McMillan, Chief Executive Officer
City of Bunbury
Mr Trevor Ayers, Economic Development Officer
Mr David Smith, Mayor
Donnybrook-Balingup Shire Council
Cr Stephen Dilley, Shire President
Shire of Augusta-Margaret River
Mr Gary Evershed, Chief Executive Officer
Cr Steve Harrison, Shire President
Shire of Busselton
Councillor Wesley Hartley, Shire President
Mr Andrew MacNish, Chief Executive Officer
South West Development Commission
Mr Donald Punch, Chief Executive Officer
Friday, 1 May 2009 - Mandurah
City of Mandurah
Ms Patricia Creevey, Mayor
Mr Ian Hill, Director, Community & Economic Development
Mr Mark Newman, Chief Executive Officer
APPENDIX C – LIST OF WITNESSES & PUBLIC HEARINGS 107
Fairbridge Western Australia Inc.
Mr Mark Anderson, Chief Executive Officer
Peel Chamber of Commerce and Industry
Mr John Matthew, President
Peel Community Development Group
Ms Donna Selby, Regional Coordinator
Peel Development Commission
Ms Colleen Yates, Manager Regional Development
Shire of Murray
Ms Christine Thompson, Acting Shire President
Mr Dean Unsworth, Chief Executive Officer
Shire of Serpentine Jarrahdale
Ms Joanne Abbiss, Chief Executive Officer
Ms Denyse Needham, Shire President
Small Business Centre Peel
Mr Paul Buckley, Chief Executive Officer
Monday, 6 July 2009 - Sydney
Abacus - Australian Mutuals
Mr Mark Degotardi, Head of Public Affairs
Ms Louise Petschler, Chief Executive Officer
Aboriginal Legal Service (NSW/ACT)
Mr Jeremy Styles, Deputy Zone Principle Legal Officer, Central South
Eastern Zone
Australian Bankers Association Inc.
Mr David Bell, Chief Executive Officer
Mr Stephen Carroll, Director - Regional & Rural Policy
108 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
Community Legal Centres NSW Inc.
Mr Alastair McEwin, Director
Ms Amanda Smithers, Board Member & Co-Convenor of Regional, Rural
and Remote Committee
Genworth Financial
Ms Kristen Foster, Head of Government & Industry Affairs
Mr Peter Hall, Country Executive and Director
NSW Business Chamber
Ms Louise Southall, Policy Adviser, Regional Business Initiatives
NSW Legal Assistance Forum
Mr Alan Kirkland, Chair
The Law Society of New South Wales
Mr Joseph Catanzariti, President
Tourism and Transport Forum
Mr Evan Hall, National Manager, Tourism
Ms Fiona Landis, Tourism Manager
Mr Euan Robertson, National Manager, Research
Tuesday, 7 July 2009 - Broken Hill
Barrier Industrial Council Broken Hill
Mr Daniel O'Connor, President
Broken Hill City Council
Mr Desmond Bilske, Acting General Manager
Business Broken Hill
Mr Robin Edgecumbe, President
Far West Community Legal Centre
Mr Neville Gasmier, Coordinator
Ms Rebecca McIlveen, Principal Solicitor
APPENDIX C – LIST OF WITNESSES & PUBLIC HEARINGS 109
Far West Credit Counselling Service
Mrs Sherrie Wilkins, Financial Counsellor
New England and Western Tenants Advice and Advocacy Service
Ms Margaret Kelly, Tenant Advocate
Pastoralists Association of West Darling
Mrs Susan Andrews, Vice President
Regional Development Australia - Farwest/Outback
Mr Scott Howe, Acting Chief Executive Officer
Tuesday, 4 August 2009 - Beenleigh
BDS Group of Companies
Mr David Kemp, Managing Director
Business GC Advisory Board
Mr John Witheriff, Chairman
Chamber of Commerce & Industry Queensland
Mr Tom Tate, Regional Chairman - Gold Coast & Hinterland
Gold Coast City Council
Ms Anne Norton-Knight, Advocacy Officer
Mr Grayson Perry, Manager, Economic Development
Gold Coast Tourism
Mr Paul Donovan, Chairman
Mr Martin Winter, CEO
Logan City Council
Mr David van den Brule, Manager, Economic Development
Marine Queensland
Mr Donald Jones, General Manager
110 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
Nation Building Australia Pty Ltd.
Mr Dave Cooke, Director
Mr Mark Salmon, Director
Scenic Rim Regional Council
Mr Anthony Magner, Director, Development Services
Friday, 14 August 2009 - Canberra
Australian Local Government Association
Mr Adrian Beresford-Wylie, Chief Executive
Department of Education, Employment & Workplace Relations
Mr Graham Carters, Deputy Secretary, Employment
Ms Margaret Kidd, Group Manager, Employment Reform Taskforce Group
Department of Human Services
Mr Greg Amie-Fong, Assistant General Manager, Child Support Program
Enforcement Services, Business Analysis and Improvement
Ms Moya Drayton, General Manager, Education, Employment & Support
Programs, Centrelink
Ms Jenny Thomson, Acting First Assistant Secretary, Families and Income
Support Division
Mr Tim Bennetts, Business Manager, Rural and Climate Change, Rural
Policy & Programs, Centrelink
Ms Catherine Rule, National Manager, Client Business, Centrelink
Department of Infrastructure, Transport, Regional Development & Local
Government
Ms Stephanie Foster, Deputy Secretary
Mr Marcus James, General Manager, Regional Development Policy Branch
Department of Innovation, Industry, Science & Research
Mr Stephen Payne, Division Head, Manufacturing Division
Mr Paul Sexton, General Manager, Customer Services Branch, AusIndustry
APPENDIX C – LIST OF WITNESSES & PUBLIC HEARINGS 111
Mr Richard Snabel, General Manager, Industry Policy & Economic
Analysis, Industry & Small Business Policy Division
Ms Sue Weston, Deputy Secretary
Ms Judi Zielke, Head of Division, Enterprise Connect
Department of Resources Energy & Tourism
Ms Jane Madden, Head of Division, Tourism Division
Department of Resources, Energy & Tourism
Miss Lisa Chirio
Dr Chris Locke, General Manager, National Energy Market Branch, Energy
and Environment Division
Ms Dianne McGrath
Mr Christopher Stamford, General Manager, Minerals Branch, Resources
Division
National Farmers' Federation
Mr Charles McElhone, Manager, Trade & Economics
Thursday, 3 September 2009 - Townsville
DS Enterprises
Mr Colin Dwyer
James Cook University
Prof Andrew Vann, Senior Deputy Vice-Chancellor
Townsville Chamber of Commerce
Mr Craig Stack, President
Townsville City Council
Mr Todd Barr, Strategic Policy Officer, Economic Development & Strategic
Projects Unit
Mr David Lynch, Executive Manager, Economic Development & Strategic
Projects Unit
Townsville Enterprise Limited
Dr Lisa McDonald, General Manager, Economic Development
112 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
Monday, 28 September 2009 - Darwin
Alice Springs Town Council
Mr Damien Ryan, Mayor
Darwin City Council
Mr Frank Crawley, General Manager, Corporate Services
NT Government
Ms Fran Kilgariff, Executive Director, Regional Development, Department
of Regional Development, Primary Industry, Fisheries and Resources
Ms Cate Lawrence, Acting Senior Director, Infrastructure Strategy and
Sustainability, Department of Planning and Infrastructure
Dr Sarah Louise Rummery, Director, Economic Policy, NT Treasury
Ms Marj Morrissey, General Manager, Sustainability, Strategic Planning
and Policy, Department of Planning and Infrastructure
Mr Ian Prince, Acting Executive Director Economics and Policy, Business
and Industry Development, Department of Business and Employment
Ms Valerie Smith, Acting Manager, Strategic Services, Tourism NT
Mr Jeff Stewart, Director, Trade and Investment, Department of the Chief
Minister
D
Appendi x D – The Canadi an Mor t gage Bond
Pr ogr am
1.1 Canada’s Mortgage Bond Program commenced in 2001 as part of
Canada’s longer-term efforts to reduce the cost of home borrowing. In the
1980’s, the Canadian Government created the Canadian Mortgage
Housing Corporation (CMHC), which in turn created the National
Housing Act Mortgage-Backed Securities Program (NHAMBS) to
‘facilitate the development of the securitisation of mortgages in Canada’.
1
Under the CMHC, the NHAMBS began providing an unconditional
Canadian Government guarantee of timely payment of pools of
government insured mortgages.
2
1.2 Investors in these government insured mortgage-backed securities ‘receive
a monthly “pass through” cash flow comprised of interest, scheduled
principal and unscheduled principal repayments’.
3
Investors will always
receive this monthly cash flow because the Canadian Government will
make the payment if the financial institution which has issued the security
does not. This guarantee of payment costs issuers of the security a
premium.
4
1.3 The Canadian Government expanded its mortgage securitisation program
in 2001 when it introduced the CMB Program, under which the Canadian
Government issues a guaranteed bond—giving purchasers of the bond
regular interest payments with principal paid at maturity—and uses the
proceeds of the bond sales to purchase the mortgage-backed securities
issued by the NHAMBS scheme.
5
The Governments intention was to
1 Treasury, Submission No. 167, p. 1.
2 Treasury, Submission No. 167, p. 1.
3 Treasury, Submission No. 167, p. 1.
4 Treasury, Submission No. 167, p. 1.
5 Treasury, Submission No. 167, p. 2.
114 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
generate more investment in mortgage-backed securities by providing
investors with options.
6
Both programs account for around four-fifths of
mortgage securitisation in Canada and the vast majority of all
securitisation activity, with the CMB program accounting for around
three-quarters of investment in mortgage-backed securities.
7
6 Treasury, Submission No. 167, p. 2.
7 Treasury, Submission No. 167, p. 2.
doc_364046243.pdf
The effects of the global financial crisis (GFC) have been felt around Australia, from the CBD of Sydney to the CBD of Burnie. This is not surprising given the pervasive nature of the crisis and the considerable economic activity that occurs in regional Australia
The Parliament of the Commonwealth of Australia
The Gl obal Fi nanc i al Cr i si s
and r egi onal Aust r al i a
House of Representatives
Standing Committee on Infrastructure, Transport, Regional Development &
Local Government
November 2009
Canberra
© Commonwealth of Australia 2009
ISBN 978-0-642-79237-2 (Printed version)
ISBN 978-0-642-79238-9 (HTML version)
Cont ent s
Foreword ............................................................................................................................................. v
Membership of the Committee ........................................................................................................... vii
Terms of reference .............................................................................................................................. ix
List of abbreviations ............................................................................................................................ xi
List of recommendations ................................................................................................................... xiii
1 The global financial crisis and regional Australia ............................................. 1
Regional Australia ..................................................................................................................... 1
The global financial crisis ........................................................................................................ 2
Aim and scope of the report ..................................................................................................... 3
Conduct of the inquiry .............................................................................................................. 4
2 Impact of the GFC on regional business ............................................................ 7
Introduction ............................................................................................................................... 7
Resources sector ........................................................................................................................ 8
Manufacturing sector ................................................................................................................. 12
Tourism sector .......................................................................................................................... 16
Retail sector .............................................................................................................................. 24
Construction sector ................................................................................................................... 26
Primary industries ..................................................................................................................... 29
Banking and lending sector ....................................................................................................... 33
Business and downturns ........................................................................................................... 43
3 Impact of the GFC on regional populations ..................................................... 45
Introduction ............................................................................................................................. 45
Job losses in regional Australia ................................................................................................. 45
iv
Mortgage stress in regional Australia ........................................................................................ 50
The impact of the GFC on social services in regional Australia ................................................ 54
4 Impact of the GFC on local government ........................................................... 61
5 Strengthening Australia’s regions .................................................................... 67
Regional development policy in Australia ............................................................................ 67
Regional development and the post-trade liberalisation era ...................................................... 68
Three pillars of regional development policy ............................................................................. 70
Facilitating regional cooperation ........................................................................................... 83
Conclusion ................................................................................................................................ 88
Appendix A – List of Submissions ........................................................................... 89
Appendix B – List of Exhibits .................................................................................... 97
Appendix C – List of Witnesses & Public Hearings .............................................. 101
Appendix D – The Canadian Mortgage Bond Program ........................................ 113
For ew or d
The effects of the global financial crisis (GFC) have been felt around Australia and
certainly regional Australia has not been immune. Major export industries located
in the regions have suffered, as have small and medium sized regional businesses.
Working hours have reduced and job losses have been incurred.
The Committee acknowledges the economic importance of regional Australia and
has undertaken this inquiry in order to assist the Government to better understand
how economic downturns affect regional Australia, so that it will be in a better
position to formulate regional development policy aimed at strengthening the
economic resilience of our regions.
Examining an issue which continues to unfold has presented some challenges. The
changing nature of the crisis has impacted the Committee’s evidence, much of
which is anecdotal and does not provide a complete record of the impact of the
GFC on regional Australia. The Committee has reported on the evidence it
received, noting the effects of the crisis on key sectors in regional economies as
well as the impact of the crisis on local communities and government. The GFC
has also highlighted the importance of regional development in abating the effects
of economic downturns on regional communities. Therefore, the report concludes
with a discussion about the importance of continuing Commonwealth
Government programs and policies that build infrastructure, encourage education
and support the growth of business in regional Australia.
The Committee has made comments and recommendations where appropriate.
Some have been more general in nature while others more specific. The
Committee has recommended that the Government examine the use of structural
adjustment funds as a response to economic downturns and their ability to assist
small business. Increased funding for the TQUAL Grants program and increased
cooperation in identifying key tourism markets and setting priorities for
marketing those locations has also been recommended as part of the Committee’s
investigation into regional tourism. Discussion about the Government’s Bank
vi
Guarantee Scheme has led the Committee to support a review of its differential
pricing structure and comment on banking competition in regional Australia.
Should unemployment continue to rise, the Committee believes there may be a
case for the introduction of a national unemployment mortgage assistance
program, providing its impacts have been fully considered by government. The
GFC has demonstrated a need in regional Australia for the provision of localised,
collective social services and so the Committee has recommended increased
funding to the Department of Human Services in order to expand its co-location
site trials and increase its local service provision activities. It has also
recommended that the Government examine options for locating government
departments or functions of government departments into regional areas to
increase regional employment opportunities.
Support for small business is particularly important during these periods and, as
such, the Committee believes that the Small Business Advisory Service should
continue to operate beyond its current two-year funding commitment. Small
business can be further assisted by an increase in the number of AusIndustry
representatives in regional Australia.
The GFC has not been the first, nor will it be the last economic challenge regional
Australia faces. Its ability to respond in the future will depend on individual
regions reaching their growth potential. The Committee believes this will only
occur if local strategies are underpinned by Commonwealth Government policies
focusing on infrastructure, education and businesses support.
The Regional Development Australia network presents the best possible option
through which governments can assist in the development of regional Australia.
Its success will be based in part on its ability to generate region specific
community and economic development planning that is supported by the region;
maintain productive levels of cooperation between the three tiers of government;
and facilitate cooperation between various agencies and government programs in
the regions.
The GFC should be seen as an opportunity to examine the impact of change on
regional Australia and test policy responses. The lessons learned will assist in
strengthening existing regional development policy, which will help regional
Australia withstand future downturns.
Ms Catherine King MP
Chair
Member shi p of t he Commi t t ee
Chair Ms Catherine King MP
Deputy Chair Mr Paul Neville MP
Members Mr James Bidgood (from 17/6/09
until 22/10/09)
Ms Melissa Parke MP (from 19/3/09)
Ms Jodie Campbell MP Mr Brett Raguse MP
Mr Darren Cheeseman MP Mr Don Randall MP
Mr Jason Clare MP (until 15/6/09) Hon Andrew Robb AO MP
Mrs Joanna Gash MP Mr Jon Sullivan MP
Mr Robert Oakeshott MP (from 19/3/09)
viii
Commi t t ee Sec r et ar i at
Secretary Mr Peter Keele (to May 09)
Ms Julia Morris (from May 09)
Inquiry Secretary Mr Michael Crawford
Research Officers Ms Sophia Nicolle
(to June 09)
Ms Adrienne Batts
(from June 09)
Administrative Officers Ms Kane Moir
Ms Alison Wardrop
Ter ms of r ef er enc e
The Committee is to inquire into the impact of the current global financial crisis on
regional Australia and the role of the Commonwealth Government in ensuring
that regional Australia is equipped to respond, with particular focus on:
the encouragement of economic development and employment; and
the development of sustainable essential services and social
infrastructure designed to enhance the liveability of regional Australia.
x
Li st of abbr evi at i ons
ABS Australian Bureau of Statistics
ACC Area Consultative Committee
ADI Authorised Deposit-taking Institution
APRA Australian Prudential Regulation Authority
ASX Australian Stock Exchange
BEC Business Enterprise Centre
BITRE Bureau of Infrastructure, Transport and Regional Economics
CBD Central Business District
CDO Collateralised Debt Obligation
CDS Credit Default Swaps
CMB Canadian Mortgage Bond
CMHC Canadian Mortgage Housing Corporation
DEEWR Department of Education, Employment and Workplace Relations
DHS Department of Human Services
DITRDLG Department of Infrastructure, Transport, Regional Development
and Local Government
GDP Gross Domestic Product
xii
GFC Global Financial Crisis
HECS Higher Education Contribution Scheme
LEC Local Employment Coordinator
LNG Liquefied Natural Gas
NBN National Broadband Network
NHAMBS National Housing Act Mortgage-Backed Securities Program
[Canada]
NSW New South Wales
NT Northern Territory
NUMAP National Unemployment Mortgage Assistance Program
OECD Organisation for Economic Cooperation and Development
QLD Queensland
RBA Reserve Bank of Australia
RDA Regional Development Australia
RET Department of Resources, Energy and Tourism
RMBS Residential Mortgage Backed Security
SA South Australia
TAC Victorian Transport Accident Commission
TQUAL Not an acronym. A competitive funding program formerly
known as the Australian Tourism Development Program
TRAIN Trans-Regional Amalgamated Infrastructure Network
VET Vocational Education and Training
WA Western Australia
Li st of r ec ommendat i ons
2 Impact of the GFC on regional business
Recommendation 1
The Committee recommends that the Government evaluate and report on
the potential use of structural adjustment funds as a response to
economic downturns such as the global financial crisis.
Recommendation 2
The Committee recommends that the Government, in examining the use
of structural adjustment funds, consider the flexibility and ability of
structural adjustment funds to assist small enterprises in addition to
larger companies.
Recommendation 3
The Committee recommends that the Government increase the quantum
of funding for the TQUAL Grants program, while ensuring that regional
tourism businesses receive a proportionate share of the grant funding,
provided the applications adhere to the program guidelines.
Recommendation 4
The Committee recommends that the National Long-Term Tourism
Strategy should consider how states and regions can further improve
their cooperation on identifying key tourism markets and setting
priorities for marketing those locations.
xiv
3 Impact of the GFC on regional populations
Recommendation 5
The Committee recommends that the Government examine in detail the
potential impact of a national unemployment mortgage assistance
program as a means of responding to rising unemployment and
mortgage stress in regional Australia, should unemployment and
mortgage default levels continue to rise.
Recommendation 6
The Committee recommends that the Government evaluate the work of
the Local Employment Coordinators with particular focus on their ability
to act as a conduit between local, state and the Commonwealth
Government to promote coordinated human service provision, with a
view to utilising the evaluation as a basis upon which greater
coordinated action and information sharing about available services can
occur in the future.
Recommendation 7
The Committee recommends that the Government increase funding to
the Department of Human Services in order to expand its co-location site
trials and increase its local service provision activities.
Recommendation 8
The Committee recommends that the Commonwealth Government
examine options for locating government departments or functions of
government departments into regional areas.
5 Strengthening Australia’s regions
Recommendation 9
The Committee recommends that the Government examine the uptake of
its Small Business Support Line and Small Business Advisory Service
with the intention of continuing funding support for this initiative.
Recommendation 10
The Committee recommends that the Commonwealth Government
increase the number of AusIndustry representatives in regional Australia.
xv
Recommendation 11
The Committee recommends that the Government examine the manner
in which various government business support programs worked
together in particular regions during the GFC and the potential role RDA
may play in facilitating greater coordination between business support
programs and integrating them into wider regional development
frameworks in future.
Recommendation 12
The Committee recommends that the regional employment plans of
Local Employment Coordinators should be integrated into the regional
development plans of Regional Development Australia. In those areas
where a Local Employment Coordinator has not been deployed, Regional
Development Australia should be developing regional employment
plans.
xvi
1
The gl obal f i nanc i al c r i si s and r egi onal
Aust r al i a
Regional Australia
1.1 Regional Australia is the ‘economic backbone of the nation’s prosperity.’
1
In 2003, Australia’s non-capital city regions contributed 34.1 per cent of
Australia’s Gross Regional Product worth some $205 billion.
2
Regional
exports such as minerals, forestry products, grain, wool, beef, wine and
tourism drive the nation’s economy and were worth about $65 billion in
2006.
3
These industries also drive the local economies of the regions,
which often depend on major export industries to generate local econ
activity.
omic
1.2 The effects of the global financial crisis (GFC) have been felt around
Australia, from the CBD of Sydney to the CBD of Burnie. This is not
surprising given the pervasive nature of the crisis and the considerable
economic activity that occurs in regional Australia.
1.3 It is the Committee’s role to identify and highlight issues facing regional
Australia. The GFC is certainly one of those issues, and it is the
Committee’s expectation that this report will assist the Government to
better understand how economic downturns affect regional Australia so
1 Department of Foreign Affairs and Trade, about Australia fact sheet: Regional Australia,http://www.dfat.gov.au/facts/regional_australia.html, p. 3, accessed 8 September 2009.
2 2003 State of the Regions,http://dpl/Ejournals/State of theRegionsReport/INDEX.htm,
accessed 17 September 2009.
3 Department of Foreign Affairs and Trade, about Australia fact sheet: Regional Australia,http://www.dfat.gov.au/facts/regional_australia.html, p. 3, accessed 8 September 2009.
2 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
that it will be in a better position to formulate regional development policy
aimed at strengthening the economic resilience of our regions.
The global financial crisis
1.4 In July of 2007, rising interest rates in the United States, combined with a
constricting US economy, led to a rise in home mortgage defaults. Rising
mortgage defaults revealed that the lending practices of some US lenders
were questionable, as money had been lent to people who should have
been ineligible to borrow. Unfortunately, many risky mortgages in the
United States had been bundled into mortgage bonds, rated by ratings
agencies and sold to investors. In some cases, the risk associated with
these bonds was passed on utilising credit default swaps (CDS).
4
1.5 When investors began to lose confidence in the bonds, a liquidity crisis
ensued as the bonds were sold off. A declining derivatives market also
forced major investment banks such as Bear Stearns and Lehman Brothers
to write-down the value of their assets, leading to a greater lack of
liquidity in the market and the collapse of some investment banks.
5
1.6 By the time Lehman Brothers collapsed in September 2008, an American
crisis had become a global financial crisis. The internationalised capital
market was in decline and the lack of liquidity in the banking system
resulted in a lack of available or affordable credit in many countries
including Australia.
1.7 Governments around the world responded to the crisis by providing
billions in funding for banks, credit and consumer markets, and on some
occasions, guaranteeing bank deposits. In Australia, the Government
guaranteed bank deposits up to one million dollars, wholesale term
funding of Australian incorporated banks and authorised deposit-taking
institutions and purchased $4 billion in Residential Mortgage Backed
Securities.
6
4 A CDS is a form of insurance that allows for the transfer of credit risk without the transfer of
an underlying asset, Dr Michael Porter, The economic collapse we did not have to have, Committee
on Economic Development Australia, 25 August 2009,http://www.ceda.com.au/public/research/financial_crisis/porter.html, accessed 25 August
2009.
5 Manningham City Council, Submission No. 32, p. 3.
6 Media Release, Prime Minister of Australia, Global Financial Crisis, 12 October 2008.
THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA 3
1.8 No amount of government intervention could fully negate the effects of
the crisis that rippled through the Australian economy throughout late
2008 and into 2009. The Australian Stock Exchange (ASX) fell and
businesses exposed to the global economy or reliant on credit began to
suffer. Job losses followed and consumer confidence began to wane,
further impacting businesses and jobs. Australia, however, fared better
than many—and continues to do so.
7
1.9 The effects in regional Australia have been similar to those experienced in
the metropolitan areas—declines in business activity, job losses and
resulting social problems. Some regions, heavily reliant on industries such
as mining, tourism and manufacturing, have keenly felt the effects of the
crisis.
8
While some agricultural regions view the crisis as another
challenge to be faced after years of drought, others have experienced
growing economies due to an increase in domestic tourism at the expense
of declining international tourism numbers.
9
Similarly, in regions where
the drought has broken, the financial crisis is of less concern.
10
1.10 The picture that emerges of this crisis in the regions is a mixed one and
serves to highlight the challenges that regional policy makers face when
considering regional development issues generally, and responses to this
crisis specifically. Challenges, however, should not be deterrents, and
while a considerable amount of effort (and money) has been committed in
response to the GFC by government, the Committee, in undertaking this
inquiry, has sought to ensure that regional concerns are heard as
Government formulates responses to the crisis and aids in the
development of regional Australia.
Aim and scope of the report
1.11 There were several challenges the Committee faced in undertaking an
inquiry of this nature. The GFC continues to unfold and so the Committee
has been aware that information it gathered has been regularly
superseded by events. Likewise, official data is reflective of a specific time
7 The impact of the global financial crisis to date has been less severe in Australia than other
OECD countries. See OECD Economic Outlook 85 database.
8 This was most evident in areas the Committee visited such as Broken Hill (mining), the Gold
Coast (tourism) and Geelong (manufacturing).
9 Regarding agriculture see, Department of Agriculture, Fisheries and Forestry, Submission No.
128, p. 3. Regarding tourism see, Mr Robert Wallace, Transcript 21 April 2009, p. 9.
10 Mr Anthony Brun, Transcript 29 April 2009, p. 2.
4 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
period and is not always timely when events are moving quickly. In this
case, business surveys have assisted in providing more timely
information.
1.12 Much of the evidence gathered by the Committee is anecdotal and does
not provide a complete record of the impact of the GFC on regional
Australia, however, the Committee expects that this inquiry will add to
the body of information available regarding the impacts of the GFC in
regional Australia and will assist future research into the crisis once it has
abated.
1.13 The speed of the crisis and the need for governments to respond quickly
has resulted in a situation where the Committee is aware of government
action but not able to comment extensively on the impact of this action
because enough time has not lapsed. The Committee does, however,
examine government programs and stimulus in regional Australia where
appropriate.
1.14 The report is broken into two sections; the first addresses the impact of the
crisis on regional Australia to date and the government response. The
second section examines current and future regional development policy
options targeted at assisting Australia’s regions to grow and withstand
future economic challenges.
Conduct of the inquiry
1.15 The inquiry was advertised in The Australian on 18 February 2009 and in
the 13 February 2009 edition of the Australian Local Government
Association newsletter. A press release was also issued to regional media
outlets on 12 February 2009.
1.16 In addition, the Committee invited submissions from federal Ministers,
state and territory governments, 560 local governments, 49 state and
territory Regional Development Boards, 54 Area Consultative
Committees, as well as a wide range of businesses, and business and
labour organisations, research institutes and social service providers. In
total, the Committee issued 628 submission invitation letters.
1.17 To date, the Committee has received 170 submissions from 164 parties.
These submissions are listed in Appendix A. The Committee also received
31 exhibits which are listed in Appendix B.
THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA 5
1.18 The Committee held public hearings in: Burnie, Launceston, Geelong,
Ararat, Geraldton, Busselton, Mandurah, Sydney, Broken Hill, Beenleigh,
Canberra, Townsville and Darwin. In total, 164 witnesses appeared before
the Committee at these public hearings. Details of the hearings and
witnesses who appeared can be found in Appendix C and a brief
summary of the Canadian Mortgage Bond Scheme is found in Appendix
D.
1.19 Transcripts of the Committee’s public hearings and copies of all written
submissions are available from the Committee Office of the House of
Representatives, the National Library of Australia or on the inquiry
website:http://www.aph.gov.au/house/committee/itrdlg/index.htm
6 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
2
I mpac t of t he GFC on r egi onal busi ness
Introduction
2.1 It is difficult to generalise when discussing the impact of the GFC on
regional Australia. As noted in the previous chapter, the picture which has
emerged throughout the course of this inquiry is a mixed one. Some
regions are worse off than they were before the crisis, others the same or
better.
2.2 Much of this has to do with the economic make-up of various regions.
Those which are heavily reliant on the mining industry, for example, have
suffered as world commodity prices and demand have declined. Yet, in
Queensland, a new coal mine is opening in the Surat Basin, creating more
jobs
1
while declining mineral prices have led to job losses in the Mackay-
Fitzroy-Central West region of Queensland.
2
The tourism industry has
found itself in similar circumstances. Decreasing international tourist
numbers have had a negative impact on cities such as Cairns and the Gold
Coast, while the tourism sector in Tasmania remains strong.
2.3 The differing nature of the crisis is reflected to some degree in the
presentation of the evidence in this report. Rather than itemising the
impact of the crisis on various regions around Australia, the next three
chapters will note the impact of the crisis on business, individuals and
local governments in regional Australia, in each case noting the assistance
provided by the Commonwealth Government.
1 Media report, Surat Basin’s Newest Mine Creates Jobs, ABC Rural, 12 June 2009,http://www.abcnet.au/rural/resource/stories/s2596512.htm, accessed 26 August 2009.
2 See, Government of Queensland, Submission No. 156, p. 3 & Townsville Enterprise, Submission
No. 120, p. 11.
8 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
2.4 This crisis is an economic one and therefore it is logical to begin with its
impact on business in regional Australia, because a constricting economy
affects people, which in turn, affects the government institutions that
assist them.
2.5 As noted, it is not possible for the Committee to present a complete picture
of the impacts of this crisis on the various industries noted in this section,
as the crisis continues and its full impact will not be known for some time.
The first section of this chapter will therefore detail the evidence the
Committee has received to date, noting the major sectors in regional
Australia that have felt the crisis’ effects and ways in which the
Commonwealth Government has responded. These sectors include:
Resources;
Manufacturing;
Tourism;
Retail;
Construction;
Primary industries; and
Banking and lending.
The chapter will conclude with a brief discussion on operating businesses
through economic downturns.
Resources sector
2.6 Australia’s resource sector is export oriented, with much of the exports
going to Asian markets such as China, Japan and the Republic of Korea.
Gross Domestic Product (GDP) in these countries has fallen since the onset
of the GFC and as a result, demand for Australian energy and minerals
commodities has also fallen.
3
Falling demand has led to falling prices. In
turn, falling commodity prices have raised the cost of mining operations
and impacted the ability of resource companies to access financing for
development projects.
4
Accessing credit will be discussed later in this
section; however, it should be noted that mining companies have been
unable to access credit or only at terms which ‘impose a highly risky and
3 Department of Resources, Energy and Tourism, Submission No. 35, p. 9.
4 Department of Resources, Energy and Tourism, Submission No. 35, p. 9.
IMPACT OF THE GFC ON REGIONAL BUSINESS 9
onerous debt burden on them’.
5
The option of on-market equity raising
has been problematic due to the volatility of the share market.
6
2.7 Exploration in the resources sector has also decreased since the beginning
of the GFC. Barring exploration for petroleum, which has increased,
mineral exploration expenditure fell by 3.1 per cent in the December 2008
quarter alone. Exploration budgets have been cut and exploration staff
laid off in order to conserve capital.
7
2.8 All this has resulted in decreasing profits for resource companies with a
corresponding decrease in company share prices. In regional Australia, a
reduction in the demand and price of commodities has meant job losses.
From February 2009, employment in the mining industry fell by 5.2 per
cent—the equivalent of 8,600 people.
8
Combined with a decrease of 7.9 per
cent in the period between November 2009 and February 2009 (13,000
people), it is clear that job losses in the mining sector have been
significant.
9
2.9 Evidence provided to the Committee by the Department of Resources,
Energy and Tourism (RET) indicates that Western Australia (WA), South
Australia (SA) and Queensland (QLD) have been hit particularly hard by
job losses in the resources sector.
10
This is consistent with evidence
gathered by the Committee at its public hearings. In Geraldton, the
Committee was advised that some of the mining companies ‘have either
stopped or reduced production, which has led to downturns and staff
being put off’.
11
In Broken Hill, around 50 positions have been lost at the
CBH mine and 440 at the Perilya mine, resulting in a 30 per cent decrease
in employment across all of Broken Hill.
12
2.10 A 30 per cent decrease in employment in Broken Hill is substantial and the
flow-on effects even more so. In cities such as Broken Hill, mining
companies are often the major employer and driver of local industry. Job
losses at the local mine have a major impact on other businesses which
may be suppliers of mining products or services or depend on the
economic activity generated by mine employees for business. In Burnie,
5 Department of Resources, Energy and Tourism, Submission No. 35, p. 9.
6 Department of Resources, Energy and Tourism, Submission No. 35, p. 9.
7 Department of Resources, Energy and Tourism, Submission No. 35, p. 9.
8 Ms Jane Madden, Transcript 14 August 2009, p. 72.
9 Department of Resources, Energy and Tourism, Submission No. 35, pp. 10 & 11.
10 Ms Jane Madden, Transcript 14 August 2009, p. 72 & Department of Resources, Energy and
Tourism, Submission No. 35, p. 10.
11 Mr Anthony Brun, Transcript 29 April 2009, p. 3.
12 Mr Desmond Bilske, Transcript 7 July 2009, p. 2.
10 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
for example, Caterpillar, an underground mining manufacturer, has been
forced to reduce employment due to a reduction in orders for mining
equipment.
13
The whole Burnie region has suffered as a result. Some
redundant workers have found other work but at lower pay, resulting in
poorer living standards.
14
Local businesses dependant on the Caterpillar
supply chain have also experienced a reduction in orders and profits
leading to multiple job losses:
…there are a couple of other local companies that have supported
Caterpillar. There will be a loss of 20 to 25 per cent of the jobs in
one particular small engineering firm of 20 people. Lots of other
companies have gone back to four-day weeks. They are trying to
hang on and keep their skill base together as an alternative to
making people permanently redundant. The outsourcing habits,
particularly of larger businesses like Caterpillar…are fairly
catastrophic to other small to medium sized businesses in the
region.
15
2.11 In some instances, job losses in the resources sector can impact regions far
removed from the primary operation. In WA, job losses at the Iluka
mineral sands mine in the North West have had an effect as far south as
Busselton. Many of the retrenched Iluka workers were fly-in/fly-out and
based in southern cities such as Busselton. The loss of these jobs impacts
the Busselton community, as unemployed and underemployed workers
are forced to relocate to Perth or elsewhere for work, thereby reducing
economic activity in Busselton.
16
2.12 The Busselton example also highlights the sometimes transient nature of
employment in the resources sector. RET points out that resource job
losses in WA and SA were mitigated by increases in mining industry
employment in Tasmania and Queensland (the opening of a mine in the
Surat Basin has already been noted in this report) in the February 2009
quarter and the Department has advised that mining and contractor
companies are redeploying staff to other areas of their operations.
17
2.13 Reports of staff redeployments and growth in areas of the sector
(Queensland LNG for example) are encouraging. Certainly the resource
industry, while affected by the crisis, has appeared to weather it better to
date than other industries which are discussed in this chapter. RET
13 Caterpillar Underground Mining Pty Ltd., Submission No. 75.
14 Mr Paul Arnold, Transcript 20 April 2009, p. 6.
15 Mr Lee Whitely, Transcript 20 April 2009, p. 20.
16 Mr David Smith, Transcript 30 April 2009, p. 5.
17 Department of Resources, Energy and Tourism, Submission No. 35, pp. 10 & 11.
IMPACT OF THE GFC ON REGIONAL BUSINESS 11
attributes this to the resilience, innovativeness and efficiency of the sector
which has ‘taken steps over the last 10 years to ensure it is well-positioned
for the future’.
18
2.14 Despite the relatively good health of Australia’s resource sector, the
Commonwealth Government has provided assistance to the sector. The
assistance has focused predominantly on employment and education
programs for those who have lost their jobs. Much of this activity occurs
under the auspices of Job Services Australia, which is the Commonwealth
Government’s major employment services program across Australia.
19
At
its public hearing in Canberra, the Department of Education, Employment
and Workplace Relations (DEEWR) advised the Committee that Job
Services Australia is ‘there to assist redundant workers’ and noted that
‘people who lose their jobs as a result of a global economic recession…do
get immediate access to a higher level of service within Job Services
Australia’.
20
2.15 In regards to the mining sector, Job Services Australia providers firstly
attempt to help workers find other employment within the industry. If
other employment is not forthcoming, training designed to develop
alternate skill sets for employment in other sectors is provided.
21
2.16 The Committee accepts and supports the general goals of this service but
did raise concern that in a town such as Broken Hill, when a mine closes
and many people lose their jobs, the ability of the community to absorb
those workers into other professions may be limited.
22
DEEWR noted the
Committee’s concern but pointed out that the Jobs Fund
23
‘will create jobs
in the local communities’.
24
2.17 At the time of writing, the first round of Jobs Fund projects had just been
announced. Broken Hill did not receive a project in that round
25
and
therefore, it is likely that unemployed miners in Broken Hill have been
18 Department of Resources, Energy and Tourism, Submission No. 35, p. 10.
19 Mr Graham Carters, Transcript 14 August 2009, p. 17.
20 Mr Graham Carters, Transcript 14 August 2009, p. 18.
21 Mr Graham Carters, Transcript 14 August 2009, p. 18.
22 Mr Jon Sullivan MP, Transcript 14 August 2009, p. 19.
23 The Jobs Fund is a $650 million dollar fund designed to support and create jobs and improve
skills by funding projects that build community infrastructure and create social in local
communities, DEEWR,http://www.deewr.gov.au/Employment/Pages/JobsFund.aspx,
accessed 25 June 2009.
24 Mr Graham Carters, Transcript 14 August 2009, p. 19.
25 See successful Jobs Fund projects under Round 1 document,http://www.deewr.gov.au/Employment/Documents/Jobs_Fund_projects.pdf, accessed 4
September 2009.
12 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
redeployed, moved to other mining areas for work—as noted by RET in its
evidence to the Committee—or assisted by Job Services Australia.
2.18 The redeployment of skills out of a region may assist in ensuring
continued employment but it does not necessarily benefit the region’s
economy, as skilled employees do not always return. The only other
option for maintaining a region’s skills base is diversifying its economy.
Economic diversification is key to ensuring that regions are better
equipped to withstand economic downturns and the Committee will
discuss this issue in greater detail later in the report.
2.19 The Committee was advised by DEEWR that in addition to the services
provided by Job Services Australia around the country, certain regions
across Australia hit particularly hard by the crisis have been identified as
Local Employment Priority Areas. In these areas, Local Employment
Coordinators (LECs) have been tasked with identifying employment
opportunities for workers who have lost their jobs; working with
community stakeholders to maximise employment and training
opportunities resulting from the Government’s stimulus package; and
developing apprenticeship opportunities and promoting the skills needed
for future economic recovery.
26
There are twenty Local Employment
Priority Areas and several of these cover regions which have been affected
by job losses in the resources sector.
2.20 Direct government financial assistance to the resources sector is much
more limited. The sector has benefited from some of the recent
government stimulus, for example, The Australian Rail Track Corporation
received $580 million from the Commonwealth as part of a larger package
to upgrade the Hunter rail system, thereby benefiting the coal industry.
Commonwealth money has also been provided to various pipeline
projects; however, the mining sector ‘from the Government’s perspective,
is expected to pay for itself’.
27
Manufacturing sector
2.21 The Australian manufacturing sector has been under stress for some time.
Between 2002 and 2008, the high value of the Australian dollar ‘led to a
severe deterioration in the competitiveness of Australian
26 DEEWR,http://www.deewr.gov.au/Employment/Documents/LEC_FactSheet_13_July_2009.pdf,
accessed 4 September 2009.
27 Mr Christopher Stamford, Transcript 14 August 2009, p. 79.
IMPACT OF THE GFC ON REGIONAL BUSINESS 13
manufacturing’.
28
The sector has also been undergoing a period of
mechanisation—leading to a reduction in the workforce and has faced
pressure from overseas competition.
29
The GFC, then, is being viewed by
some manufacturers as the final blow in a ‘perfect storm’ of challenges
facing Australian manufacturing.
30
2.22 In regional Australia, those areas reliant upon manufacturing for the
generation of employment and other economic activity have been
particularly impacted by the GFC. Larger manufacturing centres such as
Geelong and the northern Adelaide region have received much attention
due to job losses in the automobile and textile industries; however, other
cites such as Wodonga have also suffered.
31
Furthermore, in much smaller
towns, a reduction of staff at a local manufacturing business can have an
exponentially larger impact when that business is the major employer in
the region.
32
2.23 The Committee gathered evidence around the country regarding job losses
in the manufacturing sector. Geelong, in particular, served as a valuable
case study for the Committee about the impact of the GFC on
manufacturing in regional Australia. When the Committee visited
Geelong in April 2009, 1000 jobs had already been lost as a result of the
GFC.
33
Like the resources sector, a downturn and subsequent job losses at
major manufacturers affects the entire supply chain and so, in Geelong,
the impact of the GFC on companies such as Ford, Shell, Godfreys and
Alcoa can have a substantial multiplier effect, impacting supply
companies in Geelong and the region.
34
2.24 The Commonwealth Government provides assistance to the
manufacturing sector in two ways. It provides support for small and
medium sized manufacturers through programs such as Enterprise
Connect and AusIndustry’s Small Business Advisory Program. There has
also been support provided to those who have lost their jobs in the sector
through the work of Local Employment Coordinators and Job Services
Australia.
2.25 Specifically, the Government has responded to the needs of Australian
manufacturers on a sectoral basis, establishing various programs and
28 Geelong Manufacturing Council, Submission No. 131, p. 4.
29 The Geelong Chamber of Commerce, Submission No. 129, p. 2.
30 Geelong Manufacturing Council, Submission No. 131, p. 2.
31 City of Wodonga, Submission No. 19, p. 1.
32 Central Murray ACC, Submission No. 100, p. 4.
33 Mr David Sykes, Transcript 22 April 2009, p. 46.
34 Mr David Sykes, Transcript 22 April 2009, p. 47.
14 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
structural adjustment funds targeted at facilitating innovation in
Australia’s manufacturing sector.
35
2.26 In the medium to long-term, entities such as the Pulp and Paper Industry
Group and the Steel Industry Innovation Council are examining ways in
which their industries can grow.
36
These bodies are important and are
expected to assist manufacturers in Australia to adapt to the challenges
they face. To date, the Government has announced six Industry
Innovation Councils:
Automotive (19 December 2008);
Built Environment (2 September 2008);
Future Manufacturing (10 October 2008);
Information Technology (5 May 2009);
Textile, Clothing and Footwear (12 May 2009) and
Steel (30 July 2009).
37
2.27 The Committee was interested, however, to explore how governments can
provide rapid responses and financial assistance to manufacturers during
sharp downturns. The Department of Innovation, Industry, Science and
Research advised that immediate assistance can come in the form of
structural adjustment funds. Funds have previously been set up in
response to Mitsubishi and Electrolux plant closures and the Auspine
mills in Tasmania.
38
2.28 The Geelong Investment and Innovation Fund was also cited and
discussed at the Committee’s hearing in Geelong. The Fund was
established following a decision by Ford Australia to restructure its
Geelong manufacturing operations. The fund is a $24 million package
with the Commonwealth Government contributing $15 million, the
Victorian Government $6 million and Ford Australia $3 million.
39
It is
designed to support new investment in the region which is expected to
35 Mr Stephen Payne, Transcript 14 August 2009, p. 34.
36 Mr Stephen Payne, Transcript 14 August 2009, p. 34.
37 Department of Innovation, Industry, Science and Research, Submission No. 169, p. 1.
38 Mr Stephen Payne, Transcript 14 August 2009, p. 35.
39 GrantsLINK, Geelong Investment and Innovation Fund,http://www.grantslink.gov.au/Info.aspx?NodeID=2&ResourceID=1829, accessed 7
September 2009.
IMPACT OF THE GFC ON REGIONAL BUSINESS 15
lead to sustainable job opportunities,
40
in the neighbourhood of one job
created for every $30,000 to $40,000 spent.
41
The Geelong Manufacturing
Council has noted the ‘significant and positive impact’ the fund has had
on the Geelong region.
42
2.29 Despite anecdotal evidence provided to the Committee about the positive
impact the Geelong Investment and Innovation Fund has had on the
Geelong region, it is too early to tell the extent of the impact. While its
long-term effects may be positive, the use of structural adjustment funds
as a response mechanism to a rapidly declining economic environment
should be tested. The Australian National Audit Office has examined the
administration of previous structural adjustment funds but it is not clear if
they are an effective tool to be employed during economic downturns
such as this. Therefore, the GFC presents an opportunity for the
Government to evaluate the potential use of structural adjustment funds
in response to economic downturns such as the GFC.
Recommendation 1
2.30 The Committee recommends that the Government evaluate and report
on the potential use of structural adjustment funds as a response to
economic downturns such as the global financial crisis.
2.31 The Committee is also concerned that structural adjustment funds are not
sufficiently flexible in nature to account for the challenges facing small
business during times such as these. The manufacturing sector in
Australia has been changing over time as overseas competition has
increased and jobs have been lost to improved methods of production. As
a result, smaller manufacturers in regional Australia have replaced larger
manufacturing companies. It is those smaller manufacturers, and other
small businesses, which have driven economic and employment growth in
regions such as Geelong.
43
40 GrantsLINK, Geelong Investment and Innovation Fund,http://www.grantslink.gov.au/Info.aspx?NodeID=2&ResourceID=1829, accessed 7
September 2009.
41 Mr David Sykes, Transcript 22 April 2009, pp. 49 & 50.
42 Mr David Sykes, Transcript 22 April 2009, p. 48.
43 The Geelong Chamber of Commerce, Submission No. 129, p. 2.
16 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
2.32 Structural adjustment funds are targeted in nature and are intended to
assist in cases where large scale job losses will create massive problems in
communities. They may not, however, assist smaller businesses in
regional Australia that are otherwise successful but have suffered a short,
sharp shock because of the GFC and the nature of the industry they
operate in.
44
2.33 The Committee, therefore, encourages the Government, in examining the
potential use of structural adjustment funds in response to economic
downturns such as the GFC, to consider their flexibility and ability to
assist small enterprises in addition to larger companies.
Recommendation 2
2.34 The Committee recommends that the Government, in examining the use
of structural adjustment funds, consider the flexibility and ability of
structural adjustment funds to assist small enterprises in addition to
larger companies.
Tourism sector
2.35 The tourism industry has certainly felt the impact of the GFC, declining at
a worse rate than the rest of the economy.
45
Data presented to the
Committee in August 2009 indicated that there was ‘real deterioration’ in
the domestic tourism market—the ‘backbone of the Australian tourism
industry’.
46
International visitor numbers were also down nearly two per
cent in the first half of 2009.
47
This has resulted in a marked lack of
profitability for the industry as individuals have delayed holidays and
business travel has been reduced.
48
2.36 It should be noted, however, that the Australian tourism sector is faring
comparatively well when considered against the performance of countries
such as Japan and New Zealand. Around the world, travel is down eight
44 Ms Catherine King MP, Transcript 14 August 2009, p. 35.
45 Mr Evan Hall, Transcript 6 July 2009, p. 67.
46 Ms Jane Madden, Transcript 14 August 2009, p. 72.
47 Ms Jane Madden, Transcript 14 August 2009, p. 72.
48 Tourism Australia, Tourism Forecasting Committee, Forecast 2009: Issue 1, Exhibit No. 29, p. 1.
IMPACT OF THE GFC ON REGIONAL BUSINESS 17
per cent for 2009, while the travel market in Australia has only declined by
1.7 per cent in the same period.
49
2.37 The decline in tourism activity has been particularly felt by regional areas
which have a greater reliance on tourism for employment.
50
Throughout
its public hearings, the Committee canvassed witnesses about the impact
of the GFC on tourism and tourism employment in their region. The
reports it received were mixed.
2.38 On the Gold Coast, tourism contributes approximately $4.2 billion
annually to its economy and generates over 19,000 full-time jobs.
51
In that
region, August 2009 figures indicated that international visitation was
down by 7.8 per cent or 65,000 visitors and domestic overnight visitation
was down 12.8 per cent or 470,000 visitors.
52
This has resulted in declining
operator confidence, cuts to operator marketing and a ‘virtual drying up
of tourism investment and development’ on the Gold Coast.
53
Conversely,
international visitor expenditure and day-trip expenditure has increased
while overnight visit expenditure has decreased.
54
2.39 In the Northern Territory, domestic and international visitation numbers
declined in the 2007/2008 period, as did visitor expenditure, which
decreased by 12.4 per cent in the same period.
55
As elsewhere, the greatest
impact of the GFC on NT tourism has been declining employment
prospects in the tourism and retail related industries—felt most acutely in
regional towns.
56
2.40 Western Australia, outside of Perth, has experienced a decline in tourism
activity.
57
This evidence was supplied to the Committee in July 2009,
indicating that the situation had worsened in South West WA since the
Committee’s public hearings there in April. When in Busselton WA, the
Committee was advised that:
…things are very good at the moment. We are talking about the
immediate vicinity of Busselton and not the whole Busselton shire.
Most businesses benefit in this whole Capes to Capes region either
49 Ms Jane Madden, Transcript 14 August 2009, p. 72.
50 Mr Evan Hall, Transcript 6 July 2009, p. 68.
51 Gold Coast Tourism, Submission No. 166, p. 1.
52 Gold Coast Tourism, Submission No. 166, p. 1.
53 Gold Coast Tourism, Submission No. 166, p. 1.
54 Mr Paul Donovan, Transcript 4 August 2009, p. 32.
55 Northern Territory Government, Submission No. 145, p. 6.
56 Northern Territory Government, Submission No. 145, p. 7.
57 Mr Evan Hall, Transcript 6 July 2009, p. 68.
18 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
directly or indirectly from tourism…The accommodation
providers that are providing for the top end [clientele] are
suffering a bit. The mid-range are not. Our biggest market in this
region for tourism is Perth based metropolitan. We are also getting
more and more overseas visitors. We are actually going the
opposite way to the Australian trend…people in the hospitality
industry, in general, are having the best year that they have had
for many years.
58
2.41 In Victoria, and particularly in Tasmania, discussions surrounding the
tourism sector had a generally positive tone. The Grampians area of
Victoria has noted a decline in international and interstate tourism
numbers, but the region has been buoyed by an increase in intrastate
visitors:
59
We believe that the opportunities for us, even in tough times, are
reasonably good. That is mainly because our biggest market is the
domestic market…We are already finding that we have seen a
tendency for our domestic volume to increase because everyone is
staying at home and not travelling overseas so much. From that
point of view, we see there are some positive signs.
60
2.42 Tasmania, it would appear, has fared better than most. When the
Committee visited Launceston in April 2009, it was advised that ‘tourism
in Tasmania and in Launceston in particular is going extremely well at the
moment’.
61
In Tasmania, like Victoria and perhaps even WA, domestic
tourism has carried the industry during this period:
A very small proportion of our ongoing tourism business is
internationally based or comes from international visitation.
Figures released in the last two weeks show an increase of 12 per
cent in visitation but, more importantly, an increase of 19 per cent
in per visitor spend. To put that into practical language, instead of
people from Sydney and Melbourne, which are our main drawing
areas, going overseas, they are taking a holiday to an island.
62
2.43 The Committee often received conflicting reports during the course of this
inquiry and particularly relating to tourism. Part of this has to do with the
rapidly changing and available data, as figures or evidence relayed in the
58 Mr Peter Gordon, Transcript 30 April 2009, p. 38.
59 Mr Glen Davis, Transcript 23 April 2009, p. 23.
60 Mr Ross Hatton, Transcript 23 April 2009, p. 35.
61 Mr Robert Wallace, Transcript 21 April 2009, p. 9.
62 Mr Robert Wallace, Transcript 21 April 2009, p. 9.
IMPACT OF THE GFC ON REGIONAL BUSINESS 19
first half of 2009 did not always match data released in the latter part of
the year. It also reflects the difference between national data and region
specific data. There are always challenges when interpreting data,
however, the story which emerged from the written and oral evidence was
varied enough to warrant follow-up discussion.
2.44 The Committee raised this issue with the Tourism and Transport Forum
during its public hearing in Sydney and was advised that Tasmania, South
Australia and Victoria were performing well in the domestic tourism
market and that the strength of the industry in different regions was
‘determined largely by how dependent [a region is] on domestic versus
international tourism’.
63
2.45 The Tourism and Transport Forum also argued that ‘most people are
mistaking volume for yield’.
64
The tourism industry, the Committee was
advised, has been dramatically cutting profit margins and prices which
has resulted in good volume but poor yield. Once discounting has
occurred, the only other place to cut costs is in labour and that is why
employment numbers are down in the tourism industry.
65
2.46 Employment numbers are down in those regions reliant on international
tourism. Far North Queensland and the Northern Territory in particular
are heavily reliant on international tourism and in Far North Queensland,
August 2009 employment figures indicated that the rate of unemployment
there was the highest in the country at nearly 10 per cent.
66
2.47 Differentiating between domestic and international tourism helps account
for some of the mixed messages received by the Committee. As RET
points out, often tourism is referred to as ‘almost an amorphous single
entity’ but in fact it is a sector with a range of components. In addition to
leisure tourism, there are business events, major events and study tourism
as well.
67
As a result, ‘some parts of the industry can be performing quite
strongly and well while other parts are having particularly difficult
times’.
68
2.48 The Committee heard that this is why the Government has responded to
the crisis with a suite of measures which apply to a range of industries and
63 Mr Evan Hall, Transcript 6 July 2009, p. 71.
64 Mr Evan Hall, Transcript 6 July 2009, p. 71.
65 Mr Evan Hall, Transcript 6 July 2009, p. 71.
66 Tourism and Transport Forum, Media Release: Tourism Needs a Shot in the Arm, 3 September
2009.
67 Ms Jane Madden, Transcript 14 August 2009, p. 75.
68 Ms Jane Madden, Transcript 14 August 2009, p. 75.
20 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
a range of sector sub-sets. In regards to the tourism sector, it has been a
‘net beneficiary’ of the Government’s cash stimulus and the Committee
has been advised that the ‘injections of fiscal stimulus into the economy
have been flowing through some tourism establishments’.
69
The
Government’s second stimulus package targeting infrastructure spending
is also expected to have ‘some benefit for tourism’.
70
2.49 Likewise, the Regional and Local Community Infrastructure Program is
funding projects ‘targeted primarily at improved tourism infrastructure’
71
and the Jobs Fund has supplied money for tourism related projects.
2.50 More specifically, tourism businesses have access to the TQUAL Grants
funding program administered by AusIndustry. TQUAL Grants support
initiatives that:
develop innovative product, services or systems within the tourism
industry;
contribute directly to long-term economic development in the host
region; and
develop or support high quality visitor services and experiences.
72
2.51 The TQUAL Grants program opened in early 2009 and RET reports that
over four hundred applications were received:
It was massively oversubscribed for the amount that is available
There was $8.5 million available for two years. We had 491 bids.
The total, if all bids were to be considered, would be many
hundreds of millions of dollars. And of course it is a highly
competitive process. But it shows the need, the interest and the
enthusiasm in regional and rural Australia for having some
support to help them develop further the tourism product and
service in the areas.
73
2.52 The Committee notes the strong demand for the TQUAL Grants program
and recommends that the Government consider increasing the quantum of
funding for the Program, while ensuring that regional tourism businesses
69 Ms Jane Madden, Transcript 14 August 2009, p. 78.
70 Ms Jane Madden, Transcript 14 August 2009, p. 78.
71 Western Australia Local Government Association, Submission No. 71, p. 7.
72 AusIndustry, TQUAL Grants,http://www.ausindustry.gov.au/Tourism/TQUALGrants/Pages/TQUALGrants.aspx,
accessed 8 September 2009.
73 Ms Jane Madden, Transcript 14 August 2009, p. 77.
IMPACT OF THE GFC ON REGIONAL BUSINESS 21
receive a proportionate share of the grant funding provided the
applications adhere to the program guidelines.
Recommendation 3
2.53 The Committee recommends that the Government increase the quantum
of funding for the TQUAL Grants program, while ensuring that regional
tourism businesses receive a proportionate share of the grant funding,
provided the applications adhere to the program guidelines.
2.54 Tourism businesses also have access to other government programs
administered by various departments. For example, small and medium
sized tourism businesses have been among the major beneficiaries of the
Export Market Development Grants Scheme, administered by Austrade.
74
RET advised the Committee that it has recently secured agreement that
regional tourism organisations can bid for these grants. This will help
those organisations to market offshore.
75
2.55 Like each of the industries discussed in this chapter, employees in the
tourism sector who have lost their jobs as a result of this downturn have
access to support through Job Services Australia and the services of Local
Employment Coordinators assigned to regions reliant on tourism—
particularly Far North Queensland.
2.56 The tourism industry comprises a broad range of businesses and
employees, and as such, government assistance for the sector has been
equally broad. While the tourism sector has received assistance through a
variety of programs, the Committee is concerned that the funding is not
being directed in a manner which will ensure a particular outcome.
Certainly, the money is supporting jobs and assisting business through a
tough period but looking forward, it is important that there is
coordination in the strategic planning, as there are ‘so many diverse
players within tourism, all of whom need to act together cooperatively to
create the one experience for the tourist’.
76
2.57 The Tourism and Transport Forum has suggested that destination
planning is the appropriate approach. For example:
74 Ms Jane Madden, Transcript 14 August 2009, p. 79.
75 Ms Jane Madden, Transcript 14 August 2009, p. 79.
76 Mr Evan Hall, Transcript 6 July 2009, p. 78.
22 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
You might say, ‘We’re going to build up the Gold Coast and the
hinterland of South-East Queensland as a nature based destination
attracting markets from the Middle East and India.’ That would be
quite a legitimate strategy to pursue. How do you actually
implement that? That comes down to things like planning in
Surfers Paradise to make sure that three- or four-bedroom
apartments are being built.
77
2.58 Destination planning requires a high level of cooperation between federal,
state and local governments, various industries and across government
portfolios,
78
but it may avoid scenarios whereby a grant for the private
sector in a particular tourism destination ‘is not totally inconsistent with
the branding, marketing and future direction’
79
of that destination.
2.59 The Committee has been advised that RET is ‘very mindful of trying to
work across the whole raft of government programs’
80
and there is
precedence for this type of cooperation. The National Landscapes
Program:
…provides a framework for regional and cross-jurisdictional
collaboration to ensure that the visitor experience promised by the
destination brand is delivered to the target market.
81
The TQUAL Grants process will encourage cooperation between state and
federal governments as state tourism organisations have been asked to
assess applications as part of the process.
82
The Committee is also aware
that coordination between government and the private sector has been a
primary consideration when developing the National Long-Term Tourism
Strategy.
83
2.60 Given the current levels of cooperation between federal, state and local
governments and the current levels of stimulus being provided by
governments, now would be an ideal time to encourage greater
coordinated planning in the tourism sector.
2.61 The Tourism and Transport Forum has suggested that coordinated
planning should come in the form of prioritisation:
77 Mr Evan Hall, Transcript 6 July 2009, p. 78.
78 Mr Evan Hall, Transcript 6 July 2009, pp. 78 & 79.
79 Mr Evan Hall, Transcript 6 July 2009, p. 80.
80 Ms Jane Madden, Transcript 14 August 2009, p. 79.
81 RET, Submission No. 35, p. 26.
82 Mr Evan Hall, Transcript 6 July 2009, p. 80.
83 Ms Jane Madden, Transcript 14 August 2009, p. 77.
IMPACT OF THE GFC ON REGIONAL BUSINESS 23
If you do a little bit all over the place you do not raise the quality
of a destination, which means you get no extra people going there
and they are certainly spending no more for a better experience. If
you concentrate that effort in one destination, you change the
nature of the destination, you get more people in and they spend
more. That is not to say that you should ignore everywhere else,
but we have, I think, 80 tourism regions for which we have
separate marketing campaigns. We can identify 20 that account for
90 per cent of tourism expenditure. Not all regions are the same. If
you started focusing on those 20, first of all you would be getting a
lot more bang for your buck.
84
2.62 Denying funding to projects in areas which are not considered a priority
will result in some regions missing out on funding that creates jobs and
boosts local economies. It may also deny some regions the opportunity to
grow and develop as tourist destinations. However, regions which already
have a strong focus on tourism could benefit from a coordinated planning
approach.
2.63 The Committee is aware that state, territory and the Commonwealth
Government tourism ministers have been working towards a ‘more
coordinated relationship…across government’.
85
The Committee supports
greater coordination between the tourism departments of state, territory
and the Commonwealth Government and believes that the Development
of the National Long-Term Tourism Strategy provides an opportunity to
consider how states and regions can further improve their cooperation on
identifying key tourism markets and setting priorities for marketing those
locations.
Recommendation 4
2.64 The Committee recommends that the National Long-Term Tourism
Strategy should consider how states and regions can further improve
their cooperation on identifying key tourism markets and setting
priorities for marketing those locations.
2.65 Strategic cooperation, it has been suggested, may also lessen the impact of
the GFC on the regional tourism industry through the introduction of a
84 Mr Evan Hall, Transcript 6 July 2009, p. 80.
85 Ms Jane Madden, Transcript 14 August 2009, p. 77.
24 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
joint industry and government marketing campaign to be used where
there is matching funding provided by industry or state tourism bodies:
…a joint industry/government tactical marketing fund of up to
$40 million per year over two years communicating Australian
tourism’s price competitiveness to international visitors is an
appropriate response to market conditions...It would be used for
‘tactical’ campaigns marketing competitive tourism packages, such
as airline and hotel discounts. In the short-term, this would be
more effective than general destination promotion, driving
bookings and expenditure and supporting jobs. A $40 million fund
would generate $80 million in matched co-operative marketing.
86
2.66 Central to this recommendation is the notion that, at present, targeted
marketing campaigns are more effective than general destination
promotion. This point was echoed by Gold Coast Tourism which is
concerned about the kind of marketing activities undertaken by Tourism
Australia:
Woolworths do not promote the history of tomatoes or the sun in
which they grow. They promote tomatoes, the kilo price and
where you go and buy them…we are calling for less esoteric and
aspirational marketing, getting down to things which people can
relate to, where they can see value for money, see what the price is
and see how they get there.
87
2.67 The Committee supports the use of a more strategic approach to tourism
marketing, especially during times of acute economic stress in the
industry. Tourism Australia should, therefore, consider a strategic
approach to its campaigns to ensure priority is given to markets affected
by the GFC and those that will deliver the best return for the taxpayer’s
marketing dollar.
Retail sector
2.68 The retail sector, like tourism, accounts for a wide range of businesses and
therefore, the impact of the GFC on the retail sector has varied. The retail
sector has also been affected to varying degrees depending on the region
in question.
2.69 Those regions which have suffered downturns as a result of poor
conditions in sectors such as mining, manufacturing or tourism have
86 Tourism and Transport Forum, Submission No. 155, p. 6.
87 Mr Paul Donovan and Mr Martin Winter, Transcript, 4 August 2009, p. 38.
IMPACT OF THE GFC ON REGIONAL BUSINESS 25
experienced corresponding downturns in their retail sectors. Job losses in
Broken Hill’s mining sector, for example, account for the evidence
received by the Committee there suggesting that ‘retail has been hit
heavily, especially in the discretionary spending’.
88
2.70 Businesses which rely on discretionary spending have felt the effects more
than others in the retail sector. A witness in Busselton noted:
Not surprisingly it depends almost entirely on how discretionary
the spending is. Food and beverage sales are having their best year
yet. Some of our hotels, pubs and supermarkets are doing well,
but our discretionary spending shops are really struggling now
and beginning to lay off staff. It is quite a mixed picture.
89
Indeed, when discretionary spending is separated from total sales figures,
the indication is that discretionary spending has been weak since March
2008.
90
2.71 The retail sector has also experienced periods of highs and lows during the
2008/09 financial year. Initial, sharp declines in retail sales during the
latter half of 2008 were followed by increases in retail spending during the
Christmas 2008 period—largely due to the Government’s pre-Christmas
stimulus package.
91
Recent figures suggest that the impact of the stimulus
package has begun to wash through the economy and customers are now
retreating from stores.
92
2.72 It is also interesting, and somewhat perplexing to note that in September
2009, retail spending was in a decline, while business confidence was at a
six-year high, with particular improvement showing in the retail sector
amongst others.
93
Each new survey and index reveals a different and
changing picture, which has been one of the challenges inherent in this
inquiry. It is safe to surmise, however, that the GFC has negatively
impacted the retail sector, particularly those businesses relying on
discretionary spending.
2.73 The primary action undertaken by the Government in support of the retail
sector has been the distribution of bonus payments to households across
Australia as part of the Government’s economic stimulus plan. To date, it
88 Mr Robin Edgecumbe, Transcript 7 July 2009, p. 14.
89 Councillor Steve Harrison, Transcript 30 April 2009, p. 9.
90 Property Australia, Value the new Mantra in the retail sector, 1 July 2009.
91 See for example survey respondents’ comments in Economic Development Australia,
Submission No. 110.
92 The Courier Mail, Dramatic Fall in Retail Spending, 10 September 2009.
93 ABC News, Business confidence hits six-year high, 8 September 2009.
26 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
would appear that these payments ‘have done something to hold up retail
demand’;
94
however, the retail trade remains weak.
95
Construction sector
2.74 Perhaps more than any other sector of the economy discussed in this
section, the construction industry can be ‘notably affected by the economic
cycle’
96
and particularly the economic conditions created by the GFC. The
lack of available credit resulting from the crisis has impacted on heavily
geared sectors such as commercial and medium-density property
construction,
97
and the declining output from the nation’s mines, factories,
office blocks and shopping centres means that the ‘incentive to construct
additional capacity is weak’.
98
2.75 Lower capacity utilisation rates are also coinciding with a decline in
business investment, resulting in a decrease in construction activity to
expand productive capacity. A direct result of this decreasing activity is
unemployment and it has been forecast that employment in the
construction sector ‘may decline by 8.2 per cent over the next three
years’.
99
At the end of August 2009, the sector had registered its 17
th
consecutive month of declining employment.
100
2.76 There are some positive figures that have come out of this sector to date.
Housing construction activity is low but has remained resilient. In the
July/August 2009 period, the Housing Industry Association Performance
of Construction Index rose 2.9 points, indicating an improvement in house
building and a stabilisation in the decline of apartment construction.
101
It
is expected that population demands and low interest rates will result in
‘an improvement in the number of housing starts’.
102
94 Mr Glen Stevens, Transcript 28 September 2009, Senate Economics References Committee,
Government Economic Stimulus Initiatives reference, p. 12.
95 Mr Greg Evens, Transcript 28 September 2009, Senate Economics References Committee,
Government Economic Stimulus Initiatives reference, p. 57.
96 Access Economics, Construction industry: Economic drivers and outlook, 27 July 2009, p. 5.
97 Access Economics, Construction industry: Economic drivers and outlook, 27 July 2009, p. 9.
98 Access Economics, Construction industry: Economic drivers and outlook, 27 July 2009, p. 9.
99 Access Economics, Construction industry: Economic drivers and outlook, 27 July 2009, p. 6.
100 ABC News, Construction decline continues but eases, 7 September 2009,http://www.abc.net.au/news/events/global-financial-crisis/, accessed 13 October 2009.
101 ABC News, Construction decline continues but eases, 7 September 2009.http://www.abc.net.au/news/events/global-financial-crisis/, accessed 13 October 2009.
102 Access Economics, Construction industry: Economic drivers and outlook, 27 July 2009, p. 16.
IMPACT OF THE GFC ON REGIONAL BUSINESS 27
2.77 Engineering construction has slowed but there is indication that certain
projects in the mining, oil and gas and ports and energy sectors, coupled
with government spending will assist in maintaining a strong project
agenda, albeit at lower levels than previous years.
103
Commercial
construction is generally down but the Commonwealth Government’s
Education Revolution spending program is driving building in the health
and community services sector of commercial construction.
104
2.78 This Australia-wide snapshot is consistent with the evidence received by
the Committee in regional Australia. Commercial construction in regional
Australia has slowed. In Townsville, Myer intended to spend $150 million
on a new store but that plan has been shelved for two years, as has a mall
project worth about $200 million and a cruise ship terminal
development.
105
In WA, very little commercial construction activity was
occurring in Geraldton in April 2009;
106
however, the Oakajee deep water
port project is expected to generate ‘numerous jobs in construction’ in the
area.
107
2.79 Residential construction drives the economy of many regions in Australia.
Those visited by the Committee, particularly South West WA and the
Gold Coast have suffered from serious downturns in their property
development sectors. In Busselton, the Committee was advised that:
The impact on the residential construction industry [has been]
immediate. I think people forget how important that is as an
industry in rapid growth areas. For instance, I would estimate that
in the greater Bunbury area residential construction has gone
down by about 70 per cent, which has probably caused the loss of
about 1,500 jobs from bricklayers, plasterers, tilers and so on.
108
2.80 On the Gold Coast, commercial and residential construction has dropped
significantly as a result of the crisis. Indeed, the Gold Coast felt the effects
of the crisis earlier than most parts of Australia, impacting severely on all
of its economy and particularly its construction sector, which virtually
ceased:
…at the beginning of 2007…the secondary financial market that
had built on the Gold Coast collapsed. That was funding early
103 Access Economics, Construction industry: Economic drivers and outlook, 27 July 2009, pp. 14 & 15.
104 Access Economics, Construction industry: Economic drivers and outlook, 27 July 2009, p. 13.
105 Mr Colin Dwyer, Transcript 3 September, p. 17.
106 Mr Anthony Brun, Transcript 29 April, p. 3.
107 Mid West Development Commission, Submission No. 143, p. 6.
108 Mr David Smith, Transcript 30 April, p. 4.
28 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
stage development projects which were underpinning the
construction sector…What we saw in January, February and
March 2007 was no money in the city because the financial sector,
the providers of funds to developers and the construction sector,
dried up…and a significant cash shortage [ensued] around March,
April, May. This created an immediate outflow of
employment…The rest of Australia started to move into it around
September, October, but we were there nearly nine months
earlier.
109
2.81 Housing construction on the Gold Coast has slowed but the ‘dwelling
sector is probably the most robust because there is still a demand for that
type of housing generated in part by incentives for first home buyers’.
110
Construction on community infrastructure has, as a result of government
stimulus, also helped maintain construction activity in the regions.
111
2.82 In much the same way that the Government’s cash payments to
households helped the retail sector through the first part of 2009,
government support provided through the Nation Building Economic
Stimulus Plan has assisted the construction sector and filled the gap left by
the private sector when it exited the market.
2.83 There are four components of the Nation Building Economic Stimulus
Plan that directly affect the construction sector:
Education;
Community infrastructure;
Road and rail; and
Housing.
2.84 The Building the Education Revolution program is expected to provide
builders and associated tradespeople with work constructing and
rebuilding primary and secondary school infrastructure throughout
Australia. The construction of other community infrastructure, such as
community halls and recreation centres, has commenced with funding
provided directly to local governments around Australia through the
Regional and Local Community Infrastructure Program. The Government
has also increased and brought forward funding for roads, rail and
community housing in response to the crisis.
109 Mr John Witheriff, Transcript 4 August, pp. 4 & 5.
110 Mr John Witheriff, Transcript 4 August, p. 5.
111 See for example, Southern Inland Queensland ACC, Submission No. 114, p. 2.
IMPACT OF THE GFC ON REGIONAL BUSINESS 29
2.85 Much of the initial evidence taken by this Committee was done so in the
early part of 2009. At that point, it was still unclear to some in the regions
how some parts of this stimulus package would affect them. In a
submission received by the Committee in early April, businesses in the
Central Murray region of Australia noted that ‘a number of components of
the stimulus packages (Community Infrastructure Program and Building
Education Revolution) have not yet had any impact and are unlikely to for
another 3 to 12 months.’
112
2.86 By mid year, evidence is suggesting that these stimuli have assisted in
slowing the decline in the construction sector and of equal importance,
evidence provided to this Committee suggests that the Nation Building
Economic Stimulus Plan is having a positive effect on employment in the
construction industry:
If these capital works programs continue to operate over a number
of years, they will greatly assist the City of Mandurah to maintain
its infrastructure provision role, which in turn will maintain
employment in the construction sectors. This in turn will have a
positive flow-on effect to other industry sectors;
113
and
The $21,000 first home buyers grant "has saved a lot of people
from being out of work".
114
Primary industries
2.87 The Committee received evidence from three primary industry sectors,
which will be discussed in this section:
Agriculture;
Forestry; and
Fisheries.
Agriculture
2.88 The GFC
has occurred at a time when resilience in parts of regional
Australia is ‘at an all-time low’ as a result of prolonged drought.
115
The
drought has significantly reduced yields and farm incomes and as a result,
112 Central Murray ACC, Submission No. 100, p. 9.
113 City of Mandurah, Submission No. 49, p. 8.
114 ACC-Mackay Region, Submission No. 45, p. 7.
115 National Farmers Federation, Submission No. 41, p. 3.
30 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
‘the effect of the drought has, to date, been a more significant factor than
the global financial crisis’.
116
2.89 Nevertheless, the GFC has had short and long term impacts on the sector.
Commodity prices, particularly of discretionary items such as wool and
dairy, decreased immediately at the onset of the GFC and are expected to
be volatile for some time.
117
The departure from the market of non-bank
lenders has led to credit access problems for some farmers, particularly in
Tasmania.
118
Buyers have also been troubled by limited access to credit,
thereby creating uncertainty in the international trading environment and
lowering farmers’ returns.
119
2.90 Conversely, the GFC did depreciate the Australian dollar (against the
American) thereby providing support for commodity export earnings and
lower interest rates have provided some relief to farmers.
120
As the GFC
continues, the agricultural sector is expected to be impacted by increased
protectionist measures as countries support buy domestic campaigns. The
initial retreat in discretionary commodity prices is being borne out by
decreased demand for premium products in the market and a move
towards cheaper staples. The National Farmers Federation is also
concerned that rural land values may decrease.
121
Forestry
2.91 Much of Australia’s forestry products are exported to countries such as
Japan, the Republic of Korea and China. Downturns in those economies as
a result of the GFC led to an immediate decrease in demand for forestry
products. In the export woodchip market, for example:
…it was immediate from Japan. We had boats told they were not
coming. There were boats that were scheduled to come in and take
woodchip off the docks, and they said these boats would not be
coming. It was that immediate.
122
2.92 Domestic sales have also decreased with reduced demand for solid wood
products as wholesalers reduce their inventory.
123
In Victoria, falling
116 Department of Agriculture, Fisheries and Forestry, Submission No. 128, p. 3.
117 National Farmers Federation, Submission No. 41, p. 4 & Department of Agriculture, Fisheries
and Forestry, Submission No. 128, p. 6.
118 Mr Charles McElhone, Transcript 14 August 2009, p. 51.
119 National Farmers Federation, Submission No. 41, p. 6.
120 National Farmers Federation, Submission No. 41, p. 6.
121 National Farmers Federation, Submission No. 41, p. 8.
122 Ms Eva Down, Transcript 21 April 2009, p. 63.
123 Ms Eva Down, Transcript 21 April 2009, p. 58.
IMPACT OF THE GFC ON REGIONAL BUSINESS 31
international demand for woodchips coincided with falling investor
demand for managed investment schemes used to fund forest plantations,
resulting in the collapse of companies such as Great Southern at a
considerable loss to investors.
124
2.93 Investors have lost money and employees have lost jobs as a result of the
downturn in the forestry sector. In April 2009, mills in Tasmania shut
down for ten days to avoid unnecessary redundancies. Despite this,
timber mills have downsized in North East Tasmania with several
hundred jobs lost.
125
Fisheries
2.94 The Committee received very little evidence regarding the impact of the
GFC on the fisheries sector. Only in Geraldton was the Committee able to
discuss the fisheries sector, and in that instance it related directly to the
lobster industry. Lobster is a discretionary product, so it is little surprise
that the lobster fishery has experienced a contraction in demand. Many of
the Geraldton Fisherman’s Coop’s markets were in the United States,
Japan and Western Europe, all of which have been severely impacted by
the downturn.
126
As a result, people in Geraldton ‘cannot remember…a
situation this bad in the marketplace’.
127
2.95 What has been described as a ‘short-term squeeze’
128
is coinciding with
longer-term structural adjustment that is taking place in the industry. In
much the same way that the manufacturing sector has undergone
adjustment over time, the lobster fishery has experienced a long period of
rationalisation whereby the technological capacity of the fleet was
increased while the size of the fleet has decreased—almost by half.
129
The
GFC has effectively meant that a reduced, but efficient fleet now waits to
see if lobster markets will return.
2.96 While lobster fishermen in WA ride out this difficult period, the
Commonwealth Government is offering a variety of assistance programs
to primary industries in Australia. The Department of Agriculture,
Fisheries and Forestry detailed for the Committee a number of programs
already in place to support the agricultural sector in particular. These
124 Mr Jim Cooper, Transcript 23 April 2009, p. 58.
125 ACC Tasmania, Submission No. 80, p. 8.
126 Mr Wayne Hosking, Transcript 29 April 2009, p. 46.
127 Mr Wayne Hosking, Transcript 29 April 2009, p. 45.
128 Mr Wayne Hosking, Transcript 29 April 2009, p. 50.
129 Mr Wayne Hosking, Transcript 29 April 2009, p. 49.
32 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
programs are focused on increasing productivity and investment in the
sector and preparing it for climate change. In direct response to the GFC,
the Government cites its Nation Building and Jobs Plan as well as the
Rural Financial Counselling Service and the Farm Management Deposits
Scheme as programs which will assist the agricultural sector through this
difficult period. Direct cash stimulus payments are also expected to be of
assistance.
130
2.97 Most importantly, from an industry perspective, is the boost in investment
in regional infrastructure which is expected as part of the Government’s
Nation Building Economic Stimulus Plan. Many representatives of
regional economies that rely, in part, on primary industries cited greater
infrastructure spending by government as the primary form of assistance
required during this period and into the future:
The economic infrastructure investment—we are talking about
roads, rail, ports, telecommunications and water infrastructure—is
an incredibly key element in enabling agriculture to extend its
contribution to the Australian economy, particularly to capitalise
on the opportunities that we think are there and will continue to
escalate over the medium to long term.
131
2.98 In Busselton, representatives of the South West region stressed repeatedly
the need for increased transport infrastructure spending to expand the
economic capacity of the region:
I am going to sound like a broken record…at our board level there
has been this coalescing of views, whether you are the shire
president of Donnybrook-Balingup, the shire of Collie or the shire
of Capel, with regard to the significance of the port, the capacity to
expand the port in a timely way and to ensure connectivity.
132
2.99 Those from the forestry sector who spoke with the Committee support the
Government’s efforts to combat the effects of the GFC, but noted:
If Tasmanian timber can be used in schools and new housing, if
the earth-moving equipment of forest contractors can be
redeployed for roads and if we can encourage small businesses to
take up new investments, this could lessen the impact.
133
130 Department of Agriculture, Fisheries and Forestry, Submission No. 128, pp. 9-11.
131 Mr Charles McElhone, Transcript 14 August 2009, p. 53.
132 Mr Matt Granger, Transcript 30 April 2009, p. 57.
133 Ms Eva Down, Transcript 21 April 2009, p. 55.
IMPACT OF THE GFC ON REGIONAL BUSINESS 33
2.100 Certainly, the Government’s investment in regional schools, community
and transport infrastructure is expected to do just that. In NSW, the
Business Chamber had initial concerns that local contractors may miss out
on work related to the government stimulus package but later confirmed
that no chamber members have had that experience.
134
Banking and lending sector
Introduction
2.101 Australia is lucky in that the GFC has impacted its banking sector less than
in other countries. This has much to do with the strong regulation of the
banking industry by the Australian Prudential Regulation Authority
(APRA), whose close supervision and strong approach to risk
management has resulted in an Australian banking sector that is more
stable than those in overseas countries. Nevertheless, Australia’s lending
institutions have not entirely escaped the effects of the GFC. Its impact has
been felt by banks, non-bank lenders, mutual ADIs
135
and the businesses
that utilise their services.
Impact of the GFC on the regional banking and lending sector
2.102 Representatives of the Australian banking sector advised the Committee
that despite tough economic conditions internationally:
Australian banks have remained well capitalised, with strong
lending books, as well as being profitable. They have also
continued to lend despite tight and volatile credit markets and
increased costs of funds.
136
2.103 Despite these assurances, the Committee has received evidence from
around Australia which suggests that banks’ lending criteria have become
more stringent since the onset of the GFC:
…Many local residents are more careful about their borrowings as
are the banks with their lending practices (i.e. Loan to Valuation
Ratios (LVR) have been reduced by most major banks for both
residential and commercial loans).
137
134 Mrs Louise Southall, Transcript 6 July 2009, p. 58.
135 Authorised Deposit Taking Institutions
136 Mr David Bell, Transcript 6 July 2009, p. 44.
137 Goulburn Mulwaree Council, Submission No. 113, p. 2.
34 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
2.104 It is difficult for the Committee to confirm the veracity of these claims but
the Committee has received enough anecdotal evidence to suggest that
banks’ risk profile may have changed as a result of the crisis. The banks do
admit that ‘there is a limit to the amount of risk and debt the banking
industry can provide to a business’
138
and there have been highly geared
companies which, as a result of the GFC, have been unable to secure
additional credit.
2.105 Part of the perception that banks have reduced access to credit for
business in regional Australia may be related to confusion about the
definition of a bank. In Geelong, for example, evidence received by the
Committee (and partially quoted above) noted that manufacturing
businesses are ‘finding it difficult to get any financial accommodation
from the banks’, however, that evidence goes on to state that ‘GE
Commercial Finance has really tightened its requirements’.
139
2.106 GE Commercial Finance is not a bank, it is a non-bank lender. Non-bank
lenders have been hit particularly hard by the GFC. Their inability to raise
reasonably priced money on wholesale funding markets has resulted in
increased credit costs for their customers
140
and in some cases, non-bank
lenders have exited the market altogether.
141
2.107 Mutual ADIs (authorised deposit-taking institutions) are perhaps the most
prevalent lending institutions in regional Australia.
142
Mutual ADIs are
financial institutions owned by their customers and include credit unions,
building societies and friendly societies. Mutual ADIs rely heavily on
deposits for funding in order to function but, over time, they have
increased their mortgage lending ‘by tapping securitisation markets’
which ‘virtually closed down’ as a result of the GFC.
143
2.108 Mutual ADIs are active in regional Australia but they do very little
business lending; however like the banks, mutual ADIs report that they
have not contracted their business lending as a result of the GFC:
…commercial lending is not a major feature of our operations, but
those who do it are particularly located. They have not reported to
us that they have contracted their lending at all, but nor are they
seeking to widely expand that lending either. Those who are
138 Mr Stephen Carroll, Transcript 6 July 2009, pp. 52-53.
139 Mr Lawrie Miller, Transcript 22 April, p. 18.
140 National Farmers’ Federation, Submission No. 41, p. 6.
141 Mr David Bell, Transcript 6 July 2009, p. 47.
142 Abacus, Submission No. 136, p. 1.
143 Abacus, Submission No. 136, p. 4.
IMPACT OF THE GFC ON REGIONAL BUSINESS 35
operating in the communities in which they have always operated
and provided that commercial or small business lending are
continuing to do so…
144
2.109 The availability of credit is vital to the continuing prosperity of the
Australian economy. The Commonwealth Government, therefore, moved
quickly at the onset of the GFC to support Australia’s lending institutions
during this period. On 28 November 2008, the Government implemented
the Bank Guarantee Scheme for a period of three years to protect the funds
of financial institutions and to engender confidence and stability in the
banking sector.
2.110 Under this voluntary scheme, deposits over $1m per customer and
wholesale funding liabilities are guaranteed by the Government upon
payment of a fee based on the credit rating of the institution. The lower
the credit rating the higher the fee charged. Institutions such as banks with
the higher AAA credit rating are charged a lesser fee than the lower rated
credit unions and building societies. For example, institutions that are
AAA to AA rated, such as banks, are charged 70 basis points to access the
scheme. Lower A+ to A rated institutions are charged 100 basis points and
BBB+ and below (and unrated) institutions are charged 150 basis points.
2.111 Although the Bank Guarantee Scheme is providing a level of stability and
security across the banking sector, the Committee has heard concerns that
the differential pricing structure has meant that mutual ADIs that have not
opted to utilise the Government Bank Guarantee Scheme are finding it
difficult to attract large deposits, because depositors are seeking
institutions that have the security of the Government backing.
145
2.112 The Scheme also demands that users have a credit rating—something
which most mutual ADIs do not have. The mutuals are concerned that an
agency rating will become a requirement for them and if their rating is
lower than a banks, competition may be stifled in the marketplace as
consumers choose to work with higher rated agencies.
146
2.113 Competition, or the lack of it, is being cited by mutual ADIs as the
primary concern surrounding the Government’s Bank Guarantee Scheme.
They argue that competition in the banking sector has diminished, with
less market share being experienced by the credit unions, building
societies and regional banks despite the departure of non-bank lenders
from the market. Mutual ADIs report that it is the major banks that have
144 Mr Mark Degotardi, Transcript 6 July 2009, p. 36.
145 Abacus, Submission No. 136, p. 6.
146 Abacus, Submission No. 136, pp. 5-6.
36 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
increased their market share because of the cost benefit they derive from
the Government’s Bank Guarantee Scheme.
147
2.114 The Committee is aware that the Senate Economics References Committee
tabled a report on 17 September 2009, in which differential pricing within
the Government’s Bank Guarantee Scheme was examined. In that report,
the Senate Committee found that the markets were not pricing all
guaranteed debt identically and therefore the Government should ‘review
the need to apply differential premia for ADIs with different ratings’.
148
2.115 The Committee also understands that the Government has advised the
mutual ADI sector that its Bank Guarantee Scheme is ‘under constant
review’.
149
Representatives of the mutual ADI sector observe that:
…we are yet to see any movement, although we are actively
making suggestions to the government about ways we believe
funding could be adjusted to better serve the interests of
competition.
150
2.116 Given the degree to which regional Australia relies on mutual ADIs, the
Committee is concerned about the potential for decreased competition in
the regional banking sector. Like its Senate colleagues, this Committee also
encourages the Government to review its differential pricing structure
within its Bank Guarantee Scheme.
2.117 Competition in the banking sector has suffered as a result of the GFC. As
Treasury states, ‘the global financial crisis has affected the competitive
dynamics of the banking system’:
151
…with investor demand for residential mortgage-backed securities
(RMBS) drying up in late 2007 and early 2008, smaller lenders
have found it more difficult to raise funds with which to finance
new lending at competitive rates of interest. As a result, from mid-
2007, a number of smaller financial institutions were forced to exit
the market, merge with stronger entities, or relinquish market
share to entities with more diversified sources of funding.
152
147 Mr Mark Degotardi, Transcript 6 July 2009, p. 35.
148 Senate Economics References Committee, Government measures to address confidence concerns in
the financial sector – The Financial Claims Scheme and the Guarantee Scheme for Large Deposits and
Wholesale Funding, September 2009, p. 19.
149 Ms Louise Petschler, Transcript 6 July 2009, p. 34.
150 Ms Louise Petschler, Transcript 6 July 2009, p. 34.
151 Treasury, Submission No. 167, p. 1.
152 Treasury, Submission No. 167, p. 1.
IMPACT OF THE GFC ON REGIONAL BUSINESS 37
2.118 Prior to the GFC, the securitisation markets allowed smaller lenders to
‘better manage their capital base and to continue to increase home lending
and compete with the major banks.’
153
The GFC effectively closed these
markets, and in response, the Government committed to investing up to
$16 billion in residential mortgage backed securities (RMBS) to ‘support
continued competition from smaller authorised deposit-taking institutions
and non-ADI lenders throughout the GFC’.
154
2.119 To ensure a continued supply of affordable credit for smaller lenders once
the Government has completed its RMBS purchasing round, some
participants of this inquiry have recommended the introduction of an
Australian mortgage bond program or regional housing bond scheme
similar to Canada’s Mortgage Bond (CMB) Program.
155
(A brief outline of
the Program can be found in Appendix D).
2.120 Participants of this inquiry have argued that a similar scheme for Australia
and perhaps regional Australia only, would assist Australians ‘to access
home loans throughout economic cycles’.
156
It is suggested that an
Australian program would operate in a similar fashion to the Canadian
one, whereby an accredited lender (perhaps in regional Australia, say
Bendigo Bank) writes loans (with very tight criteria) to home buyers. That
lender would then take those loans and “warehouse” them with another
facility—perhaps a larger lending institution. The Australian Government
would then use those loans to create bonds, with a government guarantee
attached, and sell them to investors. It is anticipated that the bonds would
be insured by either a government or private insurer. The sale of the
bonds to investors creates the funds which are made available to lenders
to write more loans.
157
2.121 The argument for introducing a similar program in Australia focuses on
creating greater competition in the lending market through the increased
availability of funds for smaller lenders and the generation of lower costs
for lenders and borrowers.
158
When queried on the Canadian Scheme and
its implications for introduction in Australia, the Treasury advised the
Committee that there is evidence which suggests that the Canadian
153 Ms Louise Petschler, Transcript 6 July 2009, p. 34.
154 Treasury, Submission No. 167, p. 3 & ABC News, Swan announces $8b mortgage market
investment, 11 October 2009.
155 Genworth, Submission No. 157, p. 4 & Abacus, Ms Louise Petschler, Transcript 6 July 2009, p.
34.
156 Genworth Financial, Submission No. 157, p. 4.
157 Mr Peter Hall, Transcript 6 July 2009, p. 12.
158 Genworth cites a KPMG audit of Canada’s scheme which notes decreased lender and
borrower costs as a result of the scheme, see Genworth Financial, Submission No. 157, p. 5.
38 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
scheme has resulted in cost savings for larger lenders.
159
Treasury noted
however, that there has been no substantive evidence to suggest that
Canadian mortgage borrowers have benefited from reduced interest
rates.
160
Indeed, the Reserve Bank of Australia (RBA) notes that the
Canadian scheme did not stop Canadian mortgage interest rates from
rising following the onset of the GFC.
161
2.122 Most importantly, the RBA found evidence that:
…smaller lenders may have retained the small cost-savings from
the program as increased margins rather than passing them on to
borrowers.
162
2.123 The Treasury has also raised concerns that a similar scheme in Australia
could have ‘the potential to create moral hazard’ because a higher than
optimal degree of risk taking may be encouraged.
163
Furthermore,
permanent government support for the RMBS market ‘has the potential to
distort price signals in financial markets and the efficient allocation of
capital’
164
meaning a less risky investment would be more attractive to
investors. Evidence from the Canadian scheme indicates that the
government-backed securities sector has grown at the expense of the
corporate and securitisation sectors of the Canadian bond market.
165
2.124 Of course, the other way to drive down cost is through competition.
ABACUS believes that the introduction of a Canadian mortgage bond
style scheme in Australia would assist in supporting competition in the
banking sector—particularly in regional Australia.
166
Evidence regarding
Canada’s scheme as an effective facilitator of competition is mixed.
Evaluation of the scheme reveals that [the scheme]:
…increased the availability of mortgage funding for smaller
lenders in the five years following its introduction in
2001…[and]…played an important role in maintaining smaller
lenders’ access to funds throughout the turbulence in international
159 Canada Mortgage Bonds Program Evaluation: Final Report, prepared by KPMG LLP, June 2008,
cited in Treasury, Submission No. 167, p. 5.
160 Canada Mortgage Bonds Program Evaluation: Final Report, prepared by KPMG LLP, June 2008,
cited in Treasury, Submission No. 167, p. 5.
161 RBA cited in Treasury, Submission No. 167, p. 5.
162 RBA cited in Treasury, Submission No. 167, p. 5.
163 Treasury, Submission No. 167, p. 6.
164 Treasury, Submission No. 167, p. 7.
165 Treasury, Submission No. 167, p. 7.
166 Ms Louise Petschler, Transcript 6 July 2009, p. 34.
IMPACT OF THE GFC ON REGIONAL BUSINESS 39
capital markets, and may have even facilitated the entrance of new
smaller players over this period.
167
2.125 Conversely, the Treasury notes that ‘Canada continues to have a highly-
concentrated banking sector…notwithstanding two decades of
government intervention’.
168
When the Committee queried smaller lenders
about declining competition in regional Australia, it was advised that
Australian mutual ADIs had had a marginal decline in market share since
the onset of the GFC, but had not been able to take up any of the excess
capacity that was available when non-bank lenders exited the market.
169
It
is suggested that Australian mutual ADIs have been growing but not at
the rate of the larger banks.
170
2.126 The Committee also notes comments by the RBA made in a submission to
the House of Representatives Standing Committee on Economics
regarding the need for government intervention in the RMBS market to
foster competition:
While it is true that lenders relying on securitisation have lost
market share in recent months, it has always been the case that
some phases of the economic cycle favour some forms of financing
more than others. Securitisation has been strongly favoured over
the previous five years of very low global interest rates; now it is
at a disadvantage. Our view of recent events is that they are
cyclical in nature rather than a permanent change to the structure
of the market, in the sense that when market conditions settle,
securitisation will pick up again. As such, it would be premature
at this stage to embark on proposals such as the setting up of new
government bodies to support certain forms of financial activity.
171
2.127 In analysing this issue, the Committee is cognisant of the needs of regional
Australians. The Committee would only support the introduction of
such a scheme in Australia if there was clear evidence that regional
Australians were worse off because of smaller lenders’ access to funds
(resulting in higher mortgage borrowing costs for regional Australians)
over the long-term economic cycle.
167 Canada Mortgage Bonds Program Evaluation: Final Report, prepared by KPMG LLP, June 2008,
cited in Treasury, Submission No. 167, p. 4.
168 Treasury, Submission No. 167, pp. 4-5.
169 Mr Mark Degotardi, Transcript 6 July 2009, p. 35.
170 Mr Mark Degotardi, Transcript 6 July 2009, p. 35.
171 RBA, Submission No. 44, pp. 2-3, House of Representatives Standing Committee on Economics
Inquiry into competition in the banking and non-banking sectors.
40 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
Accessing credit in regional Australia
2.128 Most businesses need credit. In a growing economy the demand for credit
is often driven by a desire for growth. In a slowing economy credit is
required for cash flow.
172
This downturn has been somewhat unique
because the GFC has resulted in a general lack of liquidity which has
impacted the availability and cost of credit for individuals and business.
This section will specifically examine credit issues for business.
2.129 Throughout this inquiry, the Committee has received evidence suggesting
that businesses in regional Australia are experiencing difficulties accessing
credit.
173
The NSW Business Chamber, for example, conducted a survey of
its members, which noted that in the three month period to March 2009, 30
per cent of respondents, most of whom are in regional NSW, thought it
had become harder to access credit.
174
2.130 The difficulty lending institutions have faced accessing wholesale credit
markets has clearly had a flow-on effect for businesses, as available credit
has constricted. The GFC has also curtailed lenders’ appetite for risk, and a
as result, ‘some loans that would have been offered prior to the GFC are
no longer readily available.’
175
2.131 Banking institutions provide credit, but so too do other businesses and
during this crisis, suppliers have reduced their payment terms thereby
putting further pressure on regional businesses.
176
Where lenders have
been willing to provide credit, the cost has also increased.
2.132 The increased cost of credit in the form of higher interest rates or increased
collateral has been a common experience facing business owners in
regional Australia. Thirty three per cent of respondents to a NSW Business
Chamber’s survey found that ‘credit had got more expensive to access’.
177
The Committee has also heard that interest rates being charged are so high
that the viability of some projects is threatened.
178
2.133 Credit costs for businesses have increased because lending institutions are
changing the way they handle risk
179
and because some non-bank lenders
have exited the market:
172 Mr Richard Snabel, Transcript 14 August 2009, p. 36.
173 Tamworth Regional Council, Submission No. 9, p. 1.
174 NSW Business Chamber, Submission No. 122, p. 3.
175 National Farmers’ Federation, Submission No. 41, p. 5.
176 Mr Alan Berechree, Transcript 20 April 2009, p. 43.
177 NSW Business Chamber, Submission No. 122, p. 3.
178 Mr Lee Whitely, Transcript 20 April 2009, p. 24.
179 Mr Richard Snabel, Transcript 14 August 2009, p. 37.
IMPACT OF THE GFC ON REGIONAL BUSINESS 41
Those non-bank lenders who would have, say, lent money to
people who we would not have now exited. That means there are
a group of businesses and institutions that are not getting money.
That is because prior to the global financial crisis they would not
have met banks’ risk profiles and banks would not have lent to
them.
180
2.134 Australian Bureau of Statistics (ABS) research shows that business lending
fell by just under 15 per cent between January and February this year,
which may in part be attributed to banks tightening their lending
criteria.
181
Although the banks and other ADIs such as credit unions and
building societies have asserted that they are still lending,
182
the
experience of business owners in regional Australia seems to contradict
this:
Certainly they tell us that they are finding it very difficult to get
any financial accommodation from the banks since the global
financial crisis became evident. The banks say that that is not the
case; that there is plenty of money around, and they will lend. But
the bank staff themselves, on a confidential basis, will tell you that
their lending criteria have changed dramatically and they require
a much more rigorous assessment of projects, particularly
development projects.
183
2.135 The higher cost of obtaining credit has not only limited the capacity of
many small and medium sized businesses to weather this global
downturn, but in some cases has been the catalyst to cease trading. The
Government has acknowledged this and taken the following action:
establishment in March 2009 of a small business complaints clearing
house within the office of the Minister for Small Business, Independent
Contractors and the Service Economy. Complaints about access to and
cost of bank finance are referred for resolution through the Australian
Bankers Association to senior management at the particular bank
concerned;
184
and
180 Mr David Bell, Transcript 6 July 2009, p. 47.
181 ABC News, Big drop in business lending, 15 April 2009,http://www.abc.net.au/news/stories/2009/04/15/2543093.htm, accessed 1 September 2009.
182 Mr David Bell, Transcript 6 July 2009, p. 47 & Mr Mark Degotardi, Transcript 6 July 2009, p. 36.
183 Mr Laurie Miller, Transcript 22 April 2009, p. 18.
184 Media release by the Hon Dr Craig Emerson, Minister for Small Business, Independent
Contractors and the Service Economy, ‘Banks to maintain funding to small business sector’, 6
March 2009.
42 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
activation from 1 September 2009 of Ozcar, a taxpayer-funded financing
scheme to provide liquidity support to car dealer financiers.
185
2.136 The Committee was advised by the Australian Bankers Association (in
July), that the use of the small business complaints line in the Minister for
Small Business’ office has been ‘extremely low…somewhere in the order
of 57 to 60 contacts’, which would indicate that ‘either people do not know
about it or that the incidence of credit problems is low’.
186
2.137 Given the volume of anecdotal evidence received by the Committee
suggesting that credit has become more difficult to access, the Committee
is inclined to believe that people have not been adequately informed about
the existence of the Small Business Credit Complaints clearing house
phone line. When queried about the lack of knowledge in the community
regarding the complaints line, the Department of Innovation, Industry,
Science and Research conceded that more publicity should lead to a
greater level of response.
187
Greater response is more likely to occur now
that the complaints line is being made accessible through the Small
Business Support Line, which acts as a link to information and referral
services on a wide range of business issues.
188
2.138 Awareness of government assistance was also an issue raised in relation to
Ozcar. Business representatives in Broken Hill advised the Committee that
car dealers there found information about Ozcar ‘not easily understood’.
189
The Committee understands that it will always be a challenge for
government to ensure that information about its programs is being
adequately communicated and understood in the community. However,
communication is an important component of any government program
and therefore, the Committee expects that the Government is making
every effort to educate the public about the assistance available to them,
particularly during a period of crisis such as currently being experienced.
2.139 The need for a program such as Ozcar illustrates the credit problem facing
businesses throughout Australia. Ozcar was designed to assist car dealers
as non-bank lenders such as GE Credit exited the market after the onset of
the GFC. When the Australian Bankers’ Association advised the
185 Media release by the Hon Wayne Swan, Treasurer, ‘Activation of car dealership financing
special purpose vehicle (‘Ozcar’)’, 28 August 2009.
186 Mr David Bell, Transcript 6 July 2009, p. 47.
187 Ms Sue Weston, Transcript 14 August 2009, p. 37.
188 Business.gov.au, Small Business Support Line, 3 September 2009,http://www.business.gov.au/Business+Entry+Point/News/Small+Business+Support+Line.h
tm, accessed 4 September 2009.
189 Mr Robin Edgecumbe, Transcript 7 July 2009, p. 16.
IMPACT OF THE GFC ON REGIONAL BUSINESS 43
Committee that their members have ‘continued to lend despite tight and
volatile credit markets’
190
this does not contradict evidence the Committee
has received around Australia suggesting that credit has been hard to
access. Credit from traditional lending institutions, such as banks and
other authorised ADIs may have increased in cost and they may be less
likely to assume greater risk, but it is the lack of alternate credit sources,
which may account for the apparent lack of available credit in regional
Australia.
Business and downturns
2.140 Many business operators in regional Australia have never run a business
during a downturn or have never experienced one of this magnitude.
191
Suddenly, they have been forced to respond to a rapid decline in demand
for products and services as well as a sudden lack of available credit
which has traditionally assisted businesses through cyclical downturns or
ensured ongoing cash flow:
Previously when we have been through these experiences before it
has not affected the financial institutions—they have always been
willing to see businesses through by extending their overdrafts
and things like that because they know that, in a cycle of about
five years or so, the zinc and lead prices will go through their
normal cycle and people will be able to repay their commitments.
But this time it is more than that and financial institutions are very
reluctant to come to the aid of businesses.
192
2.141 The response from business in regional Australia has varied. Each
business is attempting to survive in its own way with some common
trends emerging. Labour cost is often the first issue to be examined and
certainly employment figures suggest that businesses are reducing their
labour force and/or the hours worked.
193
However, some are looking to
future-proof their business by ‘re-negotiating supply terms, implementing
staff training and increasing marketing outputs’.
194
2.142 Some of this activity is occurring independently, but the Committee has
received sufficient evidence to suggest that many businesses in regional
190 Mr David Bell, Transcript 6 July 2009, p. 44.
191 Mrs Louise Southall, Transcript 6 July 2009, p. 59 & City of Wangaratta, Submission No. 23, p. 6.
192 Mr Robin Edgecumb, Transcript 7 July 2009, p. 15.
193 ABC News, Jobless figures weaken rate rise case, 10 September 2009.
194 Advance Cairns, Submission No. 160, p. 2.
44 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
Australia are seeking and receiving advice from business advisory
services:
…there is a real hunger out there for information about how to
focus on numbers, in particular—keeping an eye on your cash
flow, keeping an eye on making sure that you are paying bills and
bills are coming. There are those sorts of issues. That has been a
large part of our events program for this year, and it has been very
popular with our members.
195
2.143 Government has a strong role to play alongside industry groups in
assisting regional businesses through this period. This chapter has noted
some of the Commonwealth Government programs which provide
business mentoring and support. Some, such as Enterprise Connect and
the Business Enterprise Centres (BECs), were not designed as a response
to the GFC, yet have taken a direct role in assisting firms during the
crisis.
196
For example, BECs and other registered business organisations
have received additional funding for the Small Business Advisory Service
which is intended to ‘enhance access to information and advice on issues
important to sustaining and/or growing small business in response to the
current global financial crisis’.
197
2.144 The Small Business Advisory Service is being complemented by the Small
Business Support Line which:
…provides small business with advice and to put them in touch with
specialist advisers on matters such as obtaining finance, cash flow
management, retail leasing, personal stress and hardship counselling and
promotion and marketing advice.
198
To date, over 2220 people have utilised the Small Business Support Line
and 90 per cent of those surveyed have expressed satisfaction with the
service.
199
2.145 Likewise, Enterprise Connect offers a range of business services (noted in
Submission 169) and through the Innovative Regions and Remote
Enterprise Centres, supported by Enterprise Connect, regional and remote
Australia also has access to business support services.
200
195 Mrs Louise Southall, Transcript 6 July 2009, p. 59.
196 Department of Innovation, Industry, Science and Research, Submission No. 169, p. 3.
197 Ms Sue Weston, Transcript 14 August 2009, p. 28.
198 Ms Sue Weston, Transcript 14 August 2009, p. 28.
199 Minister Emerson, Media Release, Small business support line get the thumbs up, 20 October 2009.
200 Department of Innovation, Industry, Science and Research, Submission No. 169, p. 2.
3
I mpac t of t he GFC on r egi onal popul at i ons
Introduction
3.1 There is a personal aspect to this crisis that is often overlooked in
reporting on the GFC. It is easy to talk about manufacturing, retail and
tourism figures and the end of a mining boom. Unemployment figures can
be up, down or steady but these figures couch, in different terms, the
reality that people have been affected by this downturn. Jobs have been
lost and homes have been lost as a consequence of the GFC and social
services around the country have been strained. This chapter seeks to
highlight the human impact that this crisis has had on regional Australia.
Job losses in regional Australia
3.2 One of the most critical impacts of the GFC has been the loss of jobs. In the
first half of 2009, 87.5 per cent of regions recorded an increase in their
unemployment rate
1
and it is little surprise that those parts of regional
Australia dependent upon industries that have been adversely impacted
by the GFC have experienced corresponding job losses. What has been
different during this downturn is the rise in underemployment. Statistics
indicate that full-time employment has decreased while part-time
employment increased.
2
As one news source has reported, ‘the shedding
of work hours is far more pronounced than the shedding of jobs’.
3
This is
borne out in anecdotal reporting from around the country. In Ballarat, for
1 Department of Education, Employment and Workplace Relations, Australian Regional Labour
Markets June Quarter 2009.
2 Australian Bureau of Statistics, Labour Force, Australia, August 2009.
3 ABC News, Working hour erosion tells the real story, 6 August 2009.
46 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
example, local businesses affected by the GFC have negotiated with staff a
reduction in work hours in order to preserve jobs.
4
3.3 The Government has responded to the increasing levels of unemployment
in regional Australia in a number of ways. Its Keep Australia Working
strategy includes the support provided to business as part of the Nation
Building Economic Stimulus Plan. In addition to the creation of jobs
through economic stimulus, the Government is focusing efforts on three
areas:
Unemployment assistance;
Community assistance; and
Skills development.
3.4 Unemployed Australians are being provided support through the Job
Services Australia program. Under arrangements which commenced on 1
July 2009, job seekers ‘will receive an individual Employment Pathway
Plan, which can include literacy and numeracy programs, work
experience, help with resumes, trade equipment and training’.
5
3.5 Communities in regional Australia are being assisted through the
introduction of the Jobs Fund, which ‘supports community projects in
regions hardest hit by the downturn’.
6
The Government has also identified
20 Local Priority Employment Areas, in which Local Employment
Coordinators have been employed to ‘work with employers and not-for-
profit groups to identify new job opportunities and help match
employment and training opportunities with Government services and
funding’:
7
…the local employment coordinators have been tasked with going
around to meet with people and talk to them to make them aware
of the fact that there will be an opportunity for round 2 of the Jobs
Fund to have developed proposals.
8
In addition, Keep Australia Working Forums have been held in priority
areas as a means of facilitating discussion amongst business leaders, local
governments, employers and training and Job Services Australia
providers.
4 ABC News, Downturn prompts offers to cut work hours, 16 September 2009.
5 Keep Australia Working, Interim Report, p. 15.
6 Keep Australia Working, Interim Report, p. 17.
7 Keep Australia Working, Interim Report, p. 17.
8 Mr Graham Carters, Transcript 14 August 2009, p. 25.
IMPACT OF THE GFC ON REGIONAL POPULATIONS 47
3.6 Skills development is particularly important in regional Australia because
the growth of regional economies is dependant on the retention of skilled
labour in regional communities:
…we have seen people leaving the industry …[it is a] key
challenge and concern for the [marine] industry, because our
indicators are that as demand comes back, with the improvement
in economic circumstances and people’s household budgets
allowing for the expenditures which they previously enjoyed, that
demand will be picked up by imports rather than by domestic
product.
9
3.7 The Committee was concerned that regions do not lose their skills base
and as such, queried participants at each of its regional public hearings
about the retention of skilled labour in their regions. In many cases,
community representatives were not aware of what had happened to
those who had lost jobs in their regions.
10
In one instance, the Committee
received evidence suggesting that the Queensland State Government had
been able to track some redundant workers in Townsville through their
rapid response task force and their hotline;
11
however, the majority of the
Committee’s evidence suggests that despite the actions of the
Commonwealth Government, local governments were not across the
range of strategies being employed to keep redundant workers engaged in
their regions.
3.8 The evidence does reveal that three scenarios have been playing out in
regional Australia. In some areas, previous skills shortages have ensured
that some redundant employees have been able to pick up work in other
sectors and remain in the same location:
…probably over half were re-employed in the region. That was
probably a function of the really critical skills shortage we had
there for a while.
12
3.9 In other cases, notably in WA’s mining sector, fly-in/fly-out workers have
been able to find work on other sites and are either continuing their
commute from metropolitan centres or relocating their families back to
those centres—a prospect that does not bode well for regional
economies.
13
In some regional centres, there is no opportunity for skilled
9 Mr Donald Jones, Transcript 4 August 2009, pp. 16-17.
10 For example see Mr Anthony Brun, Transcript 29 April 2009, p. 11.
11 Dr Lisa McDonald, Transcript 3 September 2009, p. 30.
12 Dr Lisa McDonald, Transcript 3 September 2009, p. 30.
13 Mr Anthony Brun, Transcript 29 April 2009, pp. 11-12.
48 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
workers to find alternative work in their field and there is a danger that
they will be forced to relocate.
14
3.10 Finally, evidence suggests that some companies are ‘working hard to
retain skilled workers’
15
and unlike previous economic downturns,
employers are reducing staff hours rather than laying staff off.
16
Some of
this activity may be in recognition of the need to retain skilled workers for
the eventual recovery. This is particularly important in regional Australia,
where the loss of a skilled workforce can have a significant impact on the
regional economy.
3.11 Governments and industry are trying to retain skills within regional
communities. In addition to immediate government support offered to the
unemployed, education and training offer the greatest opportunity to
equip the unemployed with the necessary skills to ensure that they are
able to source alternative work within their communities:
…we are doing a lot of [training] work with workers who are
displaced from the manufacturing sector…I think I can confidently
put up my hand and say that all levels of government have
recognised that and are doing terrific work…
17
…I think that, with the changes that are being made by the state
government and also the introduction of the Australian technical
colleges—we have a campus that has just been opened here—we
are well on the way to ensuring that we can respond.
18
…there is a strong commitment to retaining apprentices and
trainees within existing industry. I think industry has learnt from
the experience of the last few years and where possible is
maintaining a commitment to training to look at the future options
for being able to pick up on labour supply.
19
3.12 Skills development is being progressed in a number of ways. The
Government has increased the number of Vocational Education and
Training (VET) places in acute skills shortage areas and is increasing the
number of places available at higher education facilities. Additional
training is being provided to the long-term unemployed and extra money
has been provided to apprentices to assist them to continue or complete
14 Mr Rodney Greene, Transcript 20 April 2009, p. 12.
15 Mackay Region ACC, Submission No. 45, p. 3.
16 ABC News, Jobless figures weaken rate rise case, 10 September 2009.
17 Mr Grant Sutherland, Transcript 22 April, p. 13.
18 Mr Rodney Greene, Transcript 20 April 2009, p. 14.
19 Mr Donald Punch, Transcript 30 April 2009, p. 30.
IMPACT OF THE GFC ON REGIONAL POPULATIONS 49
their training during this period.
20
In response to the Keep Australia
Working Report, the Jobs Fund has been adjusted to include a new
Apprentice Kickstart Package ‘to accelerate the take-up of apprenticeships
in order to support the availability of trade skills in crucial sectors of the
economy’.
21
3.13 Skills will be retained if the right kind of training is provided. People
should be trained in skills for which there are jobs available now and into
the future.
22
The Committee has been advised that in the past, the typical
training provider approach, in the manufacturing sector for example, may
have meant going to Ford and signing up workers for a certificate in some
automotive category even though, in reality, there probably wasn’t going
to be any work for someone with those skills.
23
They should also be
provided with training that will increase and develop their skills, making
them more employable when the economy recovers:
When Caterpillar comes back they are going to want to grow their
employment pretty quickly but with more skilled employees than
the people who are losing their jobs now. We need to get
tradespeople up to university degrees and people who are
unskilled into at least trade diploma or advanced diploma stage.
They are the sorts of things we need to be moving on within the
next few months to take advantage of the lull, if you like, before
the economic growth that will come at the end of this crisis.
24
3.14 The recently announced National Resource Sector Employment Taskforce
is intended, in part, to examine the skills needed in the resource sector and
plan for the education and training necessary to fill those skilled
positions.
25
The evidence noted here, suggests that there is need for similar
workforce planning in other sectors of the economy. The National
Resource Sector Employment Taskforce effectiveness has yet to be tested,
however, should resource sector-specific, Commonwealth Government
workforce planning prove successful, then there may be scope for similar
planning to occur in other sectors of the economy, notably the
manufacturing sector.
20 Keep Australia Working, Interim Report, p. 15.
21 DEEWR website,http://www.deewr.gov.au/Employment/KeepAustraliaWorking/Pages/home.aspx,
accessed 21 October 2009.
22 Professor Sue Kilpatrick, Transcript 22 April 2009, p. 31.
23 Mr Grant Sutherland, Transcript 22 April, p. 13.
24 Mr Paul Arnold, Transcript 20 April 2009, p. 6.
25 Media Release, The Hon Gary Gray AO MP, Gray to Head Up Resource Jobs Taskforce, 2 October
2009.
50 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
Mortgage stress in regional Australia
3.15 There is a direct link between unemployment and mortgage stress and as
unemployment and underemployment rise, Australians become
increasingly concerned about losing their jobs and their homes. This is
equally true in regional Australia where almost 40 per cent of people
could only continue to keep paying their mortgages for one to three
months if they or their partner lost a job.
26
3.16 In late 2008 and early 2009, when unemployment in the regions was rising
precipitously, unemployment and underemployment was accounting for
the majority of hardship applications received by mortgage insurers:
27
In the first quarter of 2009, more than 500 hardship applications
were approved as a result of employment related factors. The total
number of arrears and mortgages in possession…as at May 2009
for regional areas was 672, which represents a significant increase
since May 2008. In May 2009, the nationwide delinquency rate was
0.60 per cent. Some of the key regional areas of concern which
were above the national delinquency average included, for
example, the Hunter Region in New South Wales, which had a
delinquency rate of 0.79 per cent; the Illawarra in the south-eastern
region of New South Wales, which had a delinquency rate of 1.25
per cent; the northern far west, north-west region in New South
Wales, which had a delinquency rate of 0.70 per cent; the north
and west region in Queensland, which had a delinquency rate of
0.98 per cent; and the Mornington Peninsula, which had a
delinquency rate of 0.96 per cent.
28
3.17 The Committee visited some of the areas cited by mortgage insurers as
being of particular concern. In Broken Hill, mine closures have resulted in
a situation whereby people have:
…refinanced and remortgaged when employed, substantially in
mining activities, only to be faced with a sharp decrease in the
value of their mortgage property, unanticipated unemployment
when there were recent closures in the mines, and the consequent
inability to service those mortgages. Forced repossession by the
financiers has been the result and/or the inability to sell the
mortgage property for an amount equal to the mortgage liabilities.
26 Ms Kristen Foster, Transcript 6 July 2009, p. 3.
27 Ms Kristen Foster, Transcript 6 July 2009, p. 3.
28 Ms Kristen Foster, Transcript 6 July 2009, p. 3.
IMPACT OF THE GFC ON REGIONAL POPULATIONS 51
In the majority of cases the forced sale has realised a figure
substantially less than the amount of the liability.
29
3.18 A financial counsellor speaking with the Committee in Broken Hill
advised that ‘clients with mortgage stress have increased by 60 per cent’.
30
In the most extreme of circumstances, some have simply abandoned their
mortgaged premises.
31
3.19 In April 2009, the Commonwealth Government announced an agreement
between itself and Australia’s four major banks to assist borrowers
experiencing mortgage stress as a result of the GFC.
32
The agreement
reached focused on principles which placed obligations on the four major
banks to provide temporary relief to borrowers and provide assistance
options. The agreement was subsequently extended to building societies
and credit unions. In it, lenders agreed to:
in relation to mortgages, postponement for up to 12 months the dates
on which payments are due under the contract (with interest to be
capitalised into the loan);
an extension of the period of the contract and a reduction in the amount
of each payment due under the contract;
interest-only breaks on loan repayments; and
fee waivers.
33
3.20 At its hearing in Sydney, Genworth, a mortgage insurance provider,
welcomed the agreement between the Government lenders but argued for
greater assistance in the form of a national unemployment mortgage
assistance program (NUMAP).
34
Under such a scheme:
Where the borrower cannot meet his repayments because he is
unemployed, he can apply to the federal government…along the
lines of a HECS style program where he gets the funding to keep
the mortgage up to date. The expectation would be that the lender
would convert the loan to an interest-only loan—in other words,
the borrower is not profiting from their demise—but the
29 Ms Rebecca McIlveen, Transcript 7 July 2009, p. 49.
30 Mrs Sherrie Wilkins, Transcript 7 July 2009, p. 51.
31 Ms Rebecca McIlveen, Transcript 7 July 2009, p. 49.
32 The Hon Wayne Swan, Media Release, Relieving Mortgage Stress, The Principles: A Common
Approach For Assisting Borrowers Facing Financial Hardship, 5 April 2009.
33 The Hon Wayne Swan, Media Release, Relieving Mortgage Stress, The Principles: A Common
Approach For Assisting Borrowers Facing Financial Hardship, 5 April 2009.
34 Ms Kristen Foster, Transcript 6 July 2009, p. 3.
52 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
repayment would then come from this federal government
authority or body, would be paid directly to the lender’s account
to keep the loan up-to-date and at the same time the consumer
would enter into an agreement, similar to HECS, so that once he is
back in the workforce he would repay the lender, which happens
to be the federal government, the repayments the government has
made on his behalf.
35
3.21 Genworth also advocated for the introduction of an industry funded
mortgage stress helpline for borrowers experiencing problems with their
mortgage repayments.
36
While funded by industry, it was proposed that
the helpline operate independently of industry in order to reduce potential
conflicts in seeking advice from organisations from which assistance is
also being sought.
37
3.22 The Committee canvassed with various stakeholders the potential for an
industry funded mortgage assistance helpline. The responses were not
overwhelmingly supportive. In NSW, there is already a Credit and Debt
Hotline operated by the Consumer Credit Legal Centre and the
establishment of another hotline would not be very helpful ‘because it can
be very confusing for consumers to work out where to go for advice’.
38
3.23 It was noted, however, that other states and territories might not have
access to a similar service, in which case, a hotline would be helpful
provided that it:
…be seen to be independent and for it to be operated by a body
such as a specialist community legal centre, a legal aid commission
or some other independent body so that consumers can have
confidence that the advice they are getting is appropriate and
tailored to their needs. And it should involve accommodation of
legal assistance and financial counselling.
39
3.24 Australia’s banks were less supportive:
…I am not sure what value that would add because we have
already set up hotlines…so from a bank point I am not sure
whether that would actually help; in fact, it might have the effect
of diverting someone to a hotline whereas they might be better off
speaking to their bank. It may be of assistance for other lenders
35 Mr Peter Hall, Transcript 6 July 2009, p. 7.
36 Ms Kristen Foster, Transcript 6 July 2009, p. 4.
37 Mr Peter Hall, Transcript 6 July 2009, p. 9.
38 Mr Alan Kirkland, Transcript 6 July 2009, p. 20.
39 Mr Joseph Catanzariti, Transcript 6 July 2009, p. 22.
IMPACT OF THE GFC ON REGIONAL POPULATIONS 53
outside the mainstream, but I think for banks, and possibly for
mutuals as well, what we should be promoting is that people
should be contacting their bank in the first instance. So I am not
convinced it is a good idea.
40
3.25 A debt counsellor in regional Australia was of the opinion that a mortgage
stress hotline was ‘better than nothing’ but, in general, believed that
advice lines are ‘limited in terms of the services that they can provide’
because clients need to discuss issues on a face-to-face basis.
41
3.26 In the case of NUMAP and the mortgage assistance hotline, Genworth
recommends establishing a federal government task force to monitor
mortgage stress triggered by unemployment and analyse the impact of a
national unemployment mortgage assistance program.
42
3.27 In September 2009, the unemployment rate remained high (5.8%)
43
, but
steady and was not moving rapidly towards Treasury’s earlier prediction
that the unemployment rate could reach 8.5%.
44
There is also evidence that
Australian mortgage delinquencies are on a downward trend. Fitch
Ratings notes that peak arrears were reached in the fourth quarter of 2008
and have been decreasing in 2009, due in part to the reduction in official
interest rates and the relative strength of Australian employment levels.
45
3.28 Despite the relatively positive indicators at present, the Committee is
concerned that unemployment could continue to rise, leading to increased
delinquencies. If this occurs, regional Australia will be disproportionately
affected— 15 of the Government’s 20 Local Employment Priority Areas
are in regional Australia. Close monitoring of unemployment figures and
levels of arrears will be necessary, with any rise in these figures indicating
a need for further action. Evidence collected by this Committee does not
strongly support the introduction of a mortgage assistance helpline;
however, the Committee does believe that the Government should
examine in detail the potential impact of a national unemployment
mortgage assistance program as a means of responding to rising
unemployment and mortgage stress in regional Australia.
40 Mr David Bell, Transcript 6 July 2009, p. 46.
41 Ms Rebecca McIlveen, Transcript 7 July 2009, p. 51.
42 Ms Kristen Foster, Transcript 6 July 2009, p. 4.
43 Australian Bureau of Statistics, Labour Force, Australia, August 2009.
44 Mr Peter Hall, Transcript 6 July 2009, p. 6.
45 ABC News, Delinquent mortgages continue declining: Fitch, 10 September 2009.
54 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
Recommendation 5
3.29 The Committee recommends that the Government examine in detail the
potential impact of a national unemployment mortgage assistance
program as a means of responding to rising unemployment and
mortgage stress in regional Australia, should unemployment and
mortgage default levels continue to rise.
The impact of the GFC on social services in regional Australia
3.30 The GFC has left some people in regional Australia unemployed or
underemployed and struggling to pay their bills. As a result, demand for
social services has increased. The Committee acknowledges that
governments and private service providers are responding to that demand
as best they can, but in many cases, resources are stretched. Greater
funding and resourcing for social services is an ongoing concern and will
assist to alleviate some of the pressure felt by providers. There are,
however, additional service provision models being tested which could
also have a positive impact on the provision of social services in regional
Australia.
3.31 Evidence provided to the Committee from around Australia, particularly
in the first part of 2009, indicated a substantial rise in demand for social
services. The Department of Human Services (DHS) indicated that ‘all
Centrelink’s service channels have seen a significant increase in demand
from people testing their eligibility for government assistance and income
support’
46
and Newstart and Youth Allowance claims over the past year
have also increased.
47
In May 2009, the Centrelink office in Mandurah, was
experiencing long queues often stretching out the door past 5 o’clock.
48
Private service providers in Mandurah were also indicating increased
demand. The Salvation Army there was seeing in excess of ’12 new
families per week’ contacting their office.
49
Community legal centres in
regional NSW were seeing:
… a significant increase in inquiries relating to credit/debt issues.
In addition, advice is being sought in areas of previous low
demand, such as repossessions, bankruptcy and mortgage issues.
There has also been a significant increase in the demand for
46 Department of Human Services, Submission No. 154, p. 4.
47 Department of Human Services, Submission No. 154, p. 4.
48 Mayor Patricia Creevey, Transcript 1 May 2009, p. 15.
49 Peel Community Development Group, Submission No. 142, p. 1.
IMPACT OF THE GFC ON REGIONAL POPULATIONS 55
financial counselling services attached to community legal
centres.
50
3.32 The increase in demand has exposed some service delivery problems.
Evidence suggests that non-profit service providers are lacking the staff
and finances required to respond to large-scale increases in
unemployment. In the Peel region, for example:
…welfare organisations themselves have a finite monetary and
staff resource base. They are either donation based or minimally
funded and are currently being put under greatly increased
financial and volunteer staffing pressure…there is no current
increase in resources for our Peel Region welfare organisations yet
the numbers seeking assistance continue to rise.
51
3.33 Public legal assistance services struggled to meet demand prior to the
GFC.
52
The crisis has exacerbated that situation, particularly in regional
Australia:
Public legal assistance services in regional areas are not well
placed to meet existing demand on services, let alone the increase
in demand resulting from the GFC.
53
3.34 It would appear that Centrelink too has suffered from a lack of available
service delivery staff in some instances. In Mandurah it was claimed that
Centrelink staff were ‘overwhelmed’ as a result of reductions in staff
numbers:
…as unemployment went down, the staff were cut…the staff are
very overwhelmed. There are long queues. Previously Centrelink
would go to places where redundancies were happening and
provide that information. That is not happening now. I think that
is because of the staffing and the pressures that Centrelink are
under. It is not the individual staff. The system is slow to
respond.
54
3.35 Some evidence has also suggested that increasing demand is not always
being met at Centrelink call centres. In the Central Murray, the Committee
is advised that the Centrelink call centre number was ‘constantly busy’.
55
50 NSW Legal Assistance Forum, Submission No. 148, p. 3.
51 Peel Community Development Group, Submission No. 142, p. 2.
52 NSW Legal Assistance Forum, Submission No. 148, p. 6.
53 NSW Legal Assistance Forum, Submission No. 148, p. 6.
54 Mayor Patricia Creevey, Transcript 1 May 2009, p. 41.
55 Central Murray ACC, Submission No. 100, p. 9.
56 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
In addition, many in the community are not aware of Centrelink’s various
eligibility requirements, having never accessed them before:
When they get their redundancy package, apparently the system
in place at Centrelink at the moment is that they actually have to
spend their holiday pay and their redundancy package before they
can start to get Centrelink benefits. So we are seeing people that
are selling off their hard-earned assets that they have worked for
as a family. That has huge ramifications.
56
3.36 A rapid rise in unemployment will put a strain on service delivery. One
way to overcome access and lack of knowledge problems is to access
worksites where staff are being made redundant before they leave, in
order to advise them of the services available and the guidelines
surrounding those services. There is indication that this has been
occurring. In Burnie, for example, Centrelink staff were at the Caterpillar
factory for three weeks having interviews with all of the employees as
they went out the door.
57
3.37 The coordination of services is also an important mechanism for assisting
people during times of crisis. In regional Australia, as in the rest of the
country, there is no one service provider and ‘making sure that people
have access to the full range of services is a challenge’.
58
The Committee is
aware that in response to the GFC, Centrelink has been working with the
Community Response Task Force, local Job Services Australia providers
and Local Employment Coordinators as well as providing referrals to
social workers for long-term assistance.
59
Centrelink has also begun
trialling a series of co-location sites between Centrelink and Medicare in
order to explore ways in which it can ‘work more effectively with other
service providers’.
60
3.38 The NSW Legal Assistance Forum is a proponent of integrated service
delivery. It cited the West Heidelberg Community Legal Centre in
Victoria, which is co-located with a health service, as a good example of
the successful integration of social services.
61
In the field of legal aid, the
Mortgage Distress Legal Aid NSW initiative has been set up to provide
legal assistance and financial counselling and will be ‘working very
closely with Centrelink and Job Services Australia providers to try to pick
56 Ms Donna Selby, Transcript 1 May, p. 40.
57 Mr Paul Arnold, Transcript 20 April 2009, p. 14.
58 Ms Catherine Rule, Transcript 14 August 2009, p. 41.
59 See Transcript 14 August 2009, pp. 39-50.
60 Ms Catherine Rule, Transcript 14 August 2009, p. 41.
61 Mr Alan Kirkland, Transcript 6 July 2009, p. 29.
IMPACT OF THE GFC ON REGIONAL POPULATIONS 57
up people at the point that they become unemployed or register as
unemployed’.
62
3.39 The combination of collectivised service provision and the use of a
localised, place-based approach will further enhance the response of social
service providers during crises. As this report has noted, the GFC has
affected different regions differently. Therefore, the social services
required by a region will vary across the country. Centrelink has had
experience employing localised solutions to service provision:
…it is not looking at service delivery for the same people across
the board delivered in the same way. As an example of that I will
talk about Cooma. It is very small and some people may think it is
close to Canberra and able to access services. We are doing a
project about young carers and house support. Young carers are
people still at school caring for sick parents. It is just looking at
how we might be able to act as a connector of services for a group
that is not or have not been able to access it—looking at what is
available, what needs to be available to keep them in school, in
education, to support them and all sorts of things.
63
3.40 Moves towards greater collective service provision, tailored to local needs
is an important step forward and has the potential to assist regional
Australia at all times, but in particular during times of crisis. The evidence
cited here suggests that the Commonwealth Government has attempted to
coordinate the provision of its services during the GFC
64
, and while this
may be occurring between other levels of government, the Committee has
not received evidence demonstrating an awareness of the full range of
human services provided in the regions or a high level of integration
between those services.
3.41 As a national provider, the Commonwealth Government has a role to play
in promoting and encouraging local, coordinated service provision
between the three tiers of government. The Local Employment
Coordinators have been working closely with local government, the not-
for-profit sector, employers and providers during this crisis
65
and
although they are limited to specific regions around the country, their
work warrants further examination. An evaluation of their ability to act as
a conduit between local, state and the Commonwealth Government to
62 Mr Alan Kirkland, Transcript 6 July 2009, p. 29.
63 Ms Moya Drayton, Transcript 6 July 2009, p. 44.
64 See also Ms Stephanie Foster, Transcript 14 August 2009, p. 9.
65 Mr Graham Carters, Transcript 14 August 2009, p. 20.
58 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
promote coordinated human service provision could provide the basis
upon which greater coordinated action and information sharing about
available services can occur in the future.
Recommendation 6
3.42 The Committee recommends that the Government evaluate the work of
the Local Employment Coordinators with particular focus on their
ability to act as a conduit between local, state and the Commonwealth
Government to promote coordinated human service provision, with a
view to utilising the evaluation as a basis upon which greater
coordinated action and information sharing about available services can
occur in the future.
3.43 In addition, the DHS co-location site trials, while a promising step in the
right direction, are small and, like the LECs, limited in their geographic
coverage. The trials are also expensive to undertake. DHS is attempting to
overcome the financial impost of these trials by exploring more efficient
and effective service delivery mechanisms in order to alleviate resources
needed for local services—this should be encouraged.
66
However, the GFC
has demonstrated a need in regional Australia for the provision of
localised, coordinated and collective social services.
Recommendation 7
3.44 The Committee recommends that the Government increase funding to
the Department of Human Services in order to expand its co-location
site trials and increase its local service provision activities.
3.45 In addition to the benefits derived from coordinated service provision, the
Committee received evidence in Mandurah and Geelong citing the
importance of locating government departments in regional centres to
increase employment opportunities, thereby strengthening regional
Australia’s ability to withstand economic downturns:
66 Ms Moya Drayton, Transcript 6 July 2009, p. 49.
IMPACT OF THE GFC ON REGIONAL POPULATIONS 59
The relocation of the Victorian Transport Accident Commission
(TAC) to Geelong has been a major success both for the G21
Region and for the TAC. For the region, it has broadened the base
of professional skills making it easier for such staff to consider
working in the region because they still have career options. Such
organisations are not directly affected by problems such as the
GFC, thereby providing a more stable base of employment and
reducing the impact of external shocks. The larger pool of
expertise also assists in attracting other professional organisations
to the region. For the TAC, it has reduced their cost base and
should reduce staff turnover and absenteeism, well established
characteristics of regional workforces. The overall response of staff
relocated with the TAC has been positive, with recognition of
advantages such as lower housing costs and an excellent lifestyle.
67
3.46 The Committee agrees that an increased government presence in the
regions would be of great value. On several occasions, state government
offices have been successfully relocated to regional areas—TAC being one
example—and the Committee recommends that the Commonwealth
Government examine options for locating government departments or
functions of government departments into regional areas.
Recommendation 8
3.47 The Committee recommends that the Commonwealth Government
examine options for locating government departments or functions of
government departments into regional areas.
67 G21, Submission No. 33, pp. 6-7.
60 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
4
I mpac t of t he GFC on l oc al gover nment
4.1 Local governments across Australia have been affected by the GFC.
Indirectly, by its impact on local economies, and directly by its impact on
council revenues. Specifically, councils have suffered from:
decreases in income as property development slows;
decreases in rates revenue; and
reduced income from poorly performing investments.
1
4.2 These effects have not been felt evenly across all local governments. In a
similar manner to its impact on business, the GFC has disproportionately
affected local governments in areas dependent on housing growth and
single industries. It has also substantially impacted the balance sheets of
local governments in NSW and WA that had council money invested in
collateralised debt obligations (CDOs).
2
4.3 Local governments source their income from rates, the sale of goods and
services, government grants and various other sources.
3
There is an
indication that rate revenue has slowed
4
and in some cases declined
dramatically:
…rates have been declining rapidly as a result of a significant
slowing in the housing market for Mandurah. The City's 2007/08
interim rates revenue was $1.11m; however, 2008/09 Budget
1 Department of Infrastructure, Transport, Regional Development and Local Government,
Submission No. 153, p. 5.
2 Mr Adrian Beresford-Wylie, Transcript 14 August, p. 65.
3 Australian Local Government Submission to Productivity Commission study into local
government sources revenue, July 2007.
4 National Sea Change Task Force, Submission No. 43, p. 13 & City of Townsville, Submission No.
68, p. 13.
62 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
forecasts have been reduced to $550,000 (Original budget $1.05m -
48% reduction).
5
4.4 Building and planning fees have, in some cases, been hit particularly hard.
In Mandurah, where building activity has been strong for some time, their
revenue from building and planning fees halved:
Our building application fees are about $1.8 million a year. They
have dropped to about half a million dollars a year. Our planning
fees were about $800,000 a year previously. They have dropped to
about $400,000 a year… at an inert waste disposal site, which takes
just building rubble, where we were getting $600,000 a year in
revenue from it, we are getting about $150,000 this year. So that is
an indicator, again, of the lack of building activity that is
occurring. Probably this financial year, there will be about a $3
million impact on 2008-09. We suspect it will be $4 million or $5
million next year.
6
A similar situation has occurred on the Gold Coast, another high growth
area, where a range of cancelled developments has led to a reduction in
council income.
7
Revenue reductions amounting to millions of dollars has
a substantial impact on a council’s operations.
4.5 The Shire of Busselton has found itself faced with a choice between
decreasing services or increasing its rate structure. It has also considered
cutting back on infrastructure spending and employee numbers.
8
Neighbouring shires have considered spending less on tourism and visitor
servicing, ceasing staff appointments and instigating a wage freeze for the
2009-10 financial year.
9
4.6 In an attempt to assist local governments around Australia weather the
GFC, the Commonwealth Government brought forward a portion of
2010’s Financial Assistance Grants payment ‘to help councils manage cash
flow’.
10
It is also expected that the Nation Building and Jobs Plan,
Community Infrastructure Program and the Jobs Fund will stimulate local
5 City of Mandurah, Submission No. 49, p. 4.
6 Mr Mark Newman, Transcript 1 May 2009, pp. 7-8.
7 Mr Grayson Perry, Transcript 4 August 2009, p. 13.
8 Councillor Wesley Hartley, Transcript 30 April 2009, pp. 2-3.
9 Mr Dean Unsworth, Transcript 1 May 2009, pp. 4-5.
10 Department of Infrastructure, Transport, Regional Development and Local Government,
Submission No. 153, p. 5.
IMPACT OF THE GFC ON LOCAL GOVERNMENT 63
economies, thereby assisting local governments to maintain revenue
streams.
11
4.7 In addition to the Commonwealth Government support provided to local
communities, some councils have chosen to increase rather than reduce
spending in the face of declining revenue. Gold Coast City Council has
introduced a stimulus package to ‘engender confidence within the local
economy’.
12
Its stimulus spending is designed to target ‘those projects that
are “shovel ready” and will deliver on job creation, retention and
economic growth’.
13
4.8 Few local governments, however, have the luxury of introducing
significant stimulus spending measures during economic downturns.
Indeed, many councils have found that the money they already had is no
longer contributing returns, as a result of declining interest rates and
losses from investments.
4.9 The Committee received evidence indicating that some councils in
Western Australia and NSW had exposure to investments which have
declined considerably since the onset of the GFC because the investments
were linked to the sub-prime mortgage market in the United States.
Investment in CDOs, in particular, has been the main cause of the mark-
to-market book losses of some councils in these states. CDOs are best
explained by Michael Cole, author of the 2008 Review of NSW Local
Government Investments report, commissioned by the NSW Government
in response to council losses:
CDOs are a type of structured Asset Backed Security (ABS) that
gain exposure to the credit of a portfolio of fixed income assets
and divides the credit risk among different tranches, each with a
different level of risk and return: senior tranches (rated AAA),
mezzanine tranches (AA to BB), and equity tranches (unrated).
The collateral for CDOs includes [mortgage-backed securities]
MBS, ABS, leveraged loans and corporate bonds. By combining
low rated sub-prime MBS with high rated collateral, originators
were able to create highly rated CDOs that could be widely
distributed to traditionally conservative investors such as
commercial banks, insurance companies and pension funds.
14
11 Department of Infrastructure, Transport, Regional Development and Local Government,
Submission No. 153, p. 5.
12 Gold Coast City Council, Submission No. 74, p. 16.
13 Gold Coast City Council, Submission No. 74, p. 16.
14 Michael Cole, Review of NSW Local Government Investments: Final Report, April 2008, p. 7.
64 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
4.10 Evidence provided to this inquiry regarding council investment losses has
come predominantly from NSW regional councils. Broken Hill City
Council has had to write-down its investments in the last financial year by
just over $2 million and there is a probability that this financial year, the
council will need to write-down the face value of its investments another
$1.5 million to $2 million.
15
4.11 This will have a substantial impact on the Council’s service provision:
…we have had to defer some of our capital programs. We have set
ourselves a long-term capital expenditure level of just over $5.6
million, whereas last year and this year we spent or are aiming to
spend over $7.6 million. We have had to wind that back
significantly for the future based on our ability to finance the
works.
16
4.12 Councils sought out investments with the ‘highest return available’, so
long as they were consistent with the restrictions imposed by the NSW
Local Government Minister’s 2005 Ministerial Investment Order.
17
The
councils in question were also ‘aggressively sold these complex
investment products’ by suppliers, who, in some cases, were distributing
the products as well as acting as advisers to councils.
18
Lehman Brothers,
in particular, were active in the WA and NSW markets.
19
4.13 It should be noted that these investment products were highly rated by
ratings agencies and did adhere to the Minister’s Investment Order.
Councils, however, are ‘governed by their fiduciary responsibility as
trustees for the prudent investment of public funds’
20
and therefore,
should have been less willing to accept the risk/return trade-off associated
with these products.
21
Councils in NSW would have also been aware of
Circular No. 06-70 issued in November 2006, which stated that:
Ratings in no way guarantee the investment or protect an investor
against loss. Councils should not misinterpret prescribed ratings
as an implicit guarantee of investments or entities that have such
ratings.
22
15 Mr Desmond Bilske, Transcript 7 July 2009, p. 6.
16 Mr Desmond Bilske, Transcript 7 July 2009, p. 6.
17 Michael Cole, Review of NSW Local Government Investments: Final Report, April 2008, p. 9.
18 Michael Cole, Review of NSW Local Government Investments: Final Report, April 2008, p. 10.
19 Mr Adrian Beresford-Wylie, Transcript 14 August, p. 65.
20 Michael Cole, Review of NSW Local Government Investments: Final Report, April 2008, p. 10.
21 Michael Cole, Review of NSW Local Government Investments: Final Report, April 2008, p. 11.
22 NSW Department of Local Government, Circular to Councils No. 06-70: Investment Requirements
for NSW Councils, 27 November 2006, pp. 2-3.
IMPACT OF THE GFC ON LOCAL GOVERNMENT 65
4.14 Stated responsibilities and advice from state governments was not
sufficient in guiding council staff, who did not always take great care in
examining investment products:
...if people had read the 50 to 100 pages of information that was
provided behind each of the investment products, there would
have been some concerns, generally, from staff in their advice to
take on the higher-rate return on investments.
23
4.15 The Cole report, presented in April of 2008, agreed, citing eight
recommendations intended to strengthen and clarify the investment order
provided to NSW councils. The final recommendation in the report called
on the NSW Department of Local Government to release investment
policy guidelines similar to those issued in February 2008 by the Western
Australian Department of Local Government in response to council losses
in WA.
24
4.16 The NSW Government accepted all eight of Cole’s recommendations,
issued a revised Ministerial Investment Order in August 2008 and has
drafted investment policy guidelines for local councils in NSW.
25
The
Committee expects that revised investment guidelines issued in WA and
NSW, will lead to a more conservative investment regime and help
councils in both states.
4.17 The Committee is concerned, however, that within the draft NSW
investment guidelines there is no guidance similar to that issued by the
Director-general of the Department of Local Government under Circular
to Councils No. 06-70, citing the danger of relying too heavily on the
rating of an investment product. Perhaps this omission reflects a
consistent policy. Within the same circular, it is suggested that despite the
need for caution when assessing investment ratings, ‘ratings provide the
best independent information available’.
26
The role of rating agencies in
the GFC should serve to highlight a need for policy change. At the very
least, any new investment guidelines should encourage caution when
assessing an investment product’s rating.
23 Mr Desmond Bilske, Transcript 7 July 2009, p. 6.
24 Michael Cole, Review of NSW Local Government Investments: Final Report, April 2008, p. 6.
25 See NSW Department of Local Government, Draft Investment Policy Guidelines, May 2009,http://www.dlg.nsw.gov.au/DLG/DLGHome/documents/Information/draft investmen
t%20policy%20guidelines.pdf, accessed 24 September 2009.
26 NSW Department of Local Government, Circular to Councils No. 06-70: Investment Requirements
for NSW Councils, 27 November 2006, p. 3.
66 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
4.18 The WA and NSW experience should also serve as a reminder to councils
in other states. Although none were affected, the need to properly handle
risk in investing public money is a lesson that should be heeded by
councils across the country.
5
St r engt heni ng Aust r al i a’s r egi ons
5.1 The GFC is one event in a history of continual demographic,
environmental and economic change in Australia’s regions. Various
governments have responded to these changes by implementing policies
designed to develop the regions into strong, vibrant places to live. The
GFC may be seen as an opportunity to examine the impact of change on
regional Australia and test policy responses. The lessons learned will
assist in strengthening existing regional development policy, which will
help regional Australia withstand future downturns.
5.2 This chapter will apply some of the evidence noted in the previous
chapters by framing the Committee’s position on regional development
policy within a discussion about current policy settings and possible
future direction.
Regional development policy in Australia
5.3 Governments in Australia and around the world have long recognised the
importance of regional communities within the fabric of their societies.
Since the beginning of the 20
th
century, regional policy has undergone
several ideological progressions. This section will only note Australia’s
regional development experience from the mid-1980s until the present—
what has been described by the Bureau of Transport and Regional
Economics (now Bureau of Infrastructure, Transport and Regional
Economics (BITRE) as the post-trade liberalisation era.
1
It will then discuss
current policy settings before concluding with an outline of the
Committee’s preferred approach to regional development policy.
1 Bureau of Transport and Regional Economics, Working Paper 55, Government Interventions in
Pursuit of Regional Development: Learning from Experience, June 2003, p. 17.
68 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
Regional development and the post-trade liberalisation era
5.4 Regional Australia was sheltered from global trends and international
market conditions until the mid-1980s when the Australian Government
began a policy of trade liberalisation. BITRE explains that this new policy
‘meant that regional disparities [could] be felt more sharply in regions
particularly vulnerable to the pressures of international competitiveness
and global market shocks’.
2
Certainly the GFC has confirmed this
assertion.
5.5 The Commonwealth Government responded to the disparate effects of
trade liberalisation in regional Australia by introducing regional
development policies aimed at encouraging community driven solutions,
private sector participation and reduced unemployment through business
incubators and regional employment initiatives and incentives. These
initiatives were undertaken by the Country Centres Project and the Office
of Labour Market Adjustment.
3
5.6 Nevertheless, persistent unemployment in Australia’s regions remained.
The Commonwealth Government responded with an expanded Regional
Development Programme, which provided funding for regional
infrastructure projects and the establishment of community based
Regional Development Organisations supported by Area Consultative
Committees.
4
5.7 These policies were a reflection of regional development theory which
stressed rapid regional growth through:
a relatively large stock of capital;
a highly educated population; and
an economic environment that favoured knowledge–intensive
industries.
5
5.8 This approach to regional development remained relatively consistent
throughout the 1990s until 2001, when the Commonwealth Government
2 Bureau of Transport and Regional Economics, Working Paper 55, Government Interventions in
Pursuit of Regional Development: Learning from Experience, June 2003, pp. 17-18.
3 Bureau of Transport and Regional Economics, Working Paper 55, Government Interventions in
Pursuit of Regional Development: Learning from Experience, June 2003, p. 24.
4 Bureau of Transport and Regional Economics, Working Paper 55, Government Interventions in
Pursuit of Regional Development: Learning from Experience, June 2003, p. 24.
5 Bureau of Transport and Regional Economics, Working Paper 55, Government Interventions in
Pursuit of Regional Development: Learning from Experience, June 2003, pp. 24-25.
STRENGTHENING AUSTRALIA’S REGIONS 69
released a regional policy statement titled Stronger Regions, A Stronger
Australia which outlined the following broad goals for regional Australia:
strengthen regional economic and social opportunities;
sustain productive natural resources and environment;
deliver better regional services; and
adjust to economic, technological and government–induced change.
6
5.9 One of the strategies for achieving these goals included taking a whole-of-
government approach to regional development that promoted
‘coordination between departments and agencies in implementing
Commonwealth programmes’.
7
This approach was taken in recognition of
the benefits which could be derived from coordinating regional policy
across the federal government.
5.10 For the remainder of the period prior to 2007, regional development policy
promoted partnerships between communities, industry and government
under programs such as Regional Partnerships. The Area Consultative
Committees, established in 1994 to develop local training, eduction and
employment initiatives
8
, gained a more prominent role, focusing on the
‘dissemination of information on Government priorities and programmes
for the benefit of business and the community’.
9
5.11 After 2007, regional development policies began to mix previous theory
with some new approaches. Like its predecessors, the current government
continues to stress the importance of delivering quality regional services,
while enhancing the economic viability of regional communities.
5.12 Education has once again been highlighted as an important driver of
regional development as has the provision of ‘nation-building’
infrastructure, including a national broadband network. A whole-of-
government approach to regional development is supported but the
philosophy has been extended to include cooperation between federal,
state/territory and local governments as well as intra-departmental
cooperation at the federal level. Local government, in particular, has been
6 Bureau of Transport and Regional Economics, Working Paper 55, Government Interventions in
Pursuit of Regional Development: Learning from Experience, June 2003, p. 25.
7 Bureau of Transport and Regional Economics, Working Paper 55, Government Interventions in
Pursuit of Regional Development: Learning from Experience, June 2003, p. 25.
8 Bureau of Transport and Regional Economics, Working Paper 55, Government Interventions in
Pursuit of Regional Development: Learning from Experience, June 2003, p. 24.
9 Regional Development Australia website, About the ACC Network,http://www.rda.gov.au/about_the_acc_network/index.aspx, accessed 25 September 2009.
70 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
singled out as playing an important role in the development of Australia’s
regions. This has best been displayed by the direct funding provided to all
local governments through the Regional and Local Community
Infrastructure Program, increased funding through existing programs and
the establishment of the first Australian Council of Local Government.
5.13 The Area Consultative Committees (ACC) have been dissolved and
replaced by the Regional Development Australia (RDA) network. Like the
ACCs, RDA will continue to advise regional communities about
government programs and promote those programs in the regions. It will
also:
provide advice to both Governments about regional issues;
provide strategic input into Australian and NT government programs;
help to coordinate regional planning and regional development
initiatives; and
establish links and cooperative alliances as appropriate by closely
working with other regional development organisations, neighbouring
RDA committees and local governments to promote regional
development.
10
Three pillars of regional development policy
5.14 The Commonwealth Government was engaged in a significant re-
alignment of regional development policy at the onset of the GFC. The
crisis has highlighted the importance of regional development in abating
the effects of economic downturns on regional communities and has made
apparent the importance of continuing Commonwealth Government
programs and policies that build infrastructure, encourage education and
support the growth of business in regional Australia.
5.15 The Committee is supportive of a regional development policy
underpinned by three pillars:
Infrastructure;
Education; and
Business.
10 The Hon Maxine McKew MP, Media Release, Regional Development Australia – NT
Appointments,http://www.minister.infrastructure.gov.au/mm/releases/2009/July/mm019_2009.htm,
accessed 25 September 2009.
STRENGTHENING AUSTRALIA’S REGIONS 71
5.16 In employing the pillar metaphor—a common approach to articulating
regional development strategy—the Committee is concerned that a pillar
in this context does not become synonymous with a silo. Each of the three
pillars noted above should not operate in isolation from one another,
rather they should be viewed as the foundation of an integrated policy
platform allowing government to coordinate and adapt a suite of regional
development programs. Nor should these pillars form the basis of a series
of programs under which the regions become passive recipients. Recent
regional development approaches stress the importance of encouraging
‘each individual region to reach its growth potential from within’
11
:
Greater growth occurs when regions are able to mobilise their own
local assets and resources, rather than depend on support from the
national government.
12
By presenting a range of programs focused on key economic drivers
(pillars), the Government will act as a catalyst for local action as regions
discover ways to harness the benefits of government programs to advance
their own endogenous assets. This is a process which is expected to take
time, but if executed correctly, will have a positive impact on regional
communities and national output.
13
Infrastructure
5.17 Amongst OECD countries, investment in public infrastructure has been a
key policy response to the GFC
14
and there is evidence to suggest that the
stimulatory effect of ‘quick-starting mid-scale’
15
infrastructure spending in
Australia has been of assistance in maintaining employment and business
income during this period.
16
5.18 If there are benefits to be derived from the GFC, one may be the increased
investment in regional infrastructure by the Commonwealth Government.
Shortfalls in infrastructure can have profound effects on the economic
viability and liveability of a region.
17
Social infrastructure protects the
11 OECD, Policy Brief: How Regions Grow, March 2009, p. 5.
12 OECD, Policy Brief: How Regions Grow, March 2009, p. 5.
13 OECD, Policy Brief: How Regions Grow, March 2009, p. 5.
14 OECD, Policy Brief: How Regions Grow, March 2009, p. 6.
15 Dr Steven Kennedy, Australia’s Response to the Global Financial Crisis: A speech to the Australia
Israel Leadership Forum, 24 June 2009, p. 11.
16 Mr Greg Evans, Senate Economics References Committee, Reference: Government Economic
Stimulus Measures, Transcript 28 September 2009, p. 54.
17 Andrew Beer, Alarci Maude & Bill Pritchard, Developing Australia’s Regions: theory and practice,
UNSW Press, 2003, p. 199.
72 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
living standards of people in regional Australia and ensures the future
viability of regional communities by attracting and retaining individuals
and businesses.
18
Hard infrastructure, such as roads, railways, ports,
airports and power stations, contributes directly to the functioning of the
economy. Investment in hard infrastructure in regional Australia can
improve competitiveness by reducing capacity constraints and making
regions more attractive places to do business.
19
The provision of
educational infrastructure serves both purposes, simultaneously raising
the living standards of regional Australians and the competitiveness of
regional businesses by improving access to education.
5.19 The Committee has witnessed first hand how infrastructure can increase
economic activity and protect regions from sharp economic declines. The
Northern Territory has been impacted less by the GFC than other areas of
the country. There are several reasons for this, one of which is the
Territory’s investment in strategic infrastructure prior to the GFC:
…we have been developing strategic infrastructure for a number
of years in terms of East Arm Port, the railway, the business park
and bulk mineral loading. The government has been investing in
key infrastructure to grow our trade capacity…for a small
jurisdiction that is a real leap of faith particularly going back 10
years ago when we were looking at spending $200 million on a
port where we had small trade areas. It was one of those ‘build it
and they will come’ projects and they certainly have…there has
been that investment to ensure that we were able to grow during
the good times, which we certainly have.
20
5.20 Evidence from around Australia points to the important role
infrastructure provision plays in the development of regions. For example,
access to high-speed broadband has been cited as a ‘fundamental element
to the attraction and retention of individuals and industry migrating to
rural and regional areas’:
…Critical services including emergency management, health
services, and education are increasingly provided 'online'…For
regional communities, broadband encourages innovation through
development of new industries, encourages new investment as it
18 Mid-Western Regional Council, Submission No. 60, p. 3.
19 Andrew Beer, Alarci Maude & Bill Pritchard, Developing Australia’s Regions: theory and practice,
UNSW Press, 2003, p. 199; and Mayor David Smith, Transcript 30 April 2009, pp. 5-6;
Councillor Steven Dilley, Transcript 30 April 2009, p. 7; Councillor Steven Harrison, Transcript
30 April 2009, p. 9; Councillor Wesley Hartley, Transcript 30 April 2009, p. 18.
20 Mr Jeff Steward, Transcript 28 September 2009, p. 3.
STRENGTHENING AUSTRALIA’S REGIONS 73
becomes viable for existing industries to move to areas outside
metropolitan centres therefore creating new jobs. Broadband
allows regional businesses access to new (world) markets and
assists in addressing population decline by enabling services such
as education and training to be delivered anywhere, anytime. This
allows people to remain well skilled and able to move freely and
work (telecommuting) whenever they wish from wherever they
are, meaning people do not have to reside in major cities for
employment.
21
5.21 In Geraldton, access to high-speed broadband may help the community
secure a bid to build the world’s largest radio telescope array. If they are
successful, the project is expected to grow the region through the creation
of more industry and enhanced competitiveness:
Broadband… is critical for us…there is the proposal for the square
kilometre array radio telescope, which is proposed to be the
largest radio telescope array in the world [SKA project]. That is to
be built 350 kilometres east of here…[but]…needs connectivity
back to Perth. Our broadband is pretty well non-
existent…[and]…there is an opportunity to actually connect us to
the rest of the world via Western Australia, and that can lever off
the SKA project and make us more competitive. Broadband is very
important. The SKA, for us, is one of those other elements in terms
of creating a new industry here. It is all based on scientists, new
technology and creative people. If you ever had a classic study on
how to diversify an economy, then that project is it for us.
22
5.22 The call for high-speed broadband was echoed by numerous witnesses
and submitters to the inquiry throughout Australia, many of whom
acknowledged the importance of the Government’s National Broadband
Network (NBN) initiative. The Committee understands that the NBN is
‘expected to include a significant number of premises located in rural and
regional Australia’
23
with those people who may not have access to the
NBN, having ‘access to the best new fixed, wireless and satellite
technology’.
24
This is a significant step towards growing Australia’s
regions and the Committee wishes to reiterate the importance of
telecommunications infrastructure, and specifically access to high-speed
21 Municipal Association of Victoria, Submission No. 26, p. 11.
22 Mr Anthony Brun, Transcript 29 April 2009, pp. 14-15.
23 Department of Broadband, Communications and the Digital Economy, Submission No. 25, p. 2.
24 Department of Broadband, Communications and the Digital Economy, Submission No. 25, p. 4.
74 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
broadband services, to the growth and sustainability of regional
Australia.
5.23 Continued investment in regional infrastructure by all levels of
government will assist in the development of Australia’s regions, but
infrastructure alone ‘has no impact on regional growth unless regions are
endowed with adequate levels of human capital and innovation’.
25
As one
OECD policy brief succinctly states:
…infrastructure is a necessary, but insufficient, condition for
growth.
26
In other words, one pillar is unlikely to support an entire platform. More
will be required. Education, therefore, represents the second pillar and the
path to increasing the levels of human capital and innovation in
Australia’s regions.
Education
5.24 All levels of education need to be supported regionally and nation-wide,
however, it has been found that regions with a low rate of tertiary
education uptake amongst their population are less economically vibrant
than those with a high rate.
27
This may be because regional universities are
‘makers of place’ that have a role in ‘actually constructing communities
and bringing [them to] life’.
28
They are:
…centres of critical mass because intellectual inquiry and industry
centres around them…they attract skilled people to [a] region,
they promote innovation and…they are lubricants and catalysts of
social endeavour.
29
5.25 This evidence was consistently presented by regional universities around
Australia. Deakin University advised that regional universities:
generate economic activity;
build skills for the future of their regional economies;
form a connection to national and international ideas and knowledge
and serve as a catalyst for innovation, and
25 OECD, Policy Brief: How Regions Grow, March 2009, p. 6.
26 OECD, Policy Brief: How Regions Grow, March 2009, p. 6.
27 OECD, How Regions Grow: trends and analysis, 2009, p. 69.
28 Professor Andrew Vann, Transcript 3 September 2009, p. 14.
29 Professor Andrew Vann, Transcript 3 September 2009, p. 14.
STRENGTHENING AUSTRALIA’S REGIONS 75
contribute to the cultural and civic life of regional Australia.
30
5.26 Regional universities are employers that create full-time and part-time
jobs and their infrastructure spending injects capital into the regions,
helping to boost local economies.
31
They provide sporting and cultural
facilities that are available to the public and contribute to the human
capital of a region through the development of local skills and a better
educated workforce
32
by strategically engaging with regional industry and
government. Deakin University, as a member of the Committee for
Geelong and G21
33
, engages on regional planning and development issues
in order to ‘meet current and future regional skills needs through offering
relevant courses’
34
and has linked with the Commonwealth Government
on a number of skills development projects.
35
In Townsville, James Cook
University is working collaboratively with the TAFE and VET sectors as
well as local schools in order to raise participation rates and enhance the
skills of the region.
36
5.27 There cannot be a substantial university campus in every community
across Australia; therefore, the development of partnerships between
various education sectors also serves to deliver the benefits of a university
to smaller communities, where there may be a TAFE presence. That is why
Deakin University is in the process of developing study centres with a
number of regional campuses that will deliver associate degrees.
37
5.28 These kinds of collaborations may increase participation rates in regional
universities as students are given study options which focus on local
needs and allow them to stay in regional centres.
38
Participation rates in
higher education by students in regional and remote areas have worsened
in the last five years
39
and this decline needs to be arrested. In addition to
30 Deakin University, Submission No. 11, pp. 1-2.
31 Mr Colin Dwyer, Transcript 3 September 2009, pp. 13-14.
32 Professor Sue Kilpatrick, Transcript 22 April 2009, p. 23.
33 G21 is a company established in 2003 by an alliance of five local government authorities (City
of Greater Geelong, Colac Otway Shire, Golden Plains Shire, Borough of Queenscliffe and Surf
Coast Shire) with the support of the State Government of Victoria and a wide range of local
organisations. Membership spans all three levels of government, non-government
organisations, commercial companies and community groups.
34 Deakin University, Submission No. 11, p. 2.
35 See Deakin University, Submission No. 11, p. 2.
36 Professor Andrew Vann, Transcript 3 September 2009, p. 15.
37 Professor Sue Kilpatrick, Transcript 22 April 2009, p. 24.
38 Professor Andrew Vann, Transcript 3 September 2009, p. 21.
39 Review of Higher Education: Final Report, p. 31,http://www.deewr.gov.au/highereducation/review/pages/reviewofaustralianhighereducati
onreport.aspx, accessed 21 October 2009.
76 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
the benefits students derive from a higher education, increased
participation rates grow regional universities, making them viable entities
which can contribute to the development of regions. For example, ‘regions
where universities, business and industry collaborate are more likely to be
innovative and prosper’.
40
Several regional universities, including the
University of Ballarat, have technology parks or precincts which further
enhance regional innovation and skills leading to the creation of industry
and jobs:
…some 1,350 people are employed in the Technology Park, half of
whom hold University of Ballarat degrees. The strong associations
between the University and prominent industry tenants—iconic
tenants include IBM Ballarat; Emergency Services
Telecommunication Authority; Rural Ambulance Australia; State
Revenue Office; Global Innovation Centre; ID Research; IBM
Regional Software Solutions Centre; etc—has won for Ballarat a
national reputation as a telecommunication and IT hub. In this
direct and very practical association with the development and
application of needed skills, is found the strongest expression of
regional, dual-sector education: it offers academic competency;
vocational opportunity; skills-based applicability, community
engagement; social responsibility; and economic leadership…in a
regional setting.
41
5.29 The Commonwealth Government recognises the economic and social
contribution of regional universities to Australian communities:
Sustainable higher education provision, which is responsive to the
specific needs of regional Australia, is essential to Australia’s
social and economic prosperity. Institutions have a vital role to
play in local communities and economies, and students who study
in regional areas are much more likely to stay in those areas,
providing a vital skilled workforce in the regions.
42
5.30 The Government is undertaking a series of higher education reforms,
some of which are intended to strengthen regional education provision—a
positive step supported by the Committee; however, some commentators
have suggested that ‘there needs to be a much stronger link between the
40 Deakin University, Submission No. 11, p. 3.
41 University of Ballarat, Submission No. 77, p. 5.
42 Department of Education, Employment and Workplace Relations, Strengthening Regional
Higher Education Provision,http://www.deewr.gov.au/HigherEducation/Documents/PDF/Pages from A09-
303%20Budget%20Fact%20Sheets-11_webaw.pdf, accessed 6 October 2009.
STRENGTHENING AUSTRALIA’S REGIONS 77
resolution of issues about tertiary education provision and delivery in
regional Australia with state and federal government policy on regional
development’.
43
5.31 This will occur once there is a recognition of the various ways in which
universities contribute to the wellbeing and development of regional
Australia. The Committee acknowledges the importance of education to
regional development and strongly urges the Government to view
higher education reform as part of its regional development objectives.
Regional leadership education
5.32 The growth of regional education also aids in the development of effective
leadership. ‘Leaders need realistic visions and these, in turn, require an
understanding of situation, process, opportunity and competition’ which
can be gained through education.
44
5.33 Community leaders can be found in a range of different quarters from
local government and regional development associations to educational
institutions and industry. Their presence and activity within communities
is vital to the development of a region. For example, in Western Victoria a
growing tourism industry has the potential to expand the economic
viability of the region but is lacking the leadership to do so:
…one of the gaps that we have is leadership…Across the industry,
we have a lot of networks that relate to local tourist organisations.
There is a network of event managers. There are local town tourist
organisations. At the moment, despite their best endeavours, they
are often lacking leadership and also an understanding of the big
picture and where they are meant to be paddling to. We are
certainly looking at opportunities to provide leadership and
governance training so that, as a total industry, we have a capacity
to raise our professionalism, to have far more of our total
population resource base going in the same direction and to have
the tools that we need.
45
5.34 Local Government is often viewed as the logical body to provide
leadership within communities, particularly small ones. Many local
governments have regional development staff and participate in regional
collaborative bodies intended to grow and diversify a particular region.
43 Professor David Battersby, False start for national university, Campus Review, 3 August 2009.
44 Professor Tony Sorensen, Parliamentary Library, Research Paper 26: 1999-2000, Regional
Development: Some Issues for Policy Makers, 27 June 2000, p. 10.
45 Mr Chris Burchett, Transcript 23 April 2009, p. 40.
78 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
The capacity of local governments to provide the necessary regional
development leadership varies, and therefore the Commonwealth
Government has helped establish the Centre of Excellence for Local
Government. The Centre will deliver leadership and development
training
46
and encourage a focus on ‘regionalisation, regional approaches
and collaboration between councils’.
47
A consortium of organisations
including several regional universities has been chosen to establish the
Centre, which will provide its courses and services across urban, rural and
regional Australia.
5.35 The establishment of the Centre of Excellence for Local Government is a
positive step towards enhancing leadership capacity in the regions, but
will need to be augmented by local leadership development opportunities.
The Committee is aware that in at least one region, the Commonwealth
Government, through the local RDA has partnered with local government
to offer a community leadership program designed to enhance the
leadership skills of people active in the sectors of environment, youth,
sport and recreation, cultural or community development.
48
Local
programs such as this are important and the Committee encourages the
state, territory and Commonwealth Government, through RDA to
continue promoting leadership development opportunities.
Business
5.36 In the early 1990s, Burnie lost a pulp mill, Tioxide, the North West Acid
plant, Tasmeats and Blue Ribbon. Four thousand jobs were lost.
49
The
same region now faces a loss of about 800 jobs as Caterpillar scales back its
workforce. While a substantial amount, 800 jobs is not 4000 jobs. What has
changed in Burnie between the recession of the early 1990s and the GFC
that has reduced the impact of economic downturns on the region?
5.37 Representatives in Burnie attribute the comparatively reduced impact of
the GFC on their community to economic diversification and a more
skilled workforce.
50
Evidence suggests that the impact of the GFC has
been lessened in areas where either the major industries have not been
46 Prime Minister of Australia, Media Release, New Australian Centre of Excellence for Local
Government, 24 June 2009.
47 Mr Adrian Beresford-Wylie, Transcript 14 August 2009, p. 64.
48 The program is offered by Volunteering Queensland and is supported by the City of Ipswich
and RDA SEQ West. See, www.qorf.org.au/_.../CLP%20Nomination%20Form%202009.pdf,
accessed 22 October 2009.
49 Mr Paul Arnold, Transcript 20 April 2009, p. 2.
50 Mr Rodney Greene and Mr Paul Arnold, Transcript 20 April 2009, p. 7
STRENGTHENING AUSTRALIA’S REGIONS 79
stand a
affected or where the region has a diverse enough economy to with
downturn in one sector.
5.38 In order to diversify a regional economy, existing businesses in a region
must grow and expand and new businesses need to emerge. The
Committee’s third pillar of regional development supports regional
communities through the growth and diversification of regional business.
5.39 Expansion and diversification of business in regional Australia can occur
organically as various entrepreneurs seek to grow their businesses or
create new ones. By limiting the amount of available credit to these
entrepreneurs, the GFC has revealed that private enterprise alone may not
sufficiently drive business growth and diversification in regional
Australia, proving there is a role for government in supporting regional
business.
5.40 This is a lesson that was not lost on Burnie’s local government after the
recession of the early 1990s. There, the local council undertook a series of
actions designed to stimulate the local economy and increase the
liveability of the city:
We had no cinema. The cinema we did have had failed; the private
marketplace had failed miserably, so we built a cinema. We leased
it out and then we sold it off. After we built it and operated it for a
couple of years, we sold it off. We tried to stimulate the local
economy with some entrepreneurial activities. For example, we
got involved and bought the local airport and generated a lot of
industrial land sales off that. In fact, the Vestas renewable energy
company was based out there. We did everything we could to
facilitate growth of opportunity—business, commercial,
whatever.
51
5.41 State and Territory governments have a number of business support
programs and so too does the Commonwealth Government. This report
has already noted some of the past and current Commonwealth
Government programs intended to assist small, medium and large
enterprises in regional Australia. As part of its deliberations, the
Committee canvassed witnesses about Commonwealth Government
support for businesses in their area, in an attempt to measure the
effectiveness of government support. In response, the Committee was
advised that the services offered by Enterprise Connect and the BECs were
valued but in need of extension, particularly in light of the current
situation:
51 Mr Paul Arnold, Transcript 20 April 2009, p. 10.
80 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
We have a good working relationship with the Innovative Regions
Centre, for example, which has been excellent to deal with, but it is
a matter of getting more resources on the ground.
52
5.42 In Broken Hill, the BEC ‘works in really well with the ACC/RDA,
Business Broken Hill, the community foundation and the other partnering
organisations’ but it is not considered ‘the direct linkage into business that
[Broken Hill] needs’.
53
Business Broken Hill has suggested that while the
BEC there is supportive of new businesses, it does not have the capacity to
assist existing small businesses during this period.
54
5.43 The Committee discussed the coverage of various business support
programs with the Department of Innovation, Industry, Science and
Research at its public hearing in Canberra. It highlighted the concerns
noted above, particularly regarding support for small business, and was
advised by the Department that support for business in regional Australia
is provided by many different agencies across government and industry.
55
5.44 That may be so, but the Committee is aware that some small businesses
may have problems accessing government business support programs.
For example, tailored advisory services from Enterprise Connect cost a
business $20,000—an amount many small business owners are not able to
produce.
56
The inability to access business support services may lead to a
problem whereby some regional businesses that are either very small or
not in a particular industry are able to receive support while others are
not.
5.45 AusIndustry offers five programs designed to address the needs of small
business, and of those five programs, three are targeted towards the
commercialisation of innovative products, the clothing, footwear and
textile industry or IT skills development.
57
Only the Small Business
Advisory Service and the Small Business Support Line are sufficiently
general enough in their coverage to address the needs of a range of small
businesses in regional Australia and both programs have been instigated
as a result of the GFC. The Small Business Advisory Service, for example,
has a two-year funding commitment. If it can be shown that there is a high
demand for this service and the Support Line, then funding support for
52 Dr Andrew Scott, Transcript 22 April 2009, p. 19.
53 Robin Edgecumbe, Transcript 7 July 2009, p. 23.
54 Robin Edgecumbe, Transcript 7 July 2009, p. 24.
55 Mr Paul Sexton, Transcript 14 August 2009, p. 30.
56 Mr Clyde Humphries, Transcript 23 April 2009, p. 32.
57 Seehttp://www.ausindustry.gov.au/SmallBusiness/Pages/home.aspx, accessed 21 October
2009.
STRENGTHENING AUSTRALIA’S REGIONS 81
these initiatives should be continued. Therefore, the Committee
encourages the Government to examine the uptake of its Small Business
Support Line and Small Business Advisory Service with the intention of
continuing funding support for these initiatives.
Recommendation 9
5.46 The Committee recommends that the Government examine the uptake
of its Small Business Support Line and Small Business Advisory Service
with the intention of continuing funding support for this initiative.
5.47 Programs offered by AusIndustry provide various kinds of assistance to
businesses ranging in size and across different industries. In regional
Australia, AusIndustry has 15 representatives deployed to ‘provide
information, provide assistance awareness of AusIndustry business
assistance programs’.
58
Nevertheless, not all are aware of the
Commonwealth Government support available for small business.
59
This
may be a result, in part, of the limited number of government
representatives, such as those from AusIndustry, working in regional
Australia.
60
5.48 The Department of Innovation, Industry, Science and Research observed
that AusIndustry representatives, operate in a manner intended to
‘leverage off multiplier agencies’:
61
We do not do it alone; we also work with Austrade, IP Australia,
state government agencies, Enterprise Connect people who are on
the ground. So we are providing a whole-of-government
approach…
62
5.49 Furthermore, the Department noted that it could always be argued that
there should be two or three [AusIndustry] people rather than one, but the
current representatives ‘do a fairly comprehensive job, given the funding
[the Department] has’.
63
58 Mr Paul Sexton, Transcript 14 August 2009, p. 30.
59 See for example, Mr Peter Gordon, Transcript 30 April 2009, pp. 43-44.
60 Dr Andrew Scott, Transcript 22 April 2009, p. 19.
61 Mr Paul Sexton, Transcript 14 August 2009, p. 30.
62 Mr Paul Sexton, Transcript 14 August 2009, p. 30.
63 Mr Paul Sexton, Transcript 14 August 2009, p. 30.
82 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
5.50 The Committee does not question the comprehensive efforts undertaken
by the existing AusIndustry representatives, however, given that there are
almost two million small businesses in Australia and 85 per cent of them
are in regional Australia
64
, it is questionable whether 15 representatives
can provide the necessary coverage.
Recommendation 10
5.51 The Committee recommends that the Commonwealth Government
increase the number of AusIndustry representatives in regional
Australia.
5.52 While the Government has acknowledged the importance of a whole-of-
government approach to business support, it would be worthwhile
ascertaining the degree upon which that support was coordinated in the
regions as part of their regional development plans. Like higher education
reform, business support in regional Australia will be more effective if it is
undertaken within the framework of regional policy objectives.
5.53 In conjunction with a review into the success of the Small Business
Support Line and Small Business Advisory Service and an increase in the
number of AusIndustry representatives, the Government may also wish to
examine the manner in which various government business support
programs worked together in particular regions during the GFC and the
potential role RDA may play in facilitating greater coordination between
business support programs and integrating them into wider regional
development frameworks in future.
64 Mr Paul Sexton, Transcript 14 August 2009, p. 30 & ACC – South East NSW, Submission No. 117,
p. 3.
STRENGTHENING AUSTRALIA’S REGIONS 83
Recommendation 11
5.54 The Committee recommends that the Government examine the manner
in which various government business support programs worked
together in particular regions during the GFC and the potential role
RDA may play in facilitating greater coordination between business
support programs and integrating them into wider regional
development frameworks in future.
Facilitating regional cooperation
5.55 A recent OECD policy brief asked the question: how can regional policies
mitigate the effects of the financial crisis?
65
Its answer stressed the
importance of integrated regional policies based on ‘well-developed
mechanisms for co-ordination between the central and sub-national levels’
that align local and national priorities.
66
5.56 The question then for Australia is: how does the Commonwealth
Government coordinate its infrastructure, education and business support
programs on the ground in regional Australia and how does it ensure that
those programs are working in collaboration with local and state
objectives? One possible solution may be the better utilisation of Regional
Development Australia.
5.57 The GFC has highlighted the importance of having a mechanism such as
RDA, which can be used to facilitate better coordination between various
government programs to achieve regional development objectives.
Throughout the crisis, Commonwealth Government programs have been
rolled out across Australia but administered by various departments.
5.58 In Canberra, the Committee was advised that cooperation amongst the
departments responsible for regional programs is occurring. DEEWR is
hosting an interdepartmental committee comprised of departments with
funding programs, with the intention of ‘pulling into one place
information about all of the federal programs’ so that the Department’s
LECs can relay that information in the regions.
67
The Department of
65 OECD, Policy Brief: How Regions Grow, March 2009, p. 6.
66 OECD, Policy Brief: How Regions Grow, March 2009, pp. 6-7.
67 Ms Stephanie Foster, Transcript 14 August 2009, p. 9.
84 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
Infrastructure, Transport, Regional Development and Local Government
(DITRDLG) has been running a forum ‘which puts together all of the
federal agencies with regional programs to share information’ and a
similar forum is being coordinated between state and federal deputy
secretaries to ‘agree on some priorities and ways of working together’ to
make sure that programs are being maximised.
68
5.59 In the regions, departmental representatives such as LECs and
AusIndustry managers have been working with local and state
organisations and each other to raise awareness about federal programs
and available assistance.
69
The picture which emerged as the Committee
spoke with representatives from various federal departments was one
whereby their regional staff—be they a LEC, AusIndustry manager or
Centrelink officer—were working with each other and local and state
representatives to ensure that the regions had access to the assistance
offered by government agencies.
5.60 While their efforts are an attempt to coordinate a whole-of-government
response to the GFC, they do not represent a coordinated response of
integrated regional policies that align local and national priorities beyond
those brought on by the GFC. Indeed, it is the Committee’s view that some
of their activities are the antithesis of what needs to be occurring in
regional Australia. The role of the LEC is a good example.
5.61 The Committee was advised that the LECs:
…have been tasked with developing a local employment plan for
their region and, as part of that, they have been tasked with setting
up a group within the local area to work together. They want
representation on that group from various different bodies that
would make it a functioning group within a region, who would
then be able to work together to develop that plan. Some of the
regional development aspects will be key to developing that plan.
70
5.62 Rather than viewing regional development goals as a key component of a
local employment plan, the Committee would argue that the local
employment plan should be one component of an integrated development
policy for the region. An approach of this nature requires a regional
mechanism by which policies and programs can be coordinated to achieve
68 Ms Stephanie Foster, Transcript 14 August 2009, pp. 9-10.
69 Mr Graham Carters, Transcript 14 August 2009, p. 20.
70 Mr Graham Carters, Transcript 14 August 2009, p. 20.
STRENGTHENING AUSTRALIA’S REGIONS 85
specific outcomes. RDA is well placed to be that mechanism because it
brings all three tiers of government together.
71
5.63 The need for such a mechanism predates the GFC. All around the country,
local, state and federal representatives have long identified key priorities
of development. In the North/East border region of Queensland and
NSW, for example, 25 years of studies into the infrastructure needs of the
region had not resulted in a coordinated plan. In the absence of a structure
such as RDA, a consortium of 10 local governments from NSW and
Queensland have finally ‘aligned their objectives to pursue a cohesive and
agreed regional plan’
72
called the Trans-Regional Amalgamated
Infrastructure Network (TRAIN) project, which has the backing of state
and federal members of parliament.
5.64 Similarly, transport in the Northern Territory has been identified as a key
development issue and has been the focus of much state and shire
planning; however, until the formation of RDA NT, there was not an
opportunity to coordinate the plans into one Territory-wide strategy upon
which to engage the Commonwealth Government.
73
5.65 The tourism industry is seeking to engage in destination planning that
requires the cooperation of federal, state and local governments across
various industries and government portfolios.
74
The RDA network has the
potential to be the gateway for coordinated planning of this nature.
5.66 RDA can also bring together different agencies and levels of government
offering assistance to meet regional specific outcomes. In response to
economic downturns, this could mean facilitating cooperation between the
different agencies on the ground, rolling out the economic stimulus
programs of the levels of government.
5.67 At the time of writing, the RDA network was in the process of being
finalised nationwide. Its stated objective is to ‘provide a strategic
framework for economic growth in each region’ and is underpinned by
four key functions:
provide advice on consultation and community engagement;
regional planning;
71 Ms Stephanie Foster, Transcript 14 August 2009, p. 1.
72 Mr Mark Salmon, Transcript 4 August 2009, pp. 63-64.
73 Mr Damien Ryan, Transcript 28 September 2009, p. 30.
74 Mr Evan Hall, Transcript 6 July 2009, pp. 78-79.
86 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
promoting whole-of-Government programs, policies and initiatives;
and
community and economic development.
75
5.68 The Committee is supportive of these objectives and encourages the
Government to utilise RDA in generating region specific community and
economic development planning that is supported by the region;
maintaining productive levels of cooperation between the three tiers of
government; and facilitating better cooperation between various agencies
and government programs in the regions.
5.69 While the network has yet to fully function, indications to date suggest
that RDA is intended to perform in a manner similar to the Committee’s
expectations. The Committee has been advised that ‘RDA is meant to be a
ground up initiative… [with]…the ability…to identify what is important
in the community as part of [its] work program’. It is not intended to be
‘rigorously prescriptive’ and will allow regional development objectives to
be ‘tailored regionally as is appropriate, given different economic and
social circumstances’.
76
5.70 RDA has led to increased cooperation with the states, territories and local
governments
77
, which are ‘genuinely seeking to find arrangements which
will incorporate federal interests.’
78
This level of cooperation must
continue and be constantly reassessed to ensure that no one level of
government dominates the agenda of an RDA board.
5.71 There will also be a challenge in ensuring that RDA, as regional
representatives, are able to facilitate better cooperation between
Commonwealth Government programs in the regions. DITRDLG has
recognised that coordination amongst Commonwealth Departments is a
challenge
79
but noted that there have been ‘very positive responses from
the other departments about their capacity to use RDA’:
80
There have been some discussions about the location of LECs
potentially with RDAs. Broadband have been speaking to us about
various program initiatives that can be assisted by the RDA
75 Role of RDA,http://www.rda.gov.au/index.aspx, accessed 8 October 2009.
76 Mr Marcus James, Transcript 14 August 2009, p. 5.
77 Ms Stephanie Foster, Transcript 14 August 2009, p. 6 & Mr Adrian Beresford-Wylie, Transcript
14 August 2009, p. 62.
78 Ms Stephanie Foster, Transcript 14 August 2009, p. 6.
79 Mr Marcus James, Transcript 14 August 2009, p. 10.
80 Ms Stephanie Foster, Transcript 14 August 2009, p. 10.
STRENGTHENING AUSTRALIA’S REGIONS 87
network, because it will be a national network that will be
available to help with programs.
81
5.72 It would appear that some departments view RDA as an entry point into
the regions. As a national network, RDA can be a useful tool through
which various Commonwealth Government programs can access regional
Australia. This should not, however, be its only role. RDA should be
utilised to facilitate better cooperation between various government
departments in the regions to further local and national objectives.
5.73 Having RDA undertake a facilitating role will ensure better coordination
of government programs for region specific outcomes over the long term.
For example, LECs have a two-year mandate to undertake their work and
once that two-year period is up, it is not clear what will happen to the
regional employment plans they have created, or the Keep Australia
Working Advisory Committees they have established.
82
The Committee
believes that the creation of employment opportunities in regional
Australia should be closely linked to the ongoing business development
and diversification plans of a region, and although RDA representatives
sit on Keep Australia Working Advisory Committees,
83
there is a danger
that LEC initiatives will lapse in two years time. In order to avoid this, the
regional employment plans of LECs should be integrated into the regional
development plans of specific RDAs, thereby allowing RDA to capitalise
on the work of LECs well into the future. In those areas where a LEC has
not been deployed, RDA should be developing regional employment
plans.
Recommendation 12
5.74 The Committee recommends that the regional employment plans of
Local Employment Coordinators should be integrated into the regional
development plans of Regional Development Australia. In those areas
where a Local Employment Coordinator has not been deployed,
Regional Development Australia should be developing regional
employment plans.
81 Mr Marcus James, Transcript 14 August 2009, p. 10.
82 Local Employment Coordinator Fact Sheet,http://www.deewr.gov.au/Employment/Pages/JobsFund.aspx, accessed 19 October 2009.
83 Keep Australia Working, Final Report, p. 17,http://www.deewr.gov.au/Employment/KeepAustraliaWorking/Pages/home.aspx,
accessed 19 October 2009.
88 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
Conclusion
5.75 The GFC is a reminder of the importance of regional development policy.
Regions which grow and diversify their economies and provide the social
conditions which lead to greater liveability are in a better position to
withstand the effects of a crisis such as this.
5.76 A regional development policy which focuses on building infrastructure,
encouraging education and supporting the growth of business will assist
in this regard and will be most effective if the Commonwealth
Government can coordinate its infrastructure, education and business
support programs in regional Australia in a way which ensures that those
programs are working in collaboration with local and state objectives.
5.77 The GFC has highlighted the importance of having a mechanism such as
RDA, which can be used to facilitate better cooperation between various
government programs to achieve regional development objectives. If this
occurs and regional policy is sufficiently coordinated across all three tiers
of government, then there is real scope for growth in Australia’s regions.
Catherine King MP
Chair
November 2009
A
Appendi x A – Li st of Submi ssi ons
1 Mr Bruce Evans
2 Murweh Shire Council
3 District Council of Karoonda East Murray
4 Mid North Coast Regional Development Board
4.1 Mid North Coast Regional Development Board Supplementary
5 ACC - Mid West Gascoyne
6 ACC - North Queensland
7 The Brolga Project
8 Narromine Shire Council
9 Regional Council Tamworth
10 School of Behavioural, Cognitive & Social Science
11 Deakin University
12 Mr Wally Lenyszyn
13 Corangamite Shire
14 VECCI Invigorating Business
15 Committee for Geelong
16 Wujal Wujal Aboriginal Shire Council
17 ACC - Peel
18 Geofabrics Australasia Pty Limited
19 City of Wodonga
90 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
20 Horsham Rural City Council
21 Hughenden Chamber of Commerce Inc.
22 Central Darling Shire
23 Rural City of Wangaratta
24 Southern Cross University
25 Department of Broadband, Communications & the Digital Economy
26 Municipal Association of Victoria
27 Australian Bankers' Association Inc.
28 Southern Cross University
29 Growcom
30 Southern Councils Group
31 Southern Mallee District Council
32 Manningham City Council
33 G21 - Geelong Region Alliance
34 ACC - Illawarra
35 Department of Resources, Energy & Tourism
36 Peel Development Commission
37 Latrobe City Council
38 Shire of Yilgarn
39 City of Albany
40 Glenelg Shire Council
41 National Farmers' Federation
42 RMIT University
43 National Sea Change Taskforce
44 Shire of Strathbogie
45 ACC - Mackay Region
46 Hurstville City Council
47 Qantas Airways Limited
APPENDIX A – LIST OF SUBMISSIONS 91
48 Albury City
49 City of Mandurah
50 Goldfields-Esperance Development Commission
51 Burnett Mary Regional Group
52 Central Goldfields Shire Council
53 Kempsey Shire Council
54 Urana Shire Council
55 Regional Aviation Association of Australia
56 Australia's Premier Peace Advocate
57 Toowoomba Regional Council
58 ACC - VIC Central Highlands
59 National Growth Areas Alliance
60 Mid-Western Regional Council
61 Shire of Dumbleyung
62 Wyong Shire Council
63 Upper Lachlan Shire Council
64 Greater Shepparton City Council
65 Wakefield Group
66 Darwin City Council
67 City of Wanneroo
68 City of Townsville
69 Northern Rivers Regional Development Board Inc.
70 The City of Newcastle
71 Western Australian Local Government Association
72 Shellharbour City Council
73 Richmond Shire Council
74 Gold Coast City Council
75 Caterpillar Underground Mining Pty Ltd.
92 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
76 Oberon Council
77 University of Ballarat
78 Gosford City Council
79 Gippsland Local Government Network
80 ACC - Tasmania
80.1 ACC - Tasmania Supplementary
81 Shoalhaven City Council
82 Wide Bay Burnett ROC
83 Broken Hill City Council
84 InvestWEST Alliance of Councils
85 Alexandrina Council
86 Limestone Coast Regional Development Board
87 Far Western Regional Development Board
88 Shire of Flinders
89 ACC - NT
90 District Council of Cleve
91 Organising Principles Group
92 BREAZE Inc.
93 Sunshine Coast Regional Council
94 ACC - Sunshine Coast
95 Rockhampton Regional Development Limited
96 Interface Councils
97 ACC – Kimberley
98 ACC - Northern Rivers (NSW)
99 Ozeconomics Consulting
100 ACC - Central Murray
101 Wentworth Shire Council
102 Minerals Council of Australia
APPENDIX A – LIST OF SUBMISSIONS 93
103 ACC - Orana
104 ACC - Greater Brisbane
105 ACC - Gippsland
106 Southern Grampians Shire Council
107 Local Government of Queensland
108 Griffith City Council
109 ACC - Ipswich & Regional
110 Economic Development Australia
110.1 Economic Development Australia Supplementary
111 Moree Plains Shire Council
112 Regional Economic Development Corporation
113 Goulburn Mulwaree Council
114 ACC - Southern Inland Queensland
115 Strathfield Council
116 Shire of York
117 ACC - South East NSW
118 CONFIDENTIAL
119 Nexus Consulting (Aust) Pty Ltd
120 Townsville Enterprise Limited
121 The Chamber of Minerals and Energy of Western Australia
122 NSW Business Chamber
123 Tasmanian Department of Economic Development and Tourism.
124 Wellington Shire Council
125 Australian Local Government Association
126 Mortlake Employment Services
127 ACC - Riverina
128 Department of Agriculture, Fisheries and Forestry
129 Geelong Chamber of Commerce
94 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
130 TAFE NSW - North Coast Institute
131 Geelong Manufacturing Council
132 Ararat Rural City Council
133 Grampians Pyrenees Regional Development Board
134 Grampians Tourism Inc.
135 Gunnedah Shire Council
136 Abacus - Australian Mutuals
137 Mr David Smith
138 Department for Environment, Water, Heritage and the Arts
139 Diamantina Shire Council
140 Bunbury Wellington Economic Alliance
141 Barcoo Shire Council
142 Peel Community Development Group
143 Mid West Development Commission
144 Barwon Darling Alliance
145 Northern Territory Government
146 NSW Government
147 Migration Institute of Australia Limited
148 NSW Legal Assistance Forum
148.1 NSW Legal Assistance Forum Supplementary
149 Eurobodalla Shire Council
150 Mount Isa Chamber of Commerce
151 Mildura Rural City Council
152 ACT Government
153 Department of Infrastructure, Transport, Regional Development & Local
Government
153.1 Department of Infrastructure, Transport, Regional Development & Local
Government Supplementary
APPENDIX A – LIST OF SUBMISSIONS 95
153.2 Department of Infrastructure, Transport, Regional Development & Local
Government Supplementary
154 Department of Human Services
155 Tourism and Transport Forum (TTF Australia)
156 Queensland Government
157 Genworth Financial
158 Business Broken Hill
159 Far West Community Legal Centre
160 Advance Cairns Limited
161 Mrs Sherrie Wilkins
162 Ms Margaret Kelly
163 Ms Rebecca McIlveen
164 ASPO Australia
165 Logan City Council
166 Gold Coast Tourism
167 Department of the Treasury
168 Nation Building Australia Pty Ltd.
169 Department of Innovation, Industry, Science & Research
170 Department of Education, Employment and Workplace Relations
96 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
B
Appendi x B – Li st of Ex hi bi t s
1 The Brolga Project
"The Brolga Project"
(Related to Submission No. 7)
2 VECCI Invigorating Business
2008 Regional Business Convention Summary of Recommendations
(Related to Submission No. 14)
3 VECCI Invigorating Business
Policy Papers Skills, Education and Innovation
(Related to Submission No. 14)
4 VECCI Invigorating Business
Policy Papers - Climate Change and Water
(Related to Submission No. 14)
5 VECCI Invigorating Business
Policy Papers - Liveability and Leadership
(Related to Submission No. 14)
6 VECCI Invigorating Business
98 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
Policy Papers - Infrastructure and Investment
(Related to Submission No. 14)
7 Central Darling Shire
Remote control communities
(Related to Submission No. 22)
8 ASPO Australia
An argument for greater priority to be given to spatial analysis on regional
rail policy-making
9 RMIT University
(Related to Submission No. 42)
10 RMIT University
(Related to Submission No. 42)
11 RMIT University
(Related to Submission No. 42)
12 RMIT University
(Related to Submission No. 42)
13 Gold Coast City Council
Gold Coast Northern Growth Corridor
(Related to Submission No. 74)
APPENDIX B – LIST OF EXHIBITS 99
14 University of Tasmania
Innovation: The European Journal of Social Science Research
15 Timber Communities Australia Tasmanian State Office
16 Launceston Ratepayers Association Incorporated
17 Tasmanian Small Business Council
Presentation Notes - Launceston Public Hearing
18 Deakin University
Economic modelling of improved funding and reform arrangements for
Australian Universities
(Related to Submission No. 11)
19 Area Consultative Committee - Geelong
Gross revenue from sales
20 City of Bunbury
Western Australia Auslink State Strategic Corridors
(Related to Submission No. 137)
21 City of Mandurah
22 Tourism and Transport Forum
Hotel job losses
(Related to Submission No. 155)
100 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
23 Business Broken Hill
Travel to Outback NSW
(Related to Submission No. 158)
24 Tourism and Transport Forum (TTF Australia)
25 NSW Business Chamber
Business Conditions Survey - July 2009
(Related to Submission No. 122)
26 Gold Coast City Council
27 Chamber of Commerce & Industry Queensland
General Comments - Global Financial Crisis
28 Mr David Kemp
29 Department of Resources Energy & Tourism
Forecast - Tourism Forecasting - 2009 Issue 1
30 Australian Local Government Association
Australian Local Government Association State of the Regions
Supplementary Report 2008-09
31 Department of Resources, Energy & Tourism
Cairns Watch 2009
(Related to Submission No. 35)
C
Appendi x C – Li st of Wi t nesses & Publ i c
Hear i ngs
Monday, 20 April 2009 - Burnie
Advance Burnie
Mr Peter Symonds, Director
Mr Lee Whiteley, Director, Deputy Chairman
Australian Paper
Dr David Ryder, Group General Manager
Burnie Chamber of Commerce and Industry
Mr Andrew Barry, President
Mr Alan Berechree, Vice-President
Mr David Dwyer, Member
Burnie City Council
Mr Paul Arnold, General Manager
Mr Rodney Greene, Director, Community & Economic Development
Central Coast Council
Mr Michael Downie, Mayor & Councillor
Cradle Coast Authority
Mr Roger Jaensch, Executive Chairman
Kentish Council
Mr Don Thwaites, Mayor
102 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
Latrobe Council
Mr Michael Gaffney, Mayor
Tasmanian Regional Arts/Burnie Arts Council
Mrs Lynne Price, Vice President
The Advocate Newspaper Pty Limited
Mr Rodney Tremayne, General Manager & Chairman
University of Tasmania
Ms Janelle Allison, Director - Institute for Regional Development
Tuesday, 21 April 2009 - Launceston
ACC - Tasmania
Mr Simon Boughey, Board Director
Dr Tim Cory, Chair
Mr Michael Gordon, Board Director
Mrs Ally Mercer, Board Director
Mr Craig Perkins, Chief Executive Officer
Mr Gil Sawford, Board Director
Dorset Council
Mr John Martin, General Manager
Mr Peter Partridge, Mayor
Launceston Chamber of Commerce & ACC - Tasmania
Ms Louise Clark, Executive Officer (Chamber) & and Deputy Chair (ACCT)
Launceston City Council
Mr Francis Dixon, General Manager
Mr Albert van Zetten, Mayor
Launceston Ratepayers Association Incorporated
Mr Lionel Morrell, President
APPENDIX C – LIST OF WITNESSES & PUBLIC HEARINGS 103
Northern Tasmania Development
Mr Michael Steele, Director
Mr Robert Wallace, Chief Executive Officer
Northern Tasmania Regional Development Board
Mr Des King, Chair
St Helens & District Chamber of Commerce
Mrs Natacha Bennett, President
Mr Glen McGuinness, Member of Executive Committee
Tasmanian Small Business Council
Mr Geoff Fader, Chair
Timber Communities Australia Tasmanian State Office
Ms Eva Down, Northern Tasmanian Co-ordinator
Mrs Karen Hall, Member and North East Tasmania Branch Vice President
Wednesday, 22 April 2009 - Geelong
ACC - Geelong
Mr John Hansen, Executive Officer
City of Greater Geelong
Mr Terry Demeo, Co-ordinator, Statutory Planning
Committee for Geelong
Mr Peter Dorling, Executive Director
Deakin University
Professor Sue Kilpatrick, Pro Vice-Chancellor, (Rural & Regional)
G21 - Geelong Region Alliance
Dr Andrew Scott, Chief Executive Officer
Geelong Chamber of Commerce
Ms Lawrie Miller, Executive Director
104 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
Geelong Manufacturing Council
Mr David Sykes, Chairman
Geelong Otway Tourism
Mr Roger Grant, Executive Director
Golden Plains Shire
Mr David Spear, Manager Executive Projects
Gordon Institute of TAFE
Mr Grant Sutherland, Chief Executive Officer
Thursday, 23 April 2009 - Ararat
Individual
The Hon David Hawker, MP
AME Systems
Mr Christian Carthew, General Manager
Ararat Rural City Council
Councillor Gwenda Allgood, Mayor
Mr Stephen Chapple, Chief Executive Officer
Mr Clyde Humphries, Manager, Economic Development
Committee for Portland
Ms Anita Rank, Executive Officer
Grampians Pyrenees Regional Development Board
Ms Angela Hunt, Executive Officer
Grampians Tourism
Mr Chris Burchett, Chief Executive Officer
Grampians Tourism Inc.
Mr Ross Hatton, Board Chairman
Greater Green Triangle - ACC
Mr David Francis, Executive Officer
APPENDIX C – LIST OF WITNESSES & PUBLIC HEARINGS 105
Horsham Rural City Council
Mr Tony Bawden, General Manager of Corporate Services & Economic
Development
Cr Bernard Gross, Mayor
Northern Grampians Shire Council
Mr Glen Davis, Chief Executive Officer
Councillor Kevin Erwin, Mayor
Port of Portland Pty Ltd.
Mr Jim Cooper, Special Projects Manager
Mr Peter Gracias, Manager, Business Development
Mr Scott Paterson, Chief Executive Officer
Pyrenees Shire Council
Councillor Robert Vance, Mayor
Wednesday, 29 April 2009 - Geraldton
Central West TAFE
Mr Bert Beevers, Managing Director
City of Geraldton-Greenough
Mr Anthony Brun, Chief Executive Officer
Mr Ian Carpenter, Mayor
Geraldton Fisherman's Cooperative Ltd.
Mr Wayne Hosking, Chief Executive Officer
Mid-West Gascoyne RDA
Mrs Karen Godfrey, Executive Officer
Mid-West Development Commission
Mr Stephen Douglas, Chief Executive Officer
Mid-West Gascoyne – ACC
Mr Ian Wheatland, Committee Member
106 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
Shire of Northampton
Mr George Parker, Shire President
Thursday, 30 April 2009 - Busselton
Bunbury Wellington Economic Alliance
Mr Matt Granger, Chief Executive Officer
Busselton Chamber of Commerce and Industry
Mr Peter Gordon, President
Mr Ray McMillan, Chief Executive Officer
City of Bunbury
Mr Trevor Ayers, Economic Development Officer
Mr David Smith, Mayor
Donnybrook-Balingup Shire Council
Cr Stephen Dilley, Shire President
Shire of Augusta-Margaret River
Mr Gary Evershed, Chief Executive Officer
Cr Steve Harrison, Shire President
Shire of Busselton
Councillor Wesley Hartley, Shire President
Mr Andrew MacNish, Chief Executive Officer
South West Development Commission
Mr Donald Punch, Chief Executive Officer
Friday, 1 May 2009 - Mandurah
City of Mandurah
Ms Patricia Creevey, Mayor
Mr Ian Hill, Director, Community & Economic Development
Mr Mark Newman, Chief Executive Officer
APPENDIX C – LIST OF WITNESSES & PUBLIC HEARINGS 107
Fairbridge Western Australia Inc.
Mr Mark Anderson, Chief Executive Officer
Peel Chamber of Commerce and Industry
Mr John Matthew, President
Peel Community Development Group
Ms Donna Selby, Regional Coordinator
Peel Development Commission
Ms Colleen Yates, Manager Regional Development
Shire of Murray
Ms Christine Thompson, Acting Shire President
Mr Dean Unsworth, Chief Executive Officer
Shire of Serpentine Jarrahdale
Ms Joanne Abbiss, Chief Executive Officer
Ms Denyse Needham, Shire President
Small Business Centre Peel
Mr Paul Buckley, Chief Executive Officer
Monday, 6 July 2009 - Sydney
Abacus - Australian Mutuals
Mr Mark Degotardi, Head of Public Affairs
Ms Louise Petschler, Chief Executive Officer
Aboriginal Legal Service (NSW/ACT)
Mr Jeremy Styles, Deputy Zone Principle Legal Officer, Central South
Eastern Zone
Australian Bankers Association Inc.
Mr David Bell, Chief Executive Officer
Mr Stephen Carroll, Director - Regional & Rural Policy
108 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
Community Legal Centres NSW Inc.
Mr Alastair McEwin, Director
Ms Amanda Smithers, Board Member & Co-Convenor of Regional, Rural
and Remote Committee
Genworth Financial
Ms Kristen Foster, Head of Government & Industry Affairs
Mr Peter Hall, Country Executive and Director
NSW Business Chamber
Ms Louise Southall, Policy Adviser, Regional Business Initiatives
NSW Legal Assistance Forum
Mr Alan Kirkland, Chair
The Law Society of New South Wales
Mr Joseph Catanzariti, President
Tourism and Transport Forum
Mr Evan Hall, National Manager, Tourism
Ms Fiona Landis, Tourism Manager
Mr Euan Robertson, National Manager, Research
Tuesday, 7 July 2009 - Broken Hill
Barrier Industrial Council Broken Hill
Mr Daniel O'Connor, President
Broken Hill City Council
Mr Desmond Bilske, Acting General Manager
Business Broken Hill
Mr Robin Edgecumbe, President
Far West Community Legal Centre
Mr Neville Gasmier, Coordinator
Ms Rebecca McIlveen, Principal Solicitor
APPENDIX C – LIST OF WITNESSES & PUBLIC HEARINGS 109
Far West Credit Counselling Service
Mrs Sherrie Wilkins, Financial Counsellor
New England and Western Tenants Advice and Advocacy Service
Ms Margaret Kelly, Tenant Advocate
Pastoralists Association of West Darling
Mrs Susan Andrews, Vice President
Regional Development Australia - Farwest/Outback
Mr Scott Howe, Acting Chief Executive Officer
Tuesday, 4 August 2009 - Beenleigh
BDS Group of Companies
Mr David Kemp, Managing Director
Business GC Advisory Board
Mr John Witheriff, Chairman
Chamber of Commerce & Industry Queensland
Mr Tom Tate, Regional Chairman - Gold Coast & Hinterland
Gold Coast City Council
Ms Anne Norton-Knight, Advocacy Officer
Mr Grayson Perry, Manager, Economic Development
Gold Coast Tourism
Mr Paul Donovan, Chairman
Mr Martin Winter, CEO
Logan City Council
Mr David van den Brule, Manager, Economic Development
Marine Queensland
Mr Donald Jones, General Manager
110 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
Nation Building Australia Pty Ltd.
Mr Dave Cooke, Director
Mr Mark Salmon, Director
Scenic Rim Regional Council
Mr Anthony Magner, Director, Development Services
Friday, 14 August 2009 - Canberra
Australian Local Government Association
Mr Adrian Beresford-Wylie, Chief Executive
Department of Education, Employment & Workplace Relations
Mr Graham Carters, Deputy Secretary, Employment
Ms Margaret Kidd, Group Manager, Employment Reform Taskforce Group
Department of Human Services
Mr Greg Amie-Fong, Assistant General Manager, Child Support Program
Enforcement Services, Business Analysis and Improvement
Ms Moya Drayton, General Manager, Education, Employment & Support
Programs, Centrelink
Ms Jenny Thomson, Acting First Assistant Secretary, Families and Income
Support Division
Mr Tim Bennetts, Business Manager, Rural and Climate Change, Rural
Policy & Programs, Centrelink
Ms Catherine Rule, National Manager, Client Business, Centrelink
Department of Infrastructure, Transport, Regional Development & Local
Government
Ms Stephanie Foster, Deputy Secretary
Mr Marcus James, General Manager, Regional Development Policy Branch
Department of Innovation, Industry, Science & Research
Mr Stephen Payne, Division Head, Manufacturing Division
Mr Paul Sexton, General Manager, Customer Services Branch, AusIndustry
APPENDIX C – LIST OF WITNESSES & PUBLIC HEARINGS 111
Mr Richard Snabel, General Manager, Industry Policy & Economic
Analysis, Industry & Small Business Policy Division
Ms Sue Weston, Deputy Secretary
Ms Judi Zielke, Head of Division, Enterprise Connect
Department of Resources Energy & Tourism
Ms Jane Madden, Head of Division, Tourism Division
Department of Resources, Energy & Tourism
Miss Lisa Chirio
Dr Chris Locke, General Manager, National Energy Market Branch, Energy
and Environment Division
Ms Dianne McGrath
Mr Christopher Stamford, General Manager, Minerals Branch, Resources
Division
National Farmers' Federation
Mr Charles McElhone, Manager, Trade & Economics
Thursday, 3 September 2009 - Townsville
DS Enterprises
Mr Colin Dwyer
James Cook University
Prof Andrew Vann, Senior Deputy Vice-Chancellor
Townsville Chamber of Commerce
Mr Craig Stack, President
Townsville City Council
Mr Todd Barr, Strategic Policy Officer, Economic Development & Strategic
Projects Unit
Mr David Lynch, Executive Manager, Economic Development & Strategic
Projects Unit
Townsville Enterprise Limited
Dr Lisa McDonald, General Manager, Economic Development
112 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
Monday, 28 September 2009 - Darwin
Alice Springs Town Council
Mr Damien Ryan, Mayor
Darwin City Council
Mr Frank Crawley, General Manager, Corporate Services
NT Government
Ms Fran Kilgariff, Executive Director, Regional Development, Department
of Regional Development, Primary Industry, Fisheries and Resources
Ms Cate Lawrence, Acting Senior Director, Infrastructure Strategy and
Sustainability, Department of Planning and Infrastructure
Dr Sarah Louise Rummery, Director, Economic Policy, NT Treasury
Ms Marj Morrissey, General Manager, Sustainability, Strategic Planning
and Policy, Department of Planning and Infrastructure
Mr Ian Prince, Acting Executive Director Economics and Policy, Business
and Industry Development, Department of Business and Employment
Ms Valerie Smith, Acting Manager, Strategic Services, Tourism NT
Mr Jeff Stewart, Director, Trade and Investment, Department of the Chief
Minister
D
Appendi x D – The Canadi an Mor t gage Bond
Pr ogr am
1.1 Canada’s Mortgage Bond Program commenced in 2001 as part of
Canada’s longer-term efforts to reduce the cost of home borrowing. In the
1980’s, the Canadian Government created the Canadian Mortgage
Housing Corporation (CMHC), which in turn created the National
Housing Act Mortgage-Backed Securities Program (NHAMBS) to
‘facilitate the development of the securitisation of mortgages in Canada’.
1
Under the CMHC, the NHAMBS began providing an unconditional
Canadian Government guarantee of timely payment of pools of
government insured mortgages.
2
1.2 Investors in these government insured mortgage-backed securities ‘receive
a monthly “pass through” cash flow comprised of interest, scheduled
principal and unscheduled principal repayments’.
3
Investors will always
receive this monthly cash flow because the Canadian Government will
make the payment if the financial institution which has issued the security
does not. This guarantee of payment costs issuers of the security a
premium.
4
1.3 The Canadian Government expanded its mortgage securitisation program
in 2001 when it introduced the CMB Program, under which the Canadian
Government issues a guaranteed bond—giving purchasers of the bond
regular interest payments with principal paid at maturity—and uses the
proceeds of the bond sales to purchase the mortgage-backed securities
issued by the NHAMBS scheme.
5
The Governments intention was to
1 Treasury, Submission No. 167, p. 1.
2 Treasury, Submission No. 167, p. 1.
3 Treasury, Submission No. 167, p. 1.
4 Treasury, Submission No. 167, p. 1.
5 Treasury, Submission No. 167, p. 2.
114 THE GLOBAL FINANCIAL CRISIS AND REGIONAL AUSTRALIA
generate more investment in mortgage-backed securities by providing
investors with options.
6
Both programs account for around four-fifths of
mortgage securitisation in Canada and the vast majority of all
securitisation activity, with the CMB program accounting for around
three-quarters of investment in mortgage-backed securities.
7
6 Treasury, Submission No. 167, p. 2.
7 Treasury, Submission No. 167, p. 2.
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