Australia's economic fragmentation

Back in the late 89s and early 90s the consulting team that I then led did a fair bit of economic, demographic and analysis looking at long term trends across Australia. Forecasting is a risky business. Really, our aim was simply to determine trends and possible outcomes. In doing so, we worked at state and regional level.

One thing that we pointed to was the likely fragmentation of Australia into a series of sub-economies performing in very different ways and with very different internal and external linkages. We linked this not just to different locations and resources bases, but also to the progressive winding back of the tariff barriers that had supported, forced, intra-Australian trade. In our view, this fragmentation was going make it increasingly difficult for Australian Governments to manage as though their jurisdictions were in fact single entities.

Some things we got right, some wrong. For example, we underestimated immigration and hence population growth. This was especially important in the case of Sydney, for while that city's growth has been lower than the national average, it has still been faster than we projected. We also did not take into account Melbourne's capacity to re-invent itself as a life style city. Melbourne's growth has been significantly higher than projected.   

In all this, the overall fragmentation process has occurred broadly as projected. I mention this now because the on-going process has reached an absolutely fascinating stage.

At Federal level, we have the Rudd Government attempting to impose national consistency across an increasingly disparate country. In doing so, the Government is struggling to find an effective mechanism to bridge the gap between broad national approaches and regional variation. The methods so far used such as the ARIA remoteness classification simply do not work very well. 

State Governments face similar problems, although this is most pronounced in the geographically larger states, NSW, Queensland and Western Australia. The problems are most pronounced in NSW because the state is affected by the relative and changing drawing power of the Sydney, Brisbane, Melbourne and Canberra capital cities. NSW is the only state where the capital metro centre has to contend with rival metro centres on or close to its borders or, indeed, within its territory. 

Dropping below state or territory level to local or regional level, you find a sometimes crazy patchwork quilt of change.

There are some commonalities. For example, three to four hours is about the maximum that people will drive to get away for a weekend. If you draw a three to four hour driving time circle around each major centre, you get a feel for the areas directly affected by metropolitan growth. So Beechworth and the gold fields (Victoria), the Hunter Valley wineries (NSW) and the Stanthorpe Granite Belt and its wineries (Queensland) all reflect the impact of adjoining metropolitan centres.

Another pattern of development links to resource rich areas. The coal fields of the Hunter and of Queensland, the mines and gas fields of WA all display some common features. They are a cash cow for Governments, but their growth creates local pressures that can translate into anger. Just to quote one recent comment on a recent post.

Jim, the mood in Newcastle and the Hunter is one of anger and resentment. Whereas the Hunter was the stumbling block for New England in 1967, it could now be the springboard. It is the jewel in the New England crown that would guarantee the instant success of the new state.

I for one am looking for a new state movement to be reborn and would join it an support it with enthusiasm. We are overdue for it. Perhaps we could start with an unofficial referendum throughout the north with the next council elections. A strong YES vote would give us the platform to push for a new secession referendum.

A third pattern of development links to life style. The reinvention of Melbourne is the biggest example, but it is replicated elsewhere at both regional and local level. At regional level, we have the retirees on the New England/NSW Mid North Coast, at local level in the same region Bellingen as a counter-culture centre.

Within these commonalities, there are great differences that I love, for history and geography creates different patterns. Beachworth or Bright in Victoria feel totally different from Stanthorpe in Queensland.

Change takes time, and then the effects can be unexpected. At a time when housebuilding in Sydney is at its lowest ebb for many years, the WA Government has a development well underway that will ultimately add 13,000 people to Broome in the Kimberley Region of WA, doubling the population of the local LGA.

Now this might not sound a big number. However, it has to be set in context.

WA has always been marked by a very high population in Perth. At the 2001 census, Perth's population (statistical division) was 1,325,392 out of a total WA population of 1,832,008 (72.36%), in 2006 1,455,078 out of a total state population of 1,959,088 (73.76%). So Perth's dominance has increased. 

The low population in the rest of the state - 506,616 in 2001, 514,010 in 2006 - spread over such a vast area has always created service delivery problems. Further, the increasing centralisation of the state has progressively reduced the direct political influence of the rest of the state.

However, influence is affected not just be relative numbers, but also by absolute numbers. Quite simply, if Broome's population doubles from 13,000 to 26,000, then this has a variety of flow-on effects and not just in terms of local services. Among other things, it means a likely rise in the number of community activists.

Depending on the judgements that one makes about resource developments, one scenario could see development of a scale in the Kimberley that would make it a significant counter-balance to the previous dominance of the south-east in WA. That could have quite profound dynamic effects on WA life and politics.

I don't want to overstate this. It is simply an example of a change process.

Finishing by returning to NSW, a study by BIS Shrapnel for The Urban Taskforce, a Sydney based property development lobby group, suggests that the NSW economy has become something of a cot case, that Melbourne will regain its position as Australia's biggest city. At the same time, a survey by the NSW Business Chamber of Commerce suggests current poor performance by the NSW economy is essentially a Sydney problem.

Things change all the time. The difficulty, however, is that the concept of a "NSW economy" is really a statistical construct that really makes very little sense. If we really want to address questions of economic performance across NSW, then we have to break the state up into its constituent economies. Sydney's economic problems need to be addressed as Sydney's economic problems.