Wide Bay Burnett –State of the Region

Presentation for Regional Development Australia –Wide Bay Burnett Inc

Presented by Dr Peter BrainNational Institute of Economic and Industry Research

416 Queens Parade, Clifton Hill, Victoria, 3068Phone: (03) 9488 8444; Fax: (03) 9482 3262; Email: admin@nieir.com.au

10 April 2014

The WBBR: Four alternative factors

Bumbling along (current trends) Connecting with the world

Mo

der

ate

1. Economic refugees, sea change/tree change and aged migration flows in line with historical trends.

2. Some formal regional governance changes but weak social and political regional network integration occurs. Low proportion of foreign migrants. Weak expansive networks.

3. Sea change/tree change in economic refugee culture and values.

4. Not in my backyard political culture and hegemony of established interests. Difficult to get investment projects implemented.

5. Weak political leadership. Long lags in infrastructure provision. Many growth opportunities lost.

6. Convoy development regional dynamics. 7. Development instruments focus on major

projects (when they can be located in isolated areas) and the lifestyle choice of the dominant culture.

8. De facto regional goals are a mixture of environmental production and fortress WBBR.

1. Entrepreneurship – commercial culture/expansive networks/mutual obligation.

2. High skill based migration and high rates of skill formation.

3. Infrastructure provision drives economic growth, not lags it.

4. Locomotion development. At any point in time the best opportunities are exploited irrespective of where they are in the region. 5. Strong political leadership – vision driven regional

focus on a foundation of entrepreneurial culture. Aggressive political culture.

6. Representative political culture. Full regional integration and network consolidation.

7. Import replacement opportunities strongly exploited.

8. Export driven development. Regional goals are best practice productivity to reduce income differentials with other regions. Weak lifestyle choice.

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God’s waiting room Two speed development: dual economy and society

1. Accelerated ageing/older aged migrants and economic refugees 2. Flight of the young consumerism. 3. Low rates of skill formation. Many lost

investment opportunities. Local social network isolation.

4. Not in my backyard or anywhere else either. Strong conservative culture for either selfish or environmentally driven motives.

5. Convoy development in the region produces similar poor performance outcomes for most localities.

6. Weak regional and sub-regional leadership lack of regional integration. Local area primacy. 7. Lifestyle choice homogeneity. Low income

lifestyle dominates. 8. Fortress WBBR. 9. Dominant public sector dependency. Weak

export growth (except tourism) and increased import penetration further weakens existing supply chains. Low mutual obligation.

1. Balanced lifestyle choice. Expansive networks coastal regions. Inland regions’ network isolation.

2. Increase in skills formation in coastal regions. 3. Increasingly unequal regions. Households forced

out of coastal regions as cost pressures impact who migrant to inland regions.

4. Strong political leadership vision driven but sub-regional focus on coastal regions. Inland weak leadership.

5. Some optimal design in sub-regional integration in coastal regions.

6. Partial connecting with the world strong in coastal regions weak in inland regions.

7. Inland regions become relatively more public sector dependent. Inland inter-governmental relationship more important than regional networks.

8. Locomotion development coastal/ convoy development inland.

Str

on

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Weak

Export intensity strong

The vicious cycle of low growth and ageing

Low productivity/ Low exports

Low per capita growth and productivity

Low income of working age population

Lack of regional vision/low

entrepreneurship/ low investment

Accelerated ageing

Low housing affordability

Immigration of retirees

Out-migration of

skilled/young

Low rents/housing costs

The WBBR region: Key features of the 2006 NIEIR report

On a current trends basis it is one of Australia’s most rapidly ageing regions:

average age increasing by 0.3 years per annum;

the share of population aged 65 will increase from 17% in2006 to 27% by 2020;

two-thirds of the population change will be people aged 65and over.

Population growth rates fall from 2.5% in 2006 to less than 1% per annum by 2020.

Per capita GDP growth rate: 2006 to 2030:

existing trends 1% per annum

aggressive restructure 2% per annum

Population indicators

Population 65 and over share Population growth rate 2006 to 2014 (% per annum) 2006 2014

Gympie (R) 15.0 20.7 1.7

North Burnett (R) 16.9 22.2 -0.1

South Burnett (R) 15.6 20.5 1.3

Fraser Coast (R) 19.0 23.6 2.2

Bundaberg (R) 16.9 21.5 1.5

WBBR 17.1 22.0 1.7

2014: Is WBBR on track with expectations?

Demographics

Share of population aged 65+ - mid 2014 22.4

Expected mid 2014 – 2006 report 22.7

Rate of 65+ population change to total population change – trend

2006 30%2008 40%2010 72%2012 95%

Expected share 2006 report 65%

Population growth – trend

Early 1990s 3.02002 1.52006 2.62008 2.32010 1.32012 1.22014 1.1

Region gross product indicatorPer cent of region gross product at market prices

2001 2006 2010 2013

Average annual gross

product growth rate

2006-2013 (%/annum)

Gympie (R) 18.4 16.6 16.5 16.3 0.7

North Burnett (R) 6.4 5.2 5.2 6.0 3.0

South Burnett (R) 17.0 14.6 14.4 13.8 0.1

Fraser Coast (R) 27.6 31.4 30.9 30.1 0.4

Bundaberg (R) 30.6 32.2 32.9 33.8 1.7

WBBR 100.0 100.0 100.0 100.0 1.0

Brisbane WBBR as % of Brisbane 12.4 11.7 10.7 10.3 2.9

Conclusion: Public sector dependency high.

WBBR: Sources of gross product growth – 2006 to 2012

Per cent per annum

Property income 0.3

Cash benefits 0.1

Government expenditure 0.8

Exports 0.1

Investment 1.1

Imports and other -1.5

GDP 0.9

Central themes of the 2006 report

(i) Export growth was the key for enhanced productivitygrowth and overall growth.

(ii) The scenarios would be almost totally defined by the percapita growth of exports.

Per capitaGDP growth

Outcomes 2006 to 2036

Low scenarios 0.8 – 1.2

High scenarios 1.7 – 2.5

Per capita Per capitaOutcomes GDP growth export growth

Low scenarios 0.8 – 1.2 0.7 – 1.5

High scenarios1.7 – 2.5 2.0 – 3.2

Exports growth is a driver of both overall growth and productivity growth

The reasons are:

(i) more than 50% of total gross product;

(ii) allows workers to apply skills productivity and efficiency that are not available from domestic demand opportunities; and

(iii) allows the generation of economies of scale and scope.

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-2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5

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Log of gross product growth

SEQ SA2 regions: Gross product growth versus exportshare growth - 2001 to 2011

SEQ SA2 regions: Scale versus export share 2011 –The bigger the scale the higher the productivity

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Log of SEQ export share

Export indicators

Export share in WBBR

gross product – %

Average annual export growth rate – %

2006 to 2012

2001 64.2 Gympie (R) 0.5

2006 57.1 North Burnett (R) 4.5

2012 54.6 South Burnett (R) -1.3

Fraser Coast (R) -2.6

Bundaberg (R) 1.9

WBBR 0.2

The adverse trend in unemployment rates is to be expected given the poor economic growth

Average annual growth2006 to 2013

total hours of work

Gympie 0.4North Burnett -0.3South Burnett -0.1Fraser Coast 0.5Bundaberg 0.7WBBR 0.5

Brisbane 2.0

Unemployment rates are high in WBBR:One of the highest in Australia

2008 2013

Headline unemploymentrates (%) 5.6 8.0

NIEIR unemployment rate (%) 11.8 16.4

Working age social securitytake-up rate (%) 19.2 23.4

Productivity indicatorsProductivity gross product at market prices per hour worked ($ 2011)

2001 2006 2010 2013

Average annual

productivity growth rate

2006-2013 (%/annum)

Brisbane (C) $ of GRP/hour worked 63 67 69 71 0.8

Gympie (R) Relative to Brisbane – % 97 89 85 86 0.3

North Burnett (R) Relative to Brisbane – % 110 110 115 131 3.4

South Burnett (R) Relative to Brisbane – % 87 86 83 82 0.2

Fraser Coast (R) Relative to Brisbane – % 80 86 83 81 -0.1

Bundaberg (R) Relative to Brisbane – % 89 93 91 93 1.0

WBBR Relative to Brisbane – % 88 90 87 88 0.5

QLD Wide Bay Burnett - Housing

Housing Indicator 1991.3 1997.3 2001.3 2006.3 2010.2 2012.2 2013.2 1997.3

Rank 2013.2

Rank

Annual growth

1997-13

Average value of dwellings ($cvm '000s) 174.5 197.2 187.0 339.4 390.2 341.1 332.1 43 48 3.4%

Average dwelling prices to household disposable income (%) 4.7 3.3 3.1 4.8 5.4 4.7 4.6 31 23 2.1%

Mortgage burden on average dwelling purchase (%) n/a 26.3 24.6 38.6 43.3 37.8 36.7 31 23 2.1%

Greenfield construction costs to average dwelling price (%) 108.0 100.8 125.2 93.6 92.1 102.3 109.6 32 21 0.5%

Catchment dwelling purchase income support ($cvm) 36587 41784 45603 53404 52942 60806 64335 65 63 2.8%

Dwelling affordability – average mortgage on existing dwelling to catchment income support (%) n/a 37.7 32.7 50.7 58.8 44.8 41.2 21 25 0.6%

Dwelling affordability – average mortgage on new dwelling to catchment income support (%) n/a 38.0 41.0 47.5 54.1 45.8 45.1 11 12 1.1%

For WBBR to attract younger migration:

1. local productivity must be increases;

2. to produce high enough $/hour full time employment, to provide;

3. the income necessary to support the mortgage burden on new dwelling construction.

Otherwise:

4. the only migration which can afford new construction will be the older age migrants with capital gain wealth from elsewhere.

Examples of necessary export initiativesto lift WBBR economic performance

1. Significantly weaker multiplier than having an actual mine in the region but significantly better than nothing.

2. Make available high income employment.

3. Attract younger age migrants with sufficient income to construct a dwelling.

4. Attract additional population.

5. Generate additional expenditures in transport services and government services.

For each additional 100 fly-in/fly-out workers

1. Population increase of between 200 and 300 persons.

2. Total industry employment will increase by 60 from income-expenditure flow-on effects of the fly-in/fly-out workers and the increase in demand for government services and transport services.

3. Total resident increase in employment by 160 persons.

4. Total longer term increase in gross product of$7 million annually.

5. In the short-term, $14 million increase in gross product from construction impacts increasing industry employment and resident employmentby a further 75.

Fly-in/Fly-out: Conclusion

For every 400 additional fly-in/fly-out workers total resident hours of work will:

increase by just under 1% in the short-term,allowing for construction effects; and

increase by 0.6% to 0.7% over the longer term.

Conclusion:It would go a long way towards restoringsatisfactory economic performance outcomes.