Central Highlands Economic Development Conference
“Investing in our future”
16 March 2012
Ladies and Gentlemen:
The emphasis in my talk is going to take us beyond the industry perspective we heard this morning.
It was particularly good to hear the contributions of the previous two private sector speakers who injected a degree of commercial reality into the discussion about the economic development of this wonderful part of the world. My perspective will be very much from that of the broad public interest.
I started in public affairs way back in 1986 when I went to Canberra to work for the then Leader of the Federal National Party, Ian Sinclair.
He taught me a lot about politics, the public interest and what individual sectors were about in their representations to Canberra politicians. Early on in my time with him he reminded me of the essential nature of politics: “John, everyone that comes through that door [pointing to his parliamentary office door] will argue that their proposal is in the national interest and for every good idea that is put up there will be many others argued as passionately by an opposing interest”.
It is a perspective to keep in mind as we hear different sectors and interests bandy about massive numbers all underscoring the importance of their projects, proposals and requirements of government. We should understand that the worlds of the public, private and community sectors are inextricably entwined, but are also reasonably divergent in their core drivers and accountabilities.
My perspective about building a sustainable future for the Central Highlands starts with the year 2050 and asks: What will this place look like in 40 years?” We are going to get there in different ways, following different development pathways.
Let me start by offering two quite stark alternatives for the Central Highlands.
Will we see around Emerald in 2050?
– A strong region with complex communities that is healthy, socially resilient, economically competitive and adaptable in a world of change?
– An exhausted environmentally degraded region evidencing a social and economic monoculture, working greatly diminished natural resources, with communities in decline and politically marginalised?
In short, will we end up as a failed colony? I will come back to the colony point because we Australians have some history with colonisation and development as colonies. It has bequeathed a way of thinking that still colours our national behaviour and is relevant to the future of regional Australia – but more about that later.
So using the metaphor of divided road, which road to take? In reality, the future will not strictly reflect either, but be as life usually has it, somewhere in between. Let me address in three core themes what I think that poetic notion of Robert Frost’s ‘a road not taken’ means to the future here.
In this presentation, I will suggest that to ensure sustainable development for the Central Highlands we will need to:
- Look beyond boom and bust cycles and business as usual – because there will be a bust sooner or later and the community will best prosper if it develops in a way that in part transcends the vagaries of the commodity cycle;
- Nurture community entrepreneurship and grass roots leadership for sustainability because regional communities simply cannot look to governments which are primarily accountable to the urban populations to safeguard their interests – look to Canberra and Brisbane for leadership to make sustainable regional development, and it ain’t going to happen! Nor will it happen for that matter if you look to the corporate chieftains of London and Houston. Rather I recommend that regions like Central Highlands….
- Collaborate with other regions in Australia to build the case for sustainable regional development and demand of government policies supportive of real decentralisation away from the metro-centric paradigm.
LOOKING BEYOND BOOM AND BUST AND BUSINESS AS USUAL FOR THE FUTURE OF THE CENTRAL HIGHLANDS
Now looking to the future there is an entire range of things that are possible, but as a previous speaker rather pertinently alluded, some things are probable, something are preferable, and some things are just implausible.
And if we build our future on the best case projections of commercial sales of coal over the next five years without account of economic trends in the key markets, we run the risk of planning a future that frankly is implausible.
The focus for stakeholders in communities wanting to be sustainable is to project futures in the preferable-probable space, making a stronger future rather than having it happen at the cost of environmental degradation or diminished economic capacity.
If there is one thing I have learned from years in public affairs it is that the world of politics is about the immediate here and now – the next three year term – and it is very much about things that are “doable”, “fixable” and for which there is a political dividend to be made. There is a reactivity to our public processes which makes me sceptical about the capacity of governments to deliver on the host of expectations thrown up by communities. Frankly, much of the complex stuff, particularly that which involves innovation and new thinking, is more likely to be achieved outside the orbit of government.
Building sustainable communities requires a depth of political vision which extends beyond the here and now to the intermediate and longer term – well beyond 5-10 years to the next generation. And that is not all that far away – because as I tell my colleagues at university – the first year students for 2030 are being born this year.
Beyond the longitudinal view, there is also the need to project a community’s future in the broader context of its regional, state, nation – and beyond that the planetary living systems – the Earth itself, which is where defining forces like economic globalisation and climate change as examples shape all our futures.
Arguably the discussions we are having about the future of this community, this region, go to the heart of the national debate about who we want to be as a nation, what we want to achieve, and how we will go forward.
An off the top of my head list of the issues Australians are debating today – or perhaps should be debating – might include:
- Future population size and composition
- Comparative Advantage
- Falling Multi-factor Productivity
- Risk of ‘Dutch Australia’
- Politics of vested interests
- Underperforming education system
- Government debt
- Climate change
- FIFO and regional development
- Capacity for innovation
- Metro-centric national development
- Currency exchange rate
- Foreign investment
- Sovereign Wealth fund
- Income disparity
- Public health
- Industry policy
- Infrastructure deficits
- Limitations of government
- Limits of Federalism
- Toxic partisan politics
- Community alienation
- Sensationalist media
- Poorly informed public debate
- Negative public sentiment
- The way Australians see Australia
- The way we look at the future
We could spend all day talking about this list, but the ones I wish to focus on today are the last couple – the way Australians see Australia and the way we look at the future.
Now the people living in regional communities have a very different view of this continent and its people than do the 87% of Australians who are living in the big cities. And I think many regional people have a different more optimistic view of the potential of the country than do their metropolitan cousins.
A plethora of recent publications address these notions of national identify, our view of ourselves our capabilities and possibilities as a nation. You have Paul Cleary with his rather downbeat view of an Australia squandering the opportunities in “Too much luck: the mining boom and Australia’s future”. Cleary’s caution is echoed in Peter Hartcher’s “The sweet spot: how Australia made its own luck and now could throw it all away”.
But then as George Megalogenis reminds us in The Australian Moment, given the tumult and upheaval over the past decade, no one in their right mind would want to live anywhere but Australia. It has of its own volition through a mix of management, abundant resources, and serendipity travelled the global roller coast better than any other country. Perhaps most sobering of all, demographer Bernard Salt’s “The Big Tilt” presents the future in the very challenging terms of an aging population, unable to service its own needs or deliver on future development opportunities without a significant injection of working aged people – immigrants.
It seems there is very little we as a nation agree on but there are a number of broad themes or cleavage points which we can identify.
In ‘The Big Tilt’ and more recently in The Australian Newspaper, Bernard Salt has published a map of Australia which graphically depicts our history and likely future. It shows an Australia of the future characterised by more urban concentration and three energy-resources provinces serviced by large Fly in Fly Out (FIFO) workforces. You can access it at http://resources.news.com.au/files/2011/05/27/1226064/044811-aus-news-file-salts-australia-pdf.pdf
Demographer Salt suggests that over the next 40 years to 2050 the Australian population will increase from 22 to 35 million people and that most of that increase will be in the established metropolitan and peri-urban areas of eastern Australia.
On current projections, just one million additional Australians will live west of a line running from just west of Roxby Downs in South Australia to just north of Port Douglas in far north Queensland. And most of them will be among the 3.5 million living in greater Perth.
Salt’s depiction of a geographically fragmented economy and population reminds me of the impression I had of Australia some years ago when flying from Brisbane to Broome – across what seemed like a vast inland ocean with scarcely a sign of human settlement over hundreds of kilometres but for the occasional remote camp or geosciences exploration.
As someone said in Brisbane the other day, “Look over your back fence in Port Headland and you can almost see Queensland, there is nothing in between”.
When you look closely at the Australian nation, really it is settled on economic islands spread across a far flung continental scale archipelago.
Once there really was an inland sea, but now the islands are separated not by seas but by vast tracts of what we term “regional and rural Australia”, the “outback” or just plain “desert”.
The analogy suggests we are not one land and it should help us understand why urban Australians, particularly, look distantly upon their country counterparts, inhabitants of a remote harsh and unforgiving land alternating between drought and flood. The regions for many seem almost as a distant universe.
It should be of no surprise then that Australians, unwittingly I believe, look upon their own country imperialistically.
We are the only country to have an entire continent to ourselves and we see much of it as a place where temporary colonies can be established to extract resources and wealth, but not to support permanent settlement. It is the Australian Empire in its own backyard!
In short, there is no national will or commitment to decentralise our population and build sustainable communities in the inland. There is no serious proposition to build a future outside the major cities and the sea-change coastal belt.
Here in the Central Highlands, urban Australia sees parts of your region as a place to build mines, transport and export coal, extract and process gas, earn export income and royalties, even to work – but not to live. We in the cities do not want to live here. No, for many the Central Highlands and its neighbouring districts are a good place to drive in and drive out of, and from further afield to fly in and fly out of.
Yesterday on the Qantas-Link plane flying in here there were 79 passengers, four of whom were women, three with a baby or a young child, and me – and 73 men of all ages flying in to work. That’s the reality of a FIFO world.
Now as a former public servant, I’d like to be reassuring about how all this is well planned, managed and reflected in well coordinated strategies. But sadly, more often than not the pretty maps drawn up by government planners are not reflected in on ground efficiency and systematic development.
And when it comes to building sustainable communities, quite honestly, we don’t make or assert development conditions and requirements that make a real difference on the ground. We talk about a housing crisis in the resource communities but there is no national or state housing strategy for resource communities, even though they are the well-spring of our national wealth. Instead we improvise.
In this town at the moment we are out of tents because all are being used for emergency accommodation for people wanting to work here who cannot find accommodation. It is a disgrace and should not have to happen.
An observer can reasonably ask will Australia ever be smart enough and strategic enough to decouple investment in some of its ancillary and support services to escape the financial ravages of boom and bust commodity cycles? And be ready for the next cycle? Trouble is no bank is going to lend a miner the money to build the necessary infrastructure, until the end use customer has signed on the dotted line and the cash flow is assured. So it is no use governments telling the industry to go out and build houses and roads in readiness for the next boom – they simply won’t have the money to do so.
The possibility of counter-cyclical enabling investment in infrastructure and planning by government begs the question: why aren’t they doing it? At the moment, the same observer could ask will we be smart enough as a country to escape a serious dose of the ‘Dutch Disease’. With business planning to spend up to $173 billion over 2012 and 2013 on new mines, ports, equipment, and machinery – as well as camp accommodation for workers, more money will be invested in the resources sector next year than in the rest of the economy. Already the resources sector is consuming more than 60% of private sector capital investment – while much of the remaining economy languishes. Mining is producing 20% of our national output and growing at 15% per annum, creating an economic vortex that is both rafting other parts of the economy and wobbling it at the same time.
Of one thing we can be sure, the investment boom has emboldened the unions and Australia’s resources states particularly are at risk of ever escalating wages expectations. You cannot pay workers a 35% premium to go and work in Gladstone and not expect a flow on to other regional centres. Some have claimed American construction contractor, Bechtel, with its three big LNG projects at Gladstone to complete in four short years has started a wages-conditions merry-go-round. Let the wages genie out of the bottle and it makes Australia and Queensland an even more expensive place to do business.
Average wages in the Australian resources and energy sector are now at about $163,000 a year with Australian plant operators earning three times what their American counterparts might make.
Average weekly earnings are already at 4.2% compounding annually, whereas at the peak of the last boom they reached 3.5% – so Australian workers are pricing themselves out of the game. The Americans may be earning less but they also pay a lot less for the basics -the median house price in America is half that of Australia”. As Australia becomes increasingly a costly place to do business, the resource boom could end up effectively off-shore sourcing 50% of its construction labour.
Now I am all for the development of the ‘resources economy’ but I think we also have to be very conscious that when a relatively small and open economic system is strongly in any one direction, it happens with ‘collateral impacts’ – a term that goes back to the first Iraq War and General Schwarzkopf’s description of the ambient damage incurred in achieving a precise target.
The value of resources and energy exports from Australia in 2011 jumped 15 per cent from levels in 2010 to a record $190 billion[i]. Right now in Australia we have one sector growing at 15% and other parts growing negatively – we will do very well to remember the lessons of the Netherlands during the North Sea gas boom and seek to avoid an Australian version of the “Dutch Disease” and manage for an economy that should be performing after the boom.
When you see figures like these for Queensland which were reported in the Courier Mail’s, new monthly Boom Magazine earlier this month, it is useful to remember that boom time numbers are exactly that – boom time numbers.
- Investment in CSG to LNG $45bn
- Mining investment to 2020 to increase beyond $140 bn
- Mining exploration expenditure in 2011 was $645m
- Coal production $19.5 bn (2000) 108.4 bn (2020)
- Qld 5.25% economic growth forecast 2012-2013
- Business investment to rise 75% in 3 years.
Now the thing about boom time numbers is that they are price dependant and will hold up so long as demand justifies the extraordinary investment and costs of production being incurred in the rush to beat competitors with product to the Asian markets.
Understandably, the key players in the mining oligopoly reserve the right to change the numbers depending on what happens to their prices – and in their negotiations with suppliers, governments, councils, and unions they keep those cards very closely covered. We should not forget that booms happen because of a confluence of strategic and commercial factors which are drawn into play.
At the moment the state of play reflects itself in people wanting a million dollars for a house in the former grazing town of Capella which had a population of just 800 in 2006.
It was a typical sleepy Queensland rail town to which I can claim an early association, having worked there back in 1974 as a holidaying first year university student, stone-pitching culverts for the Peak Downs Shire Council on the gravel road which was being built over to Dysart and the Saraji mine.
38 years later and the Melbourne Herald Sun reported recently that Capella’s Franettovich family were “patiently” holding out for a million dollars offer on their house.
They are waiting because in this region population is expected to increase by 20,000 to 50,000 over the next 18 years, the average wage is already well over $60,000, unemployment is virtually non-existent at 2.5%, median weekly rents are $500, median house prices increased 16.1% last year and the median regional price for a house is already $375,000.
Many here in this room today know of or have heard of streets right here in Emerald which three years ago were made up mainly of owner occupiers, where most of the houses have since been sold and rented to contractors, mining staff, and in some cases rented back to the former owners themselves – such are the perverse incentives driving up the cost of accommodation here.
Now all of this is happening because of our growing economic dependency on the projected steel intensity of the Asian economies as reflected in investment in infrastructure and growth of middle class consumption. Back on 7 March, Commonwealth Treasury Secretary, Dr Martin Parkinson, told the Australia-Israel Chamber of Commerce in Sydney that the growth in the Asia-Pacific middle class was the defining sociological indicator of economic development in the region with the 500 million middle class consumers of 2009 expected to grow to 3.2 billion by 2030[ii].
HSBC Trade Connections predicts a growth forecast of 129% for Australia by 2025, double the global rate, and 4th overall in Asia. But I would suggest to you that it is naïve to think that the Asian economies will continue their development at any price approach into the future. The Chinese will want what we have – clean water, clean air, a cleaner environment. There is a ceiling to all this development at any price we have seen over more than two decades now.
Premier Wen Jiao Bao said just the other day that one of the priorities for the Chinese Government was to respond to changing expectations about the environment. They propose to start cleaning their air by reducing particulate emissions which come from burning coal. And then there are the changing social expectations of Chinese workers. Stanley Lau, deputy chairman of the Hong Kong Industries Association lamented to the New York Times recently that “Minimum wage increases are too fast and too high, and we also worry about the new regulations being introduced – too many and too quickly”.[iii]
The Americans are on to this trend and expect in the not too distant future to see some of their lost jobs repatriate back to the US because of the rising cost of doing business in China.
So when we talk about the resources super cycle there is understandably a divergence of view. Credit Suisse is expecting the record rates of growth in the decade to 2009 of around 10.3% per annum to drop to 7.5% per annum this decade and then lower after 2020 to 4% which is what you might expect to see in a developed economy (reported in AFR 8 March 2012 p 37).
In contrast a more wide-eyed upbeat view is promoted by Royal Bank of Scotland which claims that: “China’s infrastructure investment needs will amount to an eye-watering $10.5 trillion between 2011 and 2030, accounting for 55% of total emerging market infra investment spending. This compares with $2.9 trillion invested between 1991 and 2030, representing 57% of Asia’s total spending, led by electricity and road investment”. [iv] Given their grisly performance during the global financial crisis and need for subsequent taxpayer bail-out I am not sure how much credence we should put in RBS’s unqualified assessment of the continuing exponential jump in China’s further economic development. But even if they are half right, the magnitude of China’s next 20 years represents a massive opportunity for Australia and its resources regions particularly.
Now let me remind you, as a former director of the EPA, that this is happening and can only happen as a result of a massive environmental subsidy that comes with putting as much fossil fuel emissions into the Earth’s atmosphere over the coming 20 years as we have put there during the past 250 years. Back in 2005 the Scientific American published a confronting graph showing 1070 billion tons of carbon dioxide emitted from human activities from 1751 to 2002 with an estimated 735 million tons expected to be emitted between 2003 and 2030[v].
Now global warming is happening and it is related directly to the massive growth in fossil fuel emissions since the beginning of the modern industrial age. Sooner of later, and I expect sometime in the intermediate term, that is before 2030, we will see globally sanctioned action on climate change. My concern is that the global reaction to climate change will be too late and implemented at a far greater cost than might have been the case had the warnings been heeded from economists like Nicholas Sterns and Ross Garnaut. The global reaction, when it comes, will more likely be a panicked response, owing much to the further deteriorated state of our natural systems, probably as a result of increasingly unpredictable changes in climate patterns and severe weather events.
Putting aside some of the contingent costs of the future that will accrue from the carbon intensity of the Asian economic miracle, the fact remains Australia already is not doing a great job living off the proceeds of the record demand for our resources. The strong terms of trade and the price of the Australian dollar has certainly underwritten an upturn in the quality of life for the average Australian consumer. Our dollar today has a buying power 60% greater than what it had for our parents’ generation. Most of us in this room as well as most other working Australians during the past ten years have lived a pretty good lifestyle – one marked by consumption of consumables , something that Clive Hamilton termed “affluenza”. And at the back of it all, our governments Federal and State managed to run a mountain of debt through deficit budgeting, leaving themselves with few fiscal options and certainly little capacity to underwrite the infrastructure needed in regions like here.
Back on 7 March, Secretary of the Treasury, Dr Martin Parkinson, told the Australia-Israel Chamber of Commerce that “having deployed our fiscal ammunition during the GFC, the imperative today is to return to surplus and to pay down debt – to begin to recharge our fiscal ammunition for future use if needed…”. He predicted that “for both levels of government, surpluses are likely to remain at best razor-thin without deliberate efforts to significantly increase revenue or reduce expenditure.” In the absence of any evidence on either side of politics to actually address genuine tax reform or redirect public investment toward building enabling economic infrastructure, we can expect continuing inertia on the part of government and realisation of the Treasury Secretary’s prediction. Parkinson reminded his audience also that the creeping after-effects of the GFC contraction on most parts of the economy were enduring, that the “tax-to-GDP ratio [had] fallen by 4 percentage points since the GFC, and [was] not expected to recover to its pre-crisis level for many years to come”[vi].
So in building the Central Highlands of tomorrow, don’t look to government to cough up the funds, it’s broke!
And so here you have it – the dilemma of our time and region.
On the one hand we have government “missing in action” in helping define and realise this important stage in Australian economic history, on the other you have mums from Moranbah travelling to Melbourne to protest to BHP the social impacts of FIFO.
You have people like Kelly Vea Vea, a spokesperson for Queensland Mining Communities saying: “This just does not make sense. We should be leveraging the mining boom to develop our regions sustainably, not orchestrating this smash-and-grab frenzy that will allow regions to be turned into mere bus stops on the road to massive mining industry profits.”[vii] Increasingly vexatious, divisive, and disruptive issues like workforce accommodation, employment practice, and community design have attracted the attention of a Senate inquiry. Moranbah State High Vice Captain, Chantelle Winter told the Federal Parliamentary Inquiry into FIFO, BIBO, DIDO impacts on resource towns “Personally I think they should spend the money to buy more housing for families, and not invest the money in camps… so families can get together and stay together.“ [viii]
These perspectives from Kelly and Chantelle resonate strongly with a lot of people who are keen to see benefits for the regions leveraged from the resource boom. The challenge for Queensland is to make advantage out of the fact that it has established regional communities adjacent to and in the resources regions. Regional Queensland might suffer from services and infrastructure shortages but it is not a wasteland.
In other parts of the state these community based calls for smarter investment in the regions is amplified by the “culture wars” of coal seam gas and coal mining versus farming on the Darling Downs and even in the peri-urban rim of SEQ. Personally, I think with the right regulatory regime, prudential application of science, and best practice environmental management, coal seam gas does not have to be the environmental villain it is made out to be – largely on the basis of what we have seen happen in a relatively unregulated American context. The real risks I believe attach more to the cumulative regional and social impacts with economic dislocation, small towns overwhelmed by an influx of outsiders, investment in the gas infrastructure diverting employment away from existing industries, and the life courses of a generation of young Australians potentially being diverted from all the other things they should be doing by rushing off work for the gas and mining companies or their contractors.
Let’s face it! The CSG issue has not been managed well! It has been appallingly handled by the gas companies and indifferently dealt with by the Bligh Government, unconcerned at the landholder protests because most of it was happening in safe LNP seats and the royalties rush is needed for a bare State Treasury.
The upshot of this failure of governance and a rather clumsy engagement process has been what Peter Freyberg, head of XSTRATA Coal, described the other day as “a deficit of trust”. He went on to bemoan to an industry audience: “Over the past 12 months we have seen a proliferation of stop-gap policies that have not been based on robust science or adequate planning or analysis”[ix]. As we lead to the State election many might ask is the face of Katter’s Australian Party, the face of regional outrage of being taken for granted by governments and companies. Clearly, the pace of change and development has outstripped government’s capacity to manage and community’s capacity to comprehend.
We are dealing with our own Australian version of what Alvin Toffler described back in the 1970s as “Future Shock”. Over the past four generations we have seen more change than occurred in the previous 800 human life spans, and in the next generation there is likely to be more than all before – not a very reassuring notion for a community already feeling over-run by the pace of development. And yet we are looking in the world of technology particularly of even more interventions of what are called disruptive transformative innovations – thinks like smart phones – that change the way we live our lives.
So it is useful to remember that when we look at the future we do so with strong assumptions. We have heard a little about it this morning. Here in the Central Highlands and Galilee – all those future mines and mine expansions are being planned on the basis of some major assumptions about what will happen in export markets now and well into the future. These assumptions make no account of a rapid removal by Asian economies from fossil fuel dependence. For the foreseeable future at least it seems there is no disruptive-transformative technology threatening the utility of central Queensland’s main export product. As to the future of mine jobs, however, we cannot be sanguine.
The future Australian mine looks increasingly like it will be a work site manned by robots, GPS and spatial sensors, and large equipment managed remotely by people working offsite in faraway cities. Leading resource economist and former head of ABARE, Dr Brian Fisher has rightly concluded:
“The prize is huge. Increased automation may sustain Australian competitiveness, compared with a situation where resource exports decline in importance relative to those from competitor countries with equally good or better resource endowments but fewer constraints”[x].
Rio is already experimenting with remotely driven trucks in the Pilbara, how long will it be before this technology is commonplace making obsolete many of the jobs we see in the current mine site.
Indeed, these issues of digitalisation and technological innovation segway to the work being done in Brisbane by the CSIRO, the Brisbane Institute and a group of small-medium corporate stakeholders who are undertaking some detailed scenario analyses of how the major megatrends for the future identified by CSIRO will impact in Queensland. The megatrends identified by CSIRO which will shape our world include:
- More from less – depleting natural resources and increasing demand for those resources means resource use efficiency
- A personal touch – Growth of services followed by second wave of innovation aimed at tailoring and targeting services
- Divergent demographics – OECD ageing and lifestyle and diet related health problems vs high fertility rates, malnourishment and poverty .
- On the move – career mobility, moving house more often, commuting further and travelling overseas more often
- i World – paralleling natural world with digital virtual world[xi]
These megatrends will be articulated in the core issues of the next 20-30 years through things like:
- Climate change
- Decarbonisation of the global economy
- Population growth and stabilisation
- Food security and innovation
- Resource security including energy and water
- Geopolitical conflicts arising from resource constraints and changes
- Economic competitiveness in a wholly globalised economy
- Community sustainability.
For all communities these themes will present as threats and opportunities. Don’t vilify me for saying it, but the very economy we are currently building here in central Queensland in time will have to be part of the decarbonisation theme. What will those adjustments look like? CCS plants, clean coal technology in China?
It does mean that we have to work out how to be smart in the way we use coal. Gasification of coal will certainly be a major part of the energy transition. Indeed, I understand the Chinese are already spending something like $130 billion during the current 5 year plan on developing better gasification technologies for their own coal. The convergence of solids, liquids and gas as sources of fuel will be one of the key energy themes of the next few decades.
Hopefully, we will see competitively priced and environmentally safe carbon sequestration technologies developed that ensures Queensland has a viable and wanted product in the world of 2050. But let’s not forget, too, the vision of the automated mine and what that means for skills and economic development in the Central Highlands particularly in our 40 year view of the future.
BUILDING A SUSTAINABLE COMMUNITY IN THE CENTRAL HIGHLANDS
So what have we got to do to build sustainable communities in the Central Highlands? I will start the answer to that by saying that sustainable communities won’t happen without community entrepreneurship and grassroots leadership.
Let’s start by thinking of the region as a three dimensional continual process in which the sum of the interactions of the core components define the nature of our regional system – reflecting its resilience, connectedness, and potential for growth. In the dynamic ebb and flow of elements within our regional system lets think about
- What are the key components?
- How do these components interact?
- What are the boundaries?
- What are the key trends?
- What are the process limits?
It is not useful to think of communities as linear composites, as life happening in a straight line of mono-dimensional cause and effect. One of the foremost systems thinkers, Donella Meadows, wrote that “Many relationships in systems are nonlinear. Their relative strengths shift in disproportionate amounts as the stocks in the system shift”[xii].
With systems thinking we can talk the regional system in terms of boundaries and limits because a system only works as well as its weakest link and at the moment here in Central Highlands our weakest link is a diversity of human capital and skills – along with of course the basic things like accommodation.
Look at the future and if you are talking about sustainable development put these principles front and centre:
- Intra-generational equity
- Inter-generational equity
- Maintenance of biodiversity
- Precautionary principle
- Maintenance of cultural/social frameworks
- Internalization of environmental costs
Sustainable communities means taking close account of and factoring into all development decisions these principles. Don’t fudge them. If someone comes up with a proposal that contradicts these core tenets, it will not be sustainable. We can stop arguing about what sustainability is and start applying these principles that have been developed over the past generation. If a project shreds cultural and social frameworks or fails to take account of the full environmental costs, then it is not sustainable. For many Australians their approach to the future is unsustainable and indeed much of our planning process where it exists fudges on the basics of sustainability.
In our national development pattern, for example, Australian governments are encouraging most Australians to live in places which are likely to be water stressed in the decades ahead. 17.7 million Australians (80% of population) live in areas of declining rainfall. Last year Federation Fellow and Professor of Geography at the University of South Australia, Graeme Hugo, questioned whether we should maintain “the same settlement patterns for the next 100 years that we’ve had for the last 100 years? In other words is the existing settlement system a historical artefact or something worth maintaining?” We are approaching the future with the habitation mindset of the nineteenth and twentieth centuries.
I think it is the wrong direction and I can see the sense of arguments put up by proponents of development in northern Australia who cite the benefits of populating regions supported by abundant natural resources. But as Hugo says, to get people into these places the arguments have to go beyond sustainability:
“even if you can find a place that can tick all the sustainability boxes for future growth, you find that the places that work the best actually have other attributes. They are places with a strong sense of community; they have an identity with place and a sense of well-being…. So in the end, you have to pick places where people want to go. You might be able to tick all the other boxes, but it won’t matter if people won’t go there”[xiii].
I am sure Emerald will be one of those northern Australian places people will want to move to. In fact I am confident it will be a regional hub that ion time will bypass places like Rockhampton.
So in listing the key concepts for the long term resilience of the Central Highlands and the achievement of a role as a leading hub in a diversified regional economy, what are the pointers we should keep in mind. Here is an overall schematic featuring many inter-connected components – but in looking to the future I wish to focus on the most important which is “your capacity to innovate”.
All the other things are important, but in approaching the future the most important is how you innovate, change and make use of the opportunities that come your way. Think about the community as if it was your family and focus on the things that really matter. And when you seek inspiration remember the future is here not somewhere else. By all means find regions elsewhere in the world that are dealing with similar challenges or have dealt with change and adaptation interestingly and successfully. You are more likely to find instructive examples in those places rather than in Brisbane or Canberra. There will be ideas you can borrow from others, but the essential ingredients of sustainable regional development will always be found locally.
Some basic questions you might want to keep in mind include:
- What are the key elements of a sustainable future for the region?
- How are they different to what exists now?
- What are the things we have to do to ensure sustainable development? What needs to change?
- What will be the crucial factors shaping the way we go forward?
All these questions add up to – what do we have to do differently? Going further, we should ask:
- What matters most in the future we are trying to build?
- Who is/should be responsible?
- What drives/could drive sustainable economic development?
- What makes it sustainable or unsustainable?
- What works and how do we know it works?
- How do we ground the future in alternatives?
- What role has the local community?
In devolving to the things that really matter “community well-being” should be to the fore. The OECD’s Better Life Initiative last year published a very useful compendium of well-being indicators. The include items like health, work-life balance, education and skills, civic engagement and so on. These things all really matter; but when people talk in Australia all we hear about is the economy and GDP and Dow Jones and exchange rates. Some could suggest such indicators don’t actually capture what really matters most to us.
So using Maureen Hart’s principle of ‘measure what you want to be’ Central Highlands Regional Council would help the process of building sustainable communities by instigating a robust and comprehensive sustainability and well-being indicators project, based on extensive community input. The measures should be drawn from the real world not from bureaucracy.
Of course the development and measurement and reporting of well-being indicators is only part of a broader suite ofg methodologies relevant to building sustainable communities. An effective suite of relevant approaches will include:
- A systemic approach – problems are complex and inter-connected
- Visionary leadership – looking in the right direction
- Greater intersectoral cooperation – involve the players who can deliver
- Forward-looking strategies – be active not passive
- Participatory approach – inclusiveness is vital
- Recognition of diversity – social, economic, ecological
- Projects – communities who do it rather than argue about it – build the difference
- Transparent governance – so people are accountable and planning can be based on reality
- Effective feedback – so everyone knows what is going on and can have their say.
If there was a book I would recommend that should be in the Council library, it is called “Grass roots leaders for a new economy”, published back in the 1990s by American regional development scholars Douglas Henton and John Melville[xiv].
Their US research focussed on the role of “civic entrepreneurs”, those exceptional local leaders who draw across the sectors to make things happen in their part of the world. Henton and Melville also challenge the idea that jobs comes before community, because they found “a dynamic economy depends on building a strong community”.
To realise a long term view of the community, you first need people who can take a long term view. These people will come from business, government or the community – but they will be capable of working with all three sectors – and they present authentically with great local ownership and stake in the place. Above all else these civic entrepreneurs have willingness and an instinct for collaboration – to bring disparate parts together to leverage the asset that is the community.
For Henton and Melville, their research showed that in the dozens of successful communities they studied, the smart ones:
- Practiced “collaborative advantage”
- Leveraged their assets
- Collaborated “in order to compete globally” .
So to mobilise these concepts into strategy what are the things that need to happen for Central Highlands and regions like it to have a sustainable future?
Well starting with my Future as Innovation Strategy Quadrant, I suggest you will need initiatives in all four quadrants, starting in the bottom left hand corner with technical, engineering and scientific efficiencies that deliver more with less, optimise regional productivity and make the most of non-renewable resources.
At the same time, the civic entrepreneurs need to be working across the board to see the governance and market innovations that will help this region become involved in globally competitive industries and market opportunities. In some of the core areas of comparative advantage like mining and energy services and infrastructure and agricultural production, the Central Highlands should be looking to see what leap frogging technologies and market conditions might look like in the future. This will be relevant to some of the projects that are being talked about in the current cycle but which will be delayed because of input supply bottlenecks and infrastructure shortages.
And while all that is happening smart internationally competitive, adaptable and sustainable regions are always alert to the rise of disruptive innovation that changes the game overnight. For this region those types of technologies or interventions might include the end of fossil fuel demand in Asia, the emergence of a substitute for steel, quantum efficiencies in transportation that bring agricultural producers closer to burgeoning Asian markets, the rise of geothermal and other renewable energies in regional Queensland – to name a few.
At a recent conference in Sydney deputy Governor of the Reserve Bank of Australia Philip Lowe suggested that Australians should play to our strengths. I agree with his rather measured assessment:
“As a country rich in natural resources, we are well placed to benefit from this change. But if we are to take advantage of this opportunity, the structure of the economy must continue to evolve. Labour and capital will continue to shift to the resources sector….. [W]e can be … a supplier of manufactured goods that build on our comparative advantages: our educated workforce, our ability to design and manufacture specialised equipment, our reputation for high quality food, our R&D skills and our expertise in mining–related equipment” [xv]
It is useful to remember that mining didn’t take the manufacturing jobs. Australia was losing manufacturing jobs and generating jobs in other sectors long before resources boom. To the average Australian already paying for the boom through higher interest rates the question now is can we achieve broader benefits by building manufacturing jobs off the back of mining, instead of wasting taxpayer money propping up an auto industry that builds cars no one wants.
In the global context, Australia is rather good at mining. PwC’s global mining report, released earlier this month, pointed to “Australia’s dominant deal position in 2011, a year when more than 2600 deals worth $US149 billion were done, making it the second busiest year in history”[xvi] Commodity exports are predicted to double to $480bn by 2030 with 750,000 more jobs in the resources and related sectors – an increase of 758%[xvii]. So the question for this region like it is for many resources rich regions is how do we leverage off the commodities boom to developing and marketing intellectual property spin-offs that come from commercialising our own experience. Question: How do we leverage the skills developed beyond the mine for global application or redeployment in other sectors?
Don Scott-Kemmis at the University of Sydney says ‘the mining technology, services and equipment sector (METS) is a significant ‘new’ sector of Australian industry, developed largely by entrepreneurs with engineering or technical training”. Austrade estimates 500 companies are already generating METS exports of $3.5 billion a year to markets as diverse as Kazakhstan, Congo and Chile. Over the past eight years employment growth in commodities support industries has increased 40% to 240,000 FTEs and the total revenues exceed $90bn.[xviii]
Human capital is still the dominant theme in economic development and will remain critical in regions like the Central Highlands. Since 1985 the services sector has contributed 87% of all GDP growth in the western world. Even in newly emerging economies like China and Brazil for same period services accounted for 54% of economic growth. And while commodities and manufactures remain defining of any advanced economy, 70% of global GDP is now generated by services
The message here is that now and into the future the people of the Central Highlands will be the region’s greatest asset and the real question is how diverse can we make our economy, our workforce, our community? What does Emerald have to do to build the tertiary sector in the regional fabric with more professionals, tertiary education and advanced skills training – as well as the entrepreneurial R&D that front ends innovative enterprise? The digital revolution and the national broadband network should help regional centres overcome isolation and distance – making it possible to do virtually what has been impractical hitherto – things like managing decentralised workforces and businesses, managing inventories on line, using cloud technology to store and share data anywhere in the world.
In the world of tomorrow innovation is needed and it can come from anywhere. Sustainability will not happen without contributions like these:
- Factor 4-10 energy efficiency
- Super efficient combustion technologies
- New automotive technologies
- New stronger and lighter materials
- Sustainable building and design
- Decentralized electricity infrastructure
- Affordable renewable technologies
- CO2 sequestration technologies
- Water recycling technologies and infrastructure
- Drought resistant food and fibre
- Carbon neutral products and services
But in this abundantly blessed region let us not forget also the great potential for primary industries, particularly agriculture. The future must not be a choice between Australian farmers and Australian miners. A sustainable community will invest in diversity!
By 2050 ABARE tells us that global population will have increased by 40%, agrifood production will have increased 77% and world average income will be up 211%. In the same time frame Asian demand for food will grow by 100% to over $3 trillion annually. Most of that growth will be in China and northern Australia and regions like the Central Highlands should be well placed to market into that ever-growing market. The ongoing economic contribution of the agri-sector shows through in years like this one when with a few good seasons agriculture exports are up 9.4% this year to $35.5 billion [xix]
The trouble is agriculture’s economic development potential is being stymied like it’s resources counterparts. “Agriculture is a natural area for us to be a leader in and we are not investing enough in the opportunities that are there”, Grain Corp’s CEO Alison Watkins says. She points to our existing freight advantage of $5-$10 a tonne over competitors being eroded by rail congestion and under-investment in infrastructure. Railways upgrades are essential for the competitiveness of the Australian farm sector.[xx] In Northern Australian infrastructure and meat processing facilities are needed to boost the productivity and value contribution of our great livestock industries.
In closing, it is important also to remind Central Highlands of the potential implications for your future deriving from what Bernard Salt calls The Big Tilt – “the proposition that from 2011 onwards there will be a fundamental shift in the demography of Australia”.
Demographer Salt points out that over the past 60 years, Australia’s economic development has occurred with working-age population increasing by between 150,000 and 200,000 people each year. With the retirement of the “Baby Boomers” that is all about to change and an economy which “has geared itself over 60 years around continued growth in the age group that delivers household formation” now looking at the biggest consumer group downsizing, and Generations X and Y expressing different preferences for accommodation and career paths. As Salt says the household formation function is not to be sneezed at. “Australia nation produces 150,000 dwellings a year. Whole sections of the workforce depend on such demand continuing, including, according to the last census, 35,000 plumbers, 64,000 carpenters and 69,000 electricians”[xxi].
For Central Highlands these trends beg a few questions. How complex a society with the region boast in 20 years – will there be roles and opportunities for people in retirement? How complex will the family structures be and will there be strong support for family formation in the region? Will the jobs that are lost in the urban family formation find their way into regional communities to build the homes needed for migrants to regional Australia? Or will the future be just FIFO and DIDO and lost regional opportunities? And will the realisation of the commodities boom itself necessarily require the introduction of large temporary workforces from overseas to meet the unpredictable demand for skilled workers in mining and energy projects? Australia’s immigration policy looks already to be failing its future. What does this mean for communities like Central Highlands? Will we ever get beyond backfilling lost people with 457 visa holders to a wholesale introduction of thousands of people who unlike most Australians will come and live in regional Australia?
So, as I have said before at other conferences, if Australians are to get serious about sustainable regional development, we will need the 12 points listed below seriously addressed.
- Foresight and vision beyond 20 years – beyond the boom
- Strategies for regions to be climate adaptive and competitive
- Strategies for reduced carbon exposure and risk
- Knowledge based, diverse economic development
- Investment in core essential industries and infrastructure
- Much bigger reinvestment of royalties in the regions
- Rent resources tax and sovereign investment future fund
- Growth to pay for itself with big industrials paying their way
- Approvals conditioning in a regional systems context
- Enabled local communities with a stronger role for local government
- An informed educated population up to debating the issues and grasping the opportunities
- Input and collaboration with peer regions around the world
If we achieve decent progress on all these points, Australians may find themselves living in a country that truly spans a continent, a nation that thinks no longer like a colony and which sets ambitious targets for itself way beyond the metro-centric world of contemporary Australia. Along the way, a sustainable Central Highlands can make a significant contribution to realising that vision.
[i] ABARE release 8 March 2012
[iii] Australian Financial Review 7 Mar 2012
[iv] Euromoney’s ‘Emerging Markets News’ accessed at http://www.emergingmarkets.org/Article/2989721/In-memoriam-Chinas-commodity-supercycle.html
[v] Robert H. Socolow (July 2005) “Can we bury global warming?” Scientific American
[vi] Dr Martin Parkinson, address to the Australia-Israel Chamber of Commerce, 7 March 2012 accessed at http://www.treasury.gov.au/contentitem.asp?NavId=008&ContentID=2340
[vii] Courier Mail 3 March 2012 p 47.
[viii] Central Qld News 24 Feb 2012
[ix] Australian Financial Review 7 Mar 2012 p 22
[x] The Australian Newspaper 7 March 2012
[xi] see http://www.csiro.au/en/Portals/Multimedia/On-the-record/Western-Australia-vibrant-minerals-future/How-megatrends-are-shaping-out-future.aspx
[xii] Donella Meadows, “Thinking in Systems”
[xiii] Professor Graeme Hugo quoted in AFR 16 December 2010 p 53
[xiv] Henton D, Melville J, & Walesh K (1997) Grassroots leaders for a new economy. San Francisco: Jossey-Bass. Joint Venture: Silicon Valley Network.
[xv] Philip Lowe, Deputy Governor, The Reserve Bank of Australia, “The Changing Structure of the Australian Economy and Monetary Policy”, Address to the Australian Industry Group 12th Annual Economic Forum
Sydney – 7 March 2012
[xvi] The Australian 5 March 2012
[xvii] AFR 3 March 2012 p 44
[xviii] AFR 3 March 2012 p 44
[xix] AFR 13 March 2012 p 5 & 20
[xx] AFR 5 March 2012 p 17
[xxi] Extracted from “Baby boom to baby bust” by: Bernard Salt The Australian http://www.theaustralian.com.au/national-affairs/baby-boom-to-baby-bust/story-fn59niix-1226064006938
May 28, 2011