«TASMANIA PRESENT PROSPECTS OPPORTUNITIES AND CONSTRAINTS Dr Julian Amos July 2011 Tasmania is wallowing in the comfort of mediocrity, a mendicant ...»
TASMAN MANAGEMENT SERVICES P/L
ABN 27 073 475 813
OPPORTUNITIES AND CONSTRAINTS
Dr Julian Amos
Tasmania is wallowing in the comfort of mediocrity, a mendicant state,
fast becoming an aged care facility in a national park. It need not be so.
There is hope – there is a way forward.
BUT IT WILL REQUIRE CHANGEPO Box 95 tel/fax: 03 6231 5226 Battery Point mobile: 0412 125 656 TASMANIA 7004 e-mail: email@example.com
A REPORT ON TASMANIA’S PRESENT PROSPECTSPREFACE 2
INTRODUCTION 3AN OVERVIEW 9 Economic Demographic Budget
GOVERNMENT EFFECTIVENESS 18Parliamentary Reform Accountability Human Resources Government Solidarity
THE NEED FOR A VISION 23Governing to a Plan Areas of Economic Engagement
BARRIERS TO EFFECTIVENESS 25Budget Matters Planning The Planning System Appeals Projects of State Significance Other Deliberative Entities Local Government Disruptive Protest Action
PROVISION OF INFRASTRUCTURE 37
SECTORAL CONSIDERATIONS 38Picking Winners Sustainable Competitive Advantage Promoting “the Brand”
SPECIFIC INDUSTRY SECTORS 42Irrigation and Agriculture Aquaculture Forestry Tourism Manufacturing Health IT Renewable Energy CONCLUSIONS 46
PREFACEThis document was written to provide an insight into Tasmania‟s economic opportunities and constraints through the eyes of people who are participants in Tasmania‟s economic environment.
It is designed to provide an overview of where there might be opportunities for investment, and therefore employment, and to consider the present constraints to that investment.
However, two caveats.
This Report does not deliver an economic analysis of individual sectors, nor indeed consider every sector. More particularly, it differentiates between wealth-generating activities (which it considers) and what could be described as income-generating activities (which it doesn‟t consider).
The latter are considered to be activities that are purely dependent on Government policy that transfers wealth for political reasons, such as government benefits, handouts and programs (eg batts, set-top boxes etc) or to satisfy those considered to be rent-seekers through thepayment of subsidies such as carbon taxes, carbon sequestration schemes, exit packages etc. The reason for not considering these areas is because what the government giveth, it can also taketh away.
Further, although the report will comment on planning issues generally, it does not give any consideration to the investment climate for constructing commercial buildings, such as office blocks, warehouses or shopping malls, or residential subdivisions.
A wide range of people and organisations were consulted from around the State regarding this project, with the purpose of obtaining a range of views regarding this topic. Everyone consulted was keen to contribute to the discussion, and the views expressed tended to be common amongst the participants, even though they came from a diverse range of economic activity.
In particular, every discussion gravitated to the twin themes of governance and government involvement in the economy, and the constraints to development occasioned by the present planning environment. No report can ignore these two fundamental factors, and this report is no exception.
The Report considers the investment climate within these constraints, and opportunities for growth.
The engagement and contribution by all persons contacted is greatly appreciated.
INTRODUCTIONTasmania is not just a place, it is a state of mind. More than most places, conversations in Tasmania are peppered with connotations of “place”. It is made up of a number of communities that coalesce into three logical and distinctive regional entities, but from an economic perspective these populations are relatively small. The people that live here and the people that visit here, all recognize it is as being unique, both physically and socially. As Sir Bede Callaghan remarked in his 1977 report “Tasmania is beautiful, Tasmania is tranquil, Tasmania is economically vulnerable”.
Tasmania is a small regional economy reliant on trade, and being on the periphery of the central axis of Sydney-Melbourne, logistically challenged. It is separated from the mainland by a significant stretch of water. It has no critical mass and its main areas of economic activity - the primary industries of agriculture, forestry and mining (and the processing of products from those activities), together with tourism and the service sector - are all vulnerable to external influence.
These influences outside of State control include trade policy, interest rates, national wages and employment policy and the value of the Australian dollar, and each can have a significant bearing on the economic health of the State, in that they affect both the ability to export products and services, and to fight the challenge from imports.
The population is not especially skilled, although like elsewhere in Australia, it readily assimilates new products and ideas. The use of electronic devices such as mobile phones and computers has become an integral way of life and there is a small but energetic computer-based industry which has been able to survive and grow, which underscores the fact that regional economies can survive within a global environment. In other words, the economy is not entirely a slave to geography.
The public sector plays a significant role in the State‟s economy, which in turn is dependent upon sound and consistent public policy and economic behavior to provide stability and direction. For the community to survive and thrive, a government needs to recognise this basic fact. But this of itself is not enough. Tasmania can easily be distracted by single events and issues, which in the absence of an overall picture has the capacity to subsume all other matters.
In fact, Governments have stumbled and failed over a single issue. And yet, it need not be so.
In reality, where, when and whether a pulp mill gets up, where a hospital is to be built, the design of a new project, the building of a facility on the waterfront, should not be big issues – they certainly would not be elsewhere. In fact, elsewhere, they would have happened and without protest. And yet here they take on a character beyond their weight, possibly because they are presented as entities in themselves, and not within the bigger picture of Tasmania‟s continuing economic and social well-being.
Even small issues, such as awnings or windblades on a building, can consume much energy, time and resources, and detract from the bigger picture of Tasmania‟s well-being.
Each of these reports was written in a different economic environment to the present day, prior to the resources boom, prior to the “global financial crisis”, prior to the mining boom occurring elsewhere in the country, and prior to or at the commencement of computerisation and progress towards a digital economy. Each of these reports contain similar commentary, each of them comment on similar issues relating to governance, the overburden of regulation, difficulties with local government, low levels of productivity, population and transport, and much of what was said then remains remarkably pertinent today.
Although quotes are always selected through the prism of interest, the following are pertinent:
“If the people of Tasmania decide to have wilderness rather than workshops, they are entitled to do so, but I question whether they are entitled to seek monetary aid …to enable them to enjoy the social and economic advantages available to the residents of the other States…” “Tasmania cannot live forever on its natural beauty and its history… (there is) the need for greater economic effort… Without economic growth, human progress is impossible.” “The people of Tasmania face choices between material and non-material welfare…Choices must be made between welfare services (etc) and more realistic levels of economic activity and employment. If the concept of conservation involves a further decline in employment opportunities …there is a need for a reappraisal of priorities before aid is sought from others.” “There appears to be an absence of co-ordination within (Government) administration.” “Tasmania is vulnerable to international prices and demand.”
“Tasmanians have a distinctive and enviable lifestyle in an idyllic environment.
However, Bass Strait cannot isolate Tasmanians from the realities of a modern world. If Tasmanians wish to maintain their lifestyles, they must adapt their economy to changing circumstances.” “The State government can influence the competitiveness of industry through the institutional and regulatory environment it establishes for maintaining services and controlling activity… Public institutional arrangements and their regulatory environment are badly outdated and excessively costly in many areas of the Tasmanian economy.” “The role of Government is inter alia to ensure the provision of essential services and infrastructure, rather than to provide support for specific industries.”
Nixon also commented that there were serious governance issues that needed to be addressed, local government was too fragmented, water and sewerage should be regionalized, the workforce was relatively unskilled, and in transport, the port system was inefficient.
Since these reports were written, the Tasmanian economy has broadened somewhat (as has the Australian economy overall - see IBIS barcharts below), and the reliance on but a few sectors of
the economy has lessened. That said, the four major wealth-generating economic pillars remain:
agriculture, mining and minerals processing, forestry and timber processing, and tourism (see IMC-Link Report, 2009).
As a point of reference, the three IBIS barcharts below compare the Gross State Product (GSP) in 2010 of all States by individual industry sectors, the change in the importance of industry sectors (Australia-wide) since 1800 (with projections for the next 40 years), and finally a comparison of the relative importance of industry sectors between Australia overall and Tasmania over the last 20 years.
The demarcation point between the two periods coincides more or less with the blocking of the Gordon-below-Franklin hydroelectric scheme in 1983 by the Commonwealth Government.
Ensuing changes to the nature of industry and development were not so much influenced by energy supply and demand, but the emergence of a new political influence and philosophy that has incrementally changed the political landscape of the State.
While the economic and political shift has been occurring, the State‟s economy has become increasingly reliant on Commonwealth Government funding through specific purpose payments and general grants allocations.
A more recent report (2008) from the Commonwealth Bureau of Infrastructure, Transport and Regional Economics (BITRE), entitled “A regional economy: a case study of Tasmania - Report 116”, provides more recent data on trends in the Tasmanian economy. The report highlights a negative divergence from the national economy, and considers a number of issues, including population, household and business activity, productivity and governance.
This report found inter alia that:
The State has suffered from a vicious cycle of declining employment, income, consumption, investment and business activity (1990‟s) Tasmania has benefited from a virtuous cycle of increases in income, consumption, wealth and population (2000‟s) Business confidence has mirrored the performance of the State‟s economy Tasmania‟s government has influenced the performance of the State‟s economy through its fiscal management and leadership role (positively and negatively) Migration has been an important driver and reflector of the State‟s economic performance Outmigration is influenced by the shape of the economy, and in-migration is influenced by the level of housing affordability. The nature of such migration (young tend to leave, older tend to arrive) has led to a “structural ageing” of the community and will have economic consequences.
Australia has always been a 2-speed economy, and under Commonwealth Government Grants Commission formulae the State has always received more from the Commonwealth than the State‟s economy contributes.
In former times, the manufacturing States of Victoria and NSW were the economic powerhouse of the country, and paid for the “vertical fiscal balance” that assisted the four weaker States. As the wealth-generating emphasis changed from manufacturing to mining, the States of Queensland and Western Australia, once the beneficiaries of vertical fiscal balance, have become
$1.60 $1.27 $0.96 $0.93 $0.90 $0.72 Tasmania remains a beneficiary, and this imbalance is not likely to change for some time. The advent of the Asian economies with their rapid rates of economic growth will keep demand high for Australia‟s minerals for many years yet, and this will keep the exchange rate high as well.
Tasmania does not have the benefit of abundant minerals to take advantage of the Asian boom, and thus will not be a beneficiary of this trade to the extent that other States will benefit.