The Demographic and Economic Drivers of Growth in Regional South Australia Presentation to the Regional Summit Whyalla Professor Andrew Beer Director Centre for Housing, Urban and Regional Planning The University of Adelaide 20 May 2015
Acknowledging Prof Graeme Hugo In Numbers 33 books, 43 monographs, 267 book chapters, 261 journal papers, 94 working papers, 1066 conference papers, 125 reports
The Drivers of Growth in SA s Regions The period 2015 2030 will be unlike the previous 15 years Regional growth largely shaped by national economic conditions (Pike et al 2010) A devaluing currency/ a more robust economy Recent historic low rates of growth in wage rates Interest rates at historic lows Recent stimulus to the small business sector by the Australian Government Efficient and productive industries in regional SA Growth in access to burgeoning Asian markets
Value of the Australian Dollar, 1990 2015 1.2 1 0.8 0.6 US Cents 0.4 0.2 0
The Structural Conditions Shaping Growth in Regional South Australia 2000-2015 A high Australian currency Growth in the mining industry Concentrated in WA and Qld Decline in manufacturing Drought High interest rates Substantial public sector investment in the latter part of that period new infrastructure social welfare investments Rising standards of living Higher rates of population growth in Australia and SA
The Structural Conditions Shaping Growth in Regional South Australia 2015 -? A much lower Australian currency Growth in mining outputs from WA and Qld, but little new investment Lower interest rates Lower levels of public sector investment, less welfare innovation The potential for growth in manufacturing Opportunity in globally competitive sectors Growth in markets for agricultural products Reduced impacts of drought Lower rates of population growth in Australia and SA But stability within the workforce/retention of skills SA mining potential Olympic Dam Hydrocarbons in the Great Australian Bight Warramboo and others Generally, a much more favourable set of conditions for the traded goods sector, which works to SA s advantage
What Does the OECD tell us? OECD (2010) considered these three factors as the central pillars of local growth, a view no doubt informed by the economic growth models reviewed above. Infrastructure is seen to be a foundation of development, enabling private sector investment as governments provide the transport systems, telecommunications networks and other services that individual companies cannot afford. Human capital the quality of the workforce is acknowledged as the second pillar of growth, with some types of education in some types of region generating high returns (OECD 2010, p. 43). Innovation is the third major determinant of locally-based growth, with education attainment, R&D investment and the presence of knowledge intensive industries all contributing to economic growth.
What Does the OECD tell us? Other research by the OECD (2009) provides more detail of the factors contributing to growth locally: Human capital including workforce size and skills; Innovation, research and development ; Distance from markets accessibility to markets provides an added advantage for places, while proximity is important for innovation; Infrastructure as a necessary pre-condition for growth; and, Spatial effects including spillovers from neighbouring regions and the benefits arising from the agglomeration of activities.
Determinants of Growth in Leading and Lagging Regions Growth Factors in Leading Regions Impediments to Growth in Lagging Regions Policies Connectivity of Infrastructure Institutions including leadership. Human Capital Innovation including entrepreneurialism Business Environment Geography Presence of Natural Assets Foreign Direct Investment Institutions including leadership Policies Density and Cohesion, ie fragmentation Human Capital Geography Connectivity of Infrastructure Business Environment Demographic Factors Innovation including entrepreneurialism Source: OECD 2012, pp. 262 and 259
How Does the OECD translate for Regional SA? Connected to global markets We live on the periphery but close to an increasingly wealthy Asia Improvements in transport connectivity are making us closer to the major markets Adelaide Airport Road transport Telecommunications Continuing need to invest in appropriate infrastructure Build the human capital of the workforce Encourage immigration and skills development Spillover effects benefit from growth on the eastern seaboard and in Asia Competitive businesses High levels of innovation and productivity in key regions Many industries well integrated into global supply chains Encourage new start ups and entrepreneurs
Thomas Foods International THE THOMAS FOODS STORY Our organisation began operation back in 1988. Of course, the business has grown and changed a lot since then. Today, Thomas Foods International has annual revenue well in excess of $1 billion, and we re Australia s largest 100% family-owned meat-processing company. However, we will never lose sight of our heritage. Our business operates with strong family values. Chris Thomas provides the leadership and vision, his son and CEO, Darren, drives our growth. We will always have deep respect for our South Australian roots while we take on the world. We will always maintain our exacting standards while we innovate and expand. It s about remembering the things that underpin everything we do the quality of our livestock and the dedication of our people. These are the real secrets to our success and we re extremely proud of both.
Demographic Drivers in Regional SA A changing population Low rates of growth, but present in all regions Ageing of the population Baby boomer migration to coastal centres Second echo from the baby boom resulting in a rise in birth rates Migration Impact of government policies driving immigration Recruitment of staff by regional businesses Decline of some inland settlements
Demographic Drivers in Regional SA: 2006-2006 250,000 200,000 150,000 100,000 2006 2011 2016 2021 2026 50,000 0 OUTER ADELAIDE SD YORKE AND LOWER NORTH SD MURRAY LANDS SD SOUTH EAST SD EYRE SD NORTHERN SD
The Opportunities and Challenges for Regional SA The RAI (In)sight index SA non metropolitan regions under-perform relative to their interstate peers on a number of key measures: Low investment Poor institutional structures Low human capital Low demographic factors contributing to growth
The Structural Conditions Shaping Growth in Regional South Australia The challenges: How can SA regions improve their business environment? Investment and institutions capitalise on growth in the traded goods sector? Reducing leakage out of the regions Finding new global markets Developing service sectors» Including tourism improve their human capital? Enhancing higher education and improving secondary school outcomes Attract immigrants
Conclusions Next decade likely to be more positive for regional SA compared to the previous Likely to have growth patterns more in keeping with the 1990s Ageing of the population is likely to contribute to growth Concentration population growth on the coast But economic opportunities for all regional centres The services sector will need to grow to meet the needs of globally competitive businesses