Sustainable Economic Growth in Regional Australia

“A NEW DEAL FOR REGIONAL AUSTRALIA.” 

ALBANY, WA 

THURSDAY, 27 OCTOBER 2016 

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I’d like to acknowledge the Traditional Owners, the Menang people

It’s great to be in the beautiful Great Southern Region of WA.

I’d like to acknowledge the terrific work of SEGRA and congratulate you on your 20th anniversary. Thank you to Kate Charters, SEGRA Convenor for the invitation to speak to you today.

The issues that you have gathered here to discuss and share are fundamental to our lives, particularly in Regional Australia.

While there is much that Australia’s major political parties agree on, in particular, the big goals we aspire to, there is also much on which we differ.

That is why our Parliament and our political life is a contest of ideas, a contest of philosophies and a contest of policy proposals.

In facing these challenges Labor puts a strong emphasis on the principles of fairness and equality.

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We don't have to look far to see the consequence of a failure to build a more equal inclusive society. The rise of Donald Trump in the USA is a spectacular but not singular example. Labor’s historic mission to confront income inequality and build social mobility is more important than ever.

Our aim is to regain Australia’s essential egalitarian nature and to make the most of our greatest resource, our people. Now is right time.

This is a particular challenge for regional Australia, because on most measures, the gap between regional and urban prosperity is growing.

So as we talk about economic growth for regional Australia we must be vigilant - growth is not an end in itself but a means to a better life.

I believe in regional Australia. I come from a regional area of NSW and I can assure you, my region, the Illawarra, has been grappling with many of these same issues you have been talking about this week.

I want to talk to you about the importance of ensuring that we all share fairly in this economic growth and how I am here to argue, that this involves seeking A New Deal for Regional Australia.

I’m here to argue that it’s time to tear up the grand bargain that has seen people living in regional areas trade off their social safety net and social support framework in exchange for parcels of infrastructure funding and grants for small projects.

This grand bargain that binds the National Party to the Liberal Party colleagues sees regional Australia hostage to a trade off in funding for infrastructure in exchange for voting to cut funding from the social building blocks of education, health and employment support.

It's a dud deal: even as social support programs are cut back, regional Australians are also being short-changed on the infrastructure front. So now is the time to build a New Deal for Regional Australia.

Inequality is a policy choice. It is not an inevitability of an open economy.

The problem of inequality

Labor believes that we need a strong economy, including a strong budget and a reducing deficit – but we must tackle this is in a way that doesn't increase inequality in Australia.

According to the 2015 ACOSS study of inequality in Australia, wealth in Australia is highly concentrated, with the top 10% of wealth holders owning 45% of all wealth.

And someone in the highest wealth group now has around 70 times as much wealth as someone in the lowest wealth group.

Inequality is now at a 75 year high in Australia.

People in capital cities are more likely to be in the top 20%, while those outside capital cities are more likely to be in the bottom 20%.

So not only is inequality rising in Australia – but the equality gap between urban and regional Australia is also widening.

Why does inequality matter?

Let's start with a proposition that sounds reasonable at the outset:”if Australia is better off generally – does it matter so much if some – the people living in regional Australia for instance – are not doing so well?”

Let's look at this through the prison of healthcare.

Inequality affects our health

There’s a life expectancy gap between capital cities and regional areas.

If you live in a capital city, your median age at death is 82.2. However, if you live in an outer regional area, that drops to 79.2 years and to 73.4 years for remote areas.

The relative risk of mortality between the poorest and richest income quintile translates into a life expectancy gap (at age 20 years) of 6 years.

People who live in areas with poorer socioeconomic conditions tend to have worse health, higher levels of disease risk factors and lower use of preventative health services than people from other areas.

Diabetes is 3.5 times more common in working-age adults in the lowest socioeconomic status areas as it is the highest socioeconomic status areas.

Health inequality becomes an inheritance - Mental and behavioural problems in children are up to twice as prevalent in areas of lower socioeconomic status as in areas of high socioeconomic status.

Education

In education, we know that if children are less successful at school, they are less likely to become highly skilled workers.

Disadvantaged students in Australia risk falling further and further behind with each year of school.

Statistics show that regional Australia has lower rates of participation in secondary education than urban areas, and I believe that his factor alone is driving inequality in regional Australia.

The participation gap in secondary education between major cities and outer regional areas is 7.3%.

Even the pathway to employment that has a higher take up in regional Australia, vocational training, has been undermined by the withdrawal of public funding, particularly in my own state, NSW, through cut backs to our TAFE system and closure of TAFE colleges.

Recently in Broken Hill in the far west of NSW I heard how despite the interest of both prospective employers and young people in gaining a trade qualification in automotive mechanics or agribusiness, young apprentices face the testing prospect of travel to Dubbo – a distance of around 800 kms to reach their nearest TAFE if they want to get skilled in these areas.

The limited training opportunities and difficult learning environments in regional areas are being exacerbated by cuts to the TAFE system. And private, for-profit colleges are not filling the gap in the withdrawal of government education services in regional Australia.

With such limited opportunities to develop their skills and talents, it is no wonder that young people don’t see a future for themselves in regional Australia.

With education and training, fairness and access to economic opportunity work hand-in-hand to combat inequality.

And future economic development in regional Australia is predicated on the availability of a skilled workforce.

Access to secure, well-paying jobs in regional Australia is the best way to maximise participation in our economy and to shield the regions from inequality compared to capital cities.

Home Ownership

Australia has a relatively high level of home ownership, and this has traditionally served to put a brake on wealth inequality particularly amongst people who have retired or are nearing retirement, and who have relatively low incomes.

However, this situation is changing and is having an impact on inequality in Australia, including in regional areas.

Overall home ownership in Australia is at a 60-year low and declining.

The proportion of adults who are home owners declined from 57% in 2002 to less than 52% in 2014, and on current trend will be below 50% by next year.

Home ownership rates have been declining since 1981, with the declines greatest amongst young people aged 25 to 44 years.

For young people, you now need 15 times your annual income to buy a new home – 25 years ago you needed just 5 times your annual income.

Young people unable to get into the housing market strips them of one of the most fundamental wealth drivers through their lifetime.

According to the Grattan Institute, falling home ownership rates for young people mean they now have less wealth than people of the same age eight years before.

Labor’s policy to limit negative gearing to new properties sought to put first home buyers on a more level playing field with investors and to put a brake on the generous tax measures that are exacerbating inequality in Australia.

Coalition cuts to social programs

So the pattern of political representation in this country gives rise to the prosecution of a massive injustice. Even though National Party members represent some of the most socially disadvantaged electorates in Australia – places like Hinkler, Wide Bay and Maranoa in Qld and Cowper, Page, Lyne and Parkes in NSW are all regional areas and all have a high proportion of Australians in the lowest quintiles of income and wealth are the very places where MPs are supporting cuts to health, education and social services and second rate infrastructure.

It’s a matter of record that the Turnbull Government still have tough cuts still on the table from the disastrous 2014 budget.

These include a $30 billion cut from schools, introducing $100,000 university degrees, a price hike in medicines—tinkering with the PBS—and raising the pension age to 70, which will be the world's oldest retirement age, or cuts to the pension.

To this has been added a $50 billion unfunded corporate tax cut that we just can’t afford (and which delivers nothing for regional Australia.)

Even this week we see the Turnbull Government talking about more cuts to social services, including a new proposal for cuts to our successful and modest Paid Parental Leave system.

Under the Minister’s proposal, 80,000 mothers are going to be worse off to the tune of up to $12,000 if the Turnbull Government gets its way.

Contrary to what you hear, the median income of people who are affected by these cuts is around $43,000 a year.

These aren’t high income earners. That is the smokescreen.

These are women working in retail, hospitality and companies like Myer, McDonalds and Woolworths.

And these are also women working in regional Australia since there are only around 5% of workers on this median income in Australia’s capital cities, compared to 22% in outer regional areas.

Consistent with the grand bargain between the Coalition Government parties that I have spoken about, we can rely on National Party members, representing regional areas, to vote in support of these cuts that will see around $1 billion taken off low and middle income families.

Even though these cuts will be felt the hardest in the regional Australian electorates that this political party represents in Canberra.

Infrastructure

Now if social benefits are traded for funding for funding of infrastructure projects you would expect a payoff. It isn't there.

“Roads to Recovery” - the popular infrastructure program in regional Australia that neatly demonstrates this.

While local councils welcomed the additional $1.1 billion allocation to Roads to Recovery that Labor negotiated last year – at the same time the government had frozen Financial Assistance Grants indexation, taking nearly a billion dollars out of local council budgets.

The Australian Local Government Association has estimated that by 2020, if the Financial Assistance Grants freeze is not lifted, then the reduction in funding for local government will exceed the full value of the Roads to Recovery program.

That’s a very poor trade-off.

Freezing the indexation of funding to local government has meant local councils across Australia have been forced to reduce the services they provide to their communities like community care, aged care, library opening hours, waste transfer station operations, childcare availability and increase fees such as kindergarten fees.

The Productivity Commission has highlighted how local councils in rural and remote areas are highly dependent on FAGs funding to provide their services, so regional Australia is being hit hard by this indexation freeze.

The impact of this lost funding on infrastructure maintenance and repair budgets is also significant and that deficit in funding will never be made up.

Cutting funds to rural and regional councils is also driving the equality gap between regional Australia and capital cities since the services that are being cut are those that are basic to our daily lives.

The New Deal for Regional Australia

For the reasons I have outlined above, I believe that regional Australia needs a new approach, what I call a New Deal for Regional Australia.

This will be based around three pillars:

Social policy;

Economic policy; and

Highly targeted regional programs and interventions.

In a recent report, The Chifley Inclusive Prosperity Commission has outlined policies that establish a virtuous cycle of growth which incorporate these three pillars.

This virtuous cycle includes a decent industrial relations system with strong unions to ensure fair wages and conditions, which in turn promote sustainable household expenditure, which in part funds a tax system that provides affordable health, education and housing.

These policies in conjunction with public expenditure on infrastructure complement private sector investment and promote full employment.

These pillars are all interconnected and if used properly, serve to build sustainable economic development in our regions.

The historical record supports the inclusive prosperity approach as a more effective means of achieving economically and socially sustainable growth.

Infrastructure

Labor has always had a strong commitment to funding nation-building infrastructure.

When we came to office in 2007 Australia was ranked 20th in the OECD for infrastructure investment. When we left, Australia was first.

Labor’s $60 billion Nation Building Program covering roads, rail and ports, cleared many bottlenecks and helped Australia maintain export growth, despite the global financial crisis.

And almost two-thirds of this investment was in rural and regional communities.

However, two years after the change of government in 2013, there was a 20 per cent decline in public sector infrastructure investment.

That has a short-term impact on jobs and on living standards.

It also has an impact on economic development, particularly in Regional Australia.

Treasury figures tabled in Parliament last week show that the Turnbull Government cut its own infrastructure investment budget by $3 billion in the year to June 30.

In its notorious slash-and-burn Budget of 2014, the Coalition Government promised to invest $8 billion on transport infrastructure in the 2015-16 financial year.

However, Treasury figures show actual Government investment on infrastructure was actually $5.5 billion in 2015-16 – a cut of $3 billion or more than a third – over what was originally promised.

In the last Federal Election there was not one major infrastructure investment announced by this government. Not one.

There was nothing on offer.

Broadband

When we talk about the infrastructure priorities for regional Australia and what we need as the building blocks for sustainable economic growth, then in the 21st century, access to fast and affordable broadband sits alongside education and health care as a key driver of opportunity.

It is why Labor invested so much planning and energy in creating the National Broadband Network.

I’m not talking about the NBN that is currently being built, but the original conception of the NBN, with fibre to the premises of 97% of Australian homes.

In Labor’s original conception, the provision of fast, affordable broadband through the NBN, would be the key to access to services and economic development in regional Australia.

However, that dream is rapidly fading.

Labor’s original plan was to deliver optic fibre to 93 per cent of homes and businesses in Australia.

This included delivering optic fibre to 70 percent of regional cities and towns.

Not just equality of infrastructure - but equality of price.

Labor fears that uniform wholesale pricing could be axed which would see Australians in regional and rural areas paying more for broadband services than Australians living in our cities.

Labor had planned to use the Sky Muster satellites to serve about 200,000 of the most remote homes and businesses in Australia.

The Turnbull Government has doubled this footprint – so that now more than 400,000 homes and businesses will be served with the satellite.

The satellites are a limited resource. More users means congestion and a lower quality of service.

Broadband shouldn’t be regarded as an additional privilege or benefit associated with city-living; it is an essential service that people right across Australia already rely on.

While 88 per cent of households in major cities are online, the figure falls to 82 per cent in inner regional - and even lower - down to 79 per cent for those in outer regional and remote parts of Australia.

An Essential poll released earlier this month, showed that 88 per cent of Australians see the internet becoming an essential service, such as water and electricity, yet only 22 per cent think the current NBN strategy will meet future needs.

And only 38 per cent of Australians surveyed by Ipsos have described broadband as "very or fairly good". With a global average of 54 per cent, our broadband policy is not meeting community expectations.

Ipsos research earlier this year that found 70 per cent of Australians have had unsatisfactory experiences with their broadband services.

Digital Inclusion

And when we talk about the NBN, we shouldn’t just be focusing on the infrastructure deficiencies but how broadband is being utilised in the regions.

Just like on economic, health, housing and education measures that point to a growing inequality, we are also facing a digital divide.

A recent report from Swinburne Institute of Social Research, “Measuring Australia’s Digital Divide: The Australian Digital Inclusion Index 2016”, released in August, outlines the extent of the growing digital divide in Australia.

The ADI index measures access (internet access, frequency and data allowance), affordability (share of household income spent on internet access) and ability (basic skills and confidence, attitudes and activities).

The evidence is clear that both geography and socio-economic factors play a key role when it comes to access, affordability and digital activity in Australia.

With less shopfronts and more and more Commonwealth government services being provided online, the implications of this report for access to regional services should be sounding alarm bells for Coalition MPs and Senators.

The Swinburne report also identifies the regional areas that should be of highest concern, including the New South Wales Hunter region, North West Queensland, Northern Victoria, the Eyre region in South Australia, Southern Tasmania and much of regional Western Australia.

Where ever I go in regional Australia, both businesses and individuals are all frustrated by the lack of broadband to help them manage and grow their businesses and ensure that their kids don’t miss out.

Regional Australians shouldn’t miss out on access to government services and all of the many benefits that should flow from a more equitable access to digital services.

Sustainability

Before I finish, I just want to talk a little about environmental sustainability.

Regional Australians live in much closer proximity to their environments that urban Australians and count their natural environment as one of their greatest assets.

I know at this conference you’ve heard references to our need for secure sources of sustainable energy to drive economic growth.

I’ve been told that if you look into the distance off the coast - just outside this room - you can see some iconic wind farms on the horizon.

It’s a fact that the opportunities to be derived from investing in renewable energy will deliver more jobs and opportunity in regional Australia than in our cities.

The reality that our aging coal power station fleet, 20 per cent of which is over 35 years old, will need replacement in coming years is understood by everyone who’s familiar with the Australian electricity system; except it seems the Turnbull Government.

The Government prefers to bury its head in the sand and pretend we can rely on coal to power our prosperity rather than plan for inevitable closures.

Labor is committed to ensuring that closures happen at least cost, consistently with our climate change objectives and affected workers and communities are assisted to new industries and new jobs.

Despite our best efforts, greenhouse gas emissions are growing in Australia – and they are projected to grow every year to 2020.

Emissions are projected to be 3 per cent higher in 2020 than they were in 2000.

Dealing with this global issue is a critical challenge for government.

The Turnbull government has no policy to support any renewable energy investment beyond 2020.

This is not good enough.

Businesses and investors need a plan for the modernisation of our energy system, including renewable investment and just transition policies.

If food production for the burgeoning Asian market is to be a source of future GDP for regional Australia, then we need to take real action to deal with climate change.

This week, the Leader of the Opposition has been in a number of places including Western Australia, talking about this very issue.

Mr Shorten was visiting Carnegie Wave Power, a Perth company generating over $100 million in revenue, employing 45 people and delivering world-class, world leading wave energy technology that converts ocean swell into zero-emission renewable power and desalinated freshwater.

The jobs of the future, our future energy supply solutions and the drivers of economic investment of the future and indeed action on climate change for the future – are already here.

Labor believes that the opportunities of ocean power, wind power and marine renewable energy will help us build our future economic opportunity.

We need policies that deal with climate change, drive the expansion of renewable energy and deliver good blue-collar jobs to provide both employment and economic opportunity in regional Australia.

Attacks on renewable energy aren’t just misguided, they’re costing us new industries and new jobs, particularly in regional Australia.

We’ve lost almost 3,000 renewable energy jobs since the Coalition came to power in 2013, while renewable jobs globally have grown strongly, growing by almost 45 per cent between 2013 and 2016, or a total of 2.9 million jobs, with 9.4 million people now working in renewable energy world-wide.

If Australia had simply kept track with global jobs growth in the sector, rather than losing 3,000 jobs, we would have seen almost 7,600 new jobs created.

With the right policy settings, with a belief in renewable energy and with a commitment to achieving a fair and equitable future for all Australians, we could secure the sustainable, prosperous future we all dream of for our children.

Thank you.

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