Committee Secretariat PO Box 6021 Parliament House CANBERRA ACT 2600

Dear Secretariat,

RE: INQUIRY INTO THE AUSTRALIAN GOVERNMENT’S ROLE IN THE DEVELOPMENT OF CITIES

Townsville Enterprise Limited (TEL) welcomes the opportunity to provide a submission in response to the Inquiry into the Australian Government’s role in the development of cities. This submission is in response to the sub-inquiry growing new and transitioning existing sustainable regional cities.

Townsville Enterprise is the principal economic peak body and regional tourism organisation (RTO) representing Townsville North Queensland, which includes the five Local Government Areas of Townsville, Charters Towers, Hinchinbrook, the Burdekin and Palm Island. Townsville Enterprise is the primary engine for economic development, charged with leveraging the region’s assets and strengths to drive jobs, growth, infrastructure investment and quality of life.

Townsville Enterprise’s formal response to this commissioned study will focus upon the following key arguments:

• Establishment of enabling infrastructure • Regional relocation and retention • Decentralisation • Competitive advantages of regional location for businesses

Townsville’s employment total peaked at 125,500 in December 2010 (ABS, 2016), 82% of the total working age population during that period. Since this peak, Townsville is experiencing a significant population decrease and a disturbingly reduced number of businesses registered in the local government area. These statistics are attributed to a number of economic factors which are all impacted by the resources downturn. In considering Australia’s forecasted population growth for the next 50 years, Federal Government policy must reflect a regional development, relocation and decentralisation agenda. Population and urban growth of Australia’s capital cities is not sustainable so why continue to support growth of these areas when the nation is abundant in regional centres driven by viable propulsive sectors?

North Queensland supports an incredibly diverse economy, promoting strong foundations for a successful manufacturing industry, the largest Defence barracks in Australia and an agricultural industry representing significant growth opportunity. For this reason, the Townsville North Queensland landscape offers a range of business, investment and employment opportunities, able to support population growth. In recognising this, Australia should seek to actively promote relocation from cities into regional centres as well as form policy that incentivises retention of local talent in regional areas,

Page 1 of 7 easing the impediment that regional brain drain imposes. Urbanisation should not be encouraged when strong regions already exist outside of capital cities. These regions need to be invested in, despite any direct costs involved, the future of Australia’s economy depends on sustainability of population in all regional locations. Townsville is the largest city in Northern Australia, however current investment and policy decisions do not reflect a governing culture that supports regional economies.

PROMOTING PRIVATE INVESTMENT IN REGIONAL CENTRES AND REGIONAL INFRASTRUCTURE

ESTABLISHMENT OF ENABLING INFRASTRUCTURE North Queensland is in the recovery stage of an economic downturn which will remain stagnant when deprived of public and private funding into enabling infrastructure. Positive population growth experienced during the mining boom is suffering, post high commodity prices, consequently, infrastructure investment is necessary to unlocking the region’s potential and opportunity for population and economic growth. Investment into a region should align with the region’s inherent strengths and constraints. For example, Townsville Port is the largest container and automotive port in Northern Australia, supports critical Defence operations and cruise tourism. However, presently, the Port can only accept ships up to 238 metres in length and 32.5 metres beam and is approximately half the width of access channels at other major ports. Public investment will act as an enabling catalyst, essential to reinforcing the identified strengths that can support the region. Presently, the Queensland Government has committed $75M to the upgrade and the Port, $43M, however a $75M investment is still needed from the Australian Government for the upgrade to be possible. Additionally, reliable and affordable transport for North Queensland and beyond should include public investment into upgrading the Mount Isa to Townsville Rail Connection as well as construction of the Townsville Eastern Access Rail Corridor (See attachment 1).

Competitively priced energy is a crucial element of successful business operations; however, North Queensland is lacking this critical component needed for profitable operations and positive business growth. The current uncertainties over pricing and secure access to energy markets, including Townsville’s lack of connection to the national natural gas network, is negatively impacting upon the national and international competitiveness of North Queensland industry, the region’s capacity to attract investment and the economy’s ability to generate sustainable employment. The Federal and State Governments have an obligation to work together on behalf of the North Queensland community in pursuit of this agenda. The Federal Government should use its significant influence and establish policy that ensures that the next 2,000MW of electricity generation to be licensed in Queensland is based in North Queensland and connected to the grid north of Collinsville. Additionally, through COAG mechanisms the Federal Government should secure State Government commitment to use its influence to police the behaviour of generators so that wholesale prices match costs of production – not prices driven by market distortion (See attachment 2).

Current critical infrastructure requirements for water security for North Queensland include an upgrade to the Haughton Pipeline, already funded by the State Government, beginning construction this year.

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Other key infrastructure requirements for water security include the proposed Hells Gates Dam, currently under feasibility, due for completion in April 2018. The Dam has the potential to not only open up significant large-scale irrigated agriculture within the Upper Burdekin, but also has opportunity to act as a long-term water solution for Townsville. However, the largest impediment to Townsville’s current water security is the prohibitive cost of pumping from the Burdekin system. Therefore, investment into a battery-ready 5MW solar energy array to offset energy costs to be installed at the Haughton Pump Station must occur to secure Townsville’s water for the immediate future. Other important factors for consideration include increased water allocation for the Upper Burdekin and a final investment decision for Burdekin Falls Dam Stage 2 (See attachment 3).

PVW Partners, a local business advisory firm in Townsville produces a quarterly Business Confidence Change Index. Results in the survey often reflect positive investment announcements in the region. During the June 2017 quarter, participants were asked how important they considered a vibrant CBD to be for the growth of the greater city of Townsville and attracting new investment to Townsville. 88% of the responses reflected a view that a vibrant CBD is a highly important part of Townsville’s future growth and investment attraction, demonstrating that a vibrant CBD that imparts confidence from within is absolutely critical to attract private investment and this is underpinned by initial public investment into regional infrastructure projects. The Townsville Stadium is an example of how an initial public investment can influence positive business confidence in private investors and local business and act as a catalyst for further investment into a region. PVW Partners Business Confidence index improved 10 index points from -5 in March ‘16 to 5 in December ‘16 following positive announcements in June ‘16 around the State and Federal Government commitments to fund the Stadium. Confidence instilled in local business resulted in significant employment growth throughout the region over this period, however, this growth in employment cannot be maintained without access to a skilled workforce. This is where intervention from both levels of Government needs to be considered to ensure that incentives for skilled workers to relocate to regional areas is established through a regional relocation and retention strategy.

EXAMINING WAYS URBANISATION CAN BE RE-DIRECTED TO ACHIEVE MORE BALANCED REGIONAL DEVELOPMENT

REGIONAL RELOCATION AND RETENTION Unless governments establish conscious policy that addresses equitable distribution of wealth and employment, nations run the risk of economic instability or the establishment of a “two speed” economy. In the Australian post mining boom era our country finds itself yet again in the midst of a two- speed economy, this time comprising:

(i) NSW and Victoria (driven largely by Sydney and Melbourne); and (ii) The rest of Australia (ROA).

The size and relative strength of the NSW and Victorian economies means that economic data presented at the national level is masking weakness throughout the rest of Australia, particularly that of regional

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centres. Capacity utilisation is high in Australia’s two largest cities and demand growth is strong, courtesy of incredibly low interest rates and burgeoning property prices (see, Graph 1). Without an interventionist approach by government to stimulate regional development, the economic divide between southern capitals and regional communities will continue to widen.

A regional migration policy delivered by the Federal Government would offer a suitable solution to population decline that is impacting regional businesses. Removing barriers to people or businesses relocating, both within or to other regions and involving a federal development agenda that consciously looks beyond its centralised populations and targets regional sustainability. Economic prosperity is a key catalyst for population growth and stability, which in itself is an economic stimulant to industry sectors including retail and construction, and assists in defraying the costs of infrastructure development.

Population stability is a key contributor to the long term viability of regional communities in terms of economic, environmental and social sustainability. An economy’s population heavily influences aggregate growth rates like output and employment.

Recent figures provided by MarcoBusiness (Aird, 2016) indicate that in the year to QI 2016, population growth in Vic/NSW was running at 1.6 per cent while it was growing at 1.1 per cent for the ROA (see, Graph 2).

This is a material difference. It largely reflects two forces:

(i) Interstate migration; in particular from a weakening resource sector, which has converted economies to south eastern capitals due to a lack of job opportunities; and

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(ii) A significant proportion of overseas migrants settling in either Sydney or Melbourne.

Unless as a nation we are prepared to make a strong commitment to address factors that support the sustainability of regional communities, we will continue to see the exodus of educated and skilled labour to capital cities in pursuit of opportunity and employment. Regional universities are proactive in skilling the work force, however, a lack of job opportunity often results in graduates needing to move to state and territory capitals. The Commonwealth needs to lead by example, investing in a legitimate regional development agenda that not only delivers sustainable public sector employment opportunities and career paths for locals but also prompts existing city dwellers to consider the positive quality of life alternative these communities offer.

DECENTRALISATION The centralised locality of key government departments, agencies and personnel who preside over critical regional agenda and influence policy does not efficiently support local engagement, decision- making and participation of the communities they support. Government bureaucrats need to be directly accessible/ exposed to the segments of the community they serve, which ultimately contributes to improved/ informed decision making. Regional engagement assists successful regional development policy-making, program design and management, and service delivery activities. It underpins each government’s commitment to localism, engaging with local government, local businesses and citizens and achieving long-lasting change and reforms.

Taking civil servants out of south eastern capitals has been long debated by government advisers looking for ways to bring down government expenditure and stimulate regional economies. This agenda works to promote senior bureaucrat and executive association with a different kind of “business community” and to see things from a non-capital perspective. Regional Australia deserves its fair share of high-skilled well paid jobs – tax payer monies should be distributed equitably across the nation. There are over 243,300 Commonwealth Government public servants employed nationally, with less than 2000 residing in Townsville (ABS; June 2016).

Local Commonwealth agencies including Civil Aviation Safety Authority (CASA), the ATO and Veterans Affairs have all experienced recent significant reductions in personnel, contributing further to an already troubled North Queensland unemployment climate. The only way Northern Australia will realise its true potential and contribute as Australia’s agricultural powerhouse and gateway to Asia is for the Commonwealth to continue to invest, supporting the relocation/ decentralisation of government departments and agencies with particular consideration given to northern communities.

The downsizing of the Department of Veterans Affairs operation in North Queensland is a prime example and particularly troubling considering Townsville is home to Australia’s largest army base and whose existing personnel and extended families represent approximately 16 per cent of the city’s population. The down scaling of Veterans Affairs resources not only removes that employment and its flow on effect to the local economy, it also drastically impacts Townsville’s capacity to retain transitioning and ex-military personnel within the region due to the direct loss of services and support.

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PROMOTING THE COMPETITIVE ADVANTAGES OF REGIONAL LOCATION FOR BUSINESSES

COMPETITIVE ADVANTAGES OF REGIONAL LOCATION FOR BUSINESSES Competitive advantages for the relocation of businesses to North Queensland and other regional areas include operational costs including rent and wages as well as liveability for business owners and staff. Australia’s southern capital cities are burdened by a lack of affordable housing options and unable to address cost of living pressures supportive of their growing populations. It would only seem practical that the Commonwealth government would seek to alleviate this pressure through the decentralisation and relocation of departmental and agency operations to regional centres, seeking to turn the tide of regional migration. Australia’s large regional centres have so much to offer from a housing affordability, cost of living and life style perspective. Similar affordability pressures also apply to government and commercial operations, where median office space leasing rates are pegged three times higher /m2 in Sydney (double in Melbourne) than that of regional Australia comparable product (see, Table 1 below).

Sydney, Melbourne and to a lesser extent Canberra are emerging as economic microclimates, as income and wealth become concentrated in and around these centres. By and large, per capita income decreases the further away you get from the south-eastern capitals. As ever, people will pursue opportunity and wealth. The regions with the highest population increase are those closest to our major centres.

Recommended policy changes for the Federal Government to consider in support of transitioning existing sustainable regional cities include tax concessions for new businesses that are investing in regional locations. Additional incentives for each individual local person that is employed in the start-up process should be considered within the policy change.

A further inhibiting factor to regional location of businesses that should be addressed is the absence of connectivity from Townsville to key business centres including Canberra, the Gold Coast and Sydney. Frequency of direct flights into capital cities from regional locations is lacking, acting as a direct impediment for both business travellers and families that have relocated and wish to visit and be visited by friends and family. Additionally, a lack of affordability for most routes out of the city should be addressed to reduce inhibiting factors affecting competitive advantages for the region. Townsville Enterprise recently commissioned AEC to produce a report that demonstrated that reducing the cost of current airfares by 10% will allow a further $50M annual investment into Townsville through the direct and indirect impacts of additional visitation alone. Further critical factors including business investment,

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employee attraction and retention, and regional liveability - which are also significant impacted by air connectivity – mean that the ultimate economic and community impacts would be significantly higher. Energy prices as an inhibiting factor to investment into regional locations was mentioned above and must be seriously considered and acted upon by both State and Federal Government to justify regional relocation for business.

In summary, Townsville Enterprise supports the Committee’s research into the Australian Government’s role in the development of cities and reiterates the need to promote competitive advantages of regional location for businesses. However, critical enabling infrastructure such as those that facilitate competitive low energy prices and water security must be addressed by the Federal Government before regional location of businesses can be promoted as being a strategic competitive advantage. Finally, regional development through equitable employment and regional relocation and retention policy is a recommended strategy to incorporate into the Commonwealth Government’s policy into ‘growing new and transitioning existing sustainable regional cities and towns’.

REFERENCES ABS 2017, Labour Force, Australia, cat n. 6291.0.55.001.

ABS 2016, Counts of Australian Businesses, including Entries and Exits, Jun 2011 to Jun 2015, cat no. 81650.

Aird, G. (2016). Australia’s new two-speed economy, Unconventional Economist.

CBRE 2017, 4th Quarter, 2016.

Domain 2017, 4th Quarter, 2016

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