Commonwealth of Australia Select Committee on Jobs for the Future in Regional Areas

6 September 2019

Julia Creek | McKinlay Shire Council

1 Introduction This report is McKinlay Shire’s response to the Senate Commission’s request to provide information and insights into the future of jobs and employment opportunities in regional Australia. The report highlights several of the past, current and future challenges in regards to employment the rural community of McKinlay Shire faces. It also addresses opportunities and the need to diversify the activities to ensure continued investments in the local community.

Employment opportunities have to be supported by a sustainable base of locals that is able to supply sufficient labour. In other words, population attraction and retention and renewability are essential to sustain local economic development. However, as a remote outback Shire, the forecasts of population growth are negative even in the best-case scenarios. Combined with the existential threat of natural disasters, the high levels of reliance on two volatile sectors, and sheer size of the Shire, potential investments come with a high cost and high-risk connotation which may limit private investment.

In order to retain population, Council and other stakeholders should take away or reduce barriers that lead to limitations. Primary services like housing, health care, education and employment opportunities are essential in facilitating people to stay – or least preventing them from having to leave. The outback itself is appealing enough for people to stay or come and live there. As a resources and agriculture orientated Shire, we are vulnerable to external forces and threats that are beyond our control.

Going forward, McKinlay Shire Council emphasises that significant collaboration on multiple levels is necessary to create a sustainable future. As many other Councils face similar challenges, the solutions should emphasise scalability, flexibility and adaptability to fit a broad range of recipients.

Invitation from Commonwealth of Australia – Senate Commission The committee will inquire and report on the following matters: a. new industries and employment opportunities that can be created in the regions; b. the number of existing jobs in regional areas in clean energy technology and ecological services and their future significance; c. lessons learned from structural adjustments in the automotive, manufacturing and forestry industries and energy privatisation and their impact on labour markets and local economies; d. the importance of long-term planning to support the diversification of supply chain industries and local economies; e. measures to guide the transition into new industries and employment, including: i. community infrastructure to attract investment and job creation; ii. the need for a public authority to manage the transition; iii. meaningful community consultation to guide the transition; and iv. the role of vocational education providers, including TAFE, in enabling reskilling and retraining; f. the use of renewable resources in Northern Australia to build a clean energy export industry to export into Asia; and g. any related matters.

2 Contents Introduction ...... 2 Invitation from Commonwealth of Australia – Senate Commission...... 2 1. Recommendations...... 4 2. The McKinlay Shire at a glance ...... 4 3. Challenges...... 6 3.1 Population Retention and Demographics...... 6 3.2 Housing & Population Attraction...... 6 3.3 Extreme Weather Events...... 6 3.4 Healthcare & Social and Digital Connectedness ...... 7 3.5 Resilience and Sustainability of the Local Economy ...... 7 3.6 Seasonality & volatility in revenues for local businesses...... 8 3.7 Tourism...... 8 4. Opportunities ...... 8 4.1 Sustainable Economic Development & Collaboration ...... 8 4.2 Business Model Innovation & Education ...... 9 4.3 Digital Innovation and Connectedness ...... 10 4.4 Renewables, Resources Recovery & Sustainability...... 10 4.5 Resources Research in Mining...... 10 4.6 Tourism – Operations & Ownership ...... 10 5. Long Term Planning ...... 11

3 1. Recommendations The sheer size of the challenges, the financial investments attached and the similarity of those challenges in outback Queensland’s Shires, demands a collective approach on multiple levels both public and private. Supported by public financial relief, private investments and Council assets, the way forward is recommended to be collaborative of nature.

 Create Tax Offset Benefits to include seasonality for all local businesses in regional or rural Australia to help smooth the payable taxes and thus create a financial incentive for businesses to invest;  Financial incentives with private companies – such as insurance companies and banks – to facilitate private investments in sectors Tourism, Resources & Mining, Waste management and Energy by allowing for mitigation of premiums and/or upfront investment requirements;  Government to expand Health Care Services both in frequency and type with private/charity companies (RFDS, Allied Health)  State and Federal Government to lead the way in providing housing opportunities by allowing locals in regional areas to use part of their salary package to be used to pay for a mortgage down payment e.g.  Private companies to commit to sourcing locally in labour, services and supplies with agreements in place as part of the approvals process. Provide financial incentives on a gliding scale with lower taxes or costs if they source more locally  Council to continue to expand access to services in collaboration with IT provides (Telstra, Optus), local businesses (apprenticeships), State Government  NWQLD region to invest locally and share the costs and benefits regarding economic development opportunities. Sharing the costs of investing and subsequently the returns would support collective thinking and collaboration  Regional Development with MITEZ, RDA to be turned up a notch with dedicated funds going to providing solutions to current barriers  Assess State and Federal legislation how to create financial incentives that comply with the recommendations and ensure application of the incentives.

These recommendations are explored further below whilst also providing the context of the McKinlay Shire Council and the community.

2. The McKinlay Shire at a glance McKinlay Shire Council (MSC) serves as the Local Government Authority (LGA) to govern and manage the natural assets, infrastructure and other services and facilities provided to the community.

The Shire is located in North West Queensland 250km east of Mount Isa and 650km west of Townsville along the Overlander’s Way or the Flinders Highway. Julia Creek has been named one of the hottest places of Queensland with an annual average temperature exceeding 36 degrees. Rainfall is generally limited to the months January – March but, as the floods of 2019 have shown, rainfall can be severe and persistent.

The Shire is approx. 41,500km2 in size and rests upon the Great Artesian Basin which provides naturally heated water sources to the residents and facilities. The water in Julia Creek is cooled

4 down via the Water Tower, a landmark facility visible over 20km away in every direction. The Shire’s economy – Gross Regional Product (GRP) – was estimated to be around $386 million in the years 2015-2016 and is expected to have fallen sharply in the last financial years1 due to the extensive loss of cattle, damages to properties, and lack of visitors over the first 6 months of 2019. The Shire’s main economic activities are; Agriculture, Mining and Tourism.

Agriculture Mainly beef cattle and sheep are kept at the many stations the Shire has. Either family-owned or corporate-led, the stations provide a significant portion of beef cattle which is mostly destined to be exported overseas.

Mining With one of the world’s largest Silver and Lead Mine, Cannington Mine (South322) produces 7% of the world’s lead supply and 6% of the world’s silver supply.

Also, the Eloise Copper Mine3 located near McKinlay plays an intricate part in the Shire’s economic activity and output.

The proposed St. Elmo Mine4 located several kilometres east of Julia Creek will mine for Vanadium and may radically change the economic and demographic composition and outlook of the Shire and Julia Creek in particular.

Tourism As a popular and well-known outback destination, the Shire receives a fair share of tourists and visitors. The award-winning VIC with the endangered Dunnart5, the camping facilities with the Artesian Bath houses, and the calendar filling events throughout the year, all provide excellent opportunities to travellers to enjoy the friendly locals and natural assets of the outback.

The total economic activity is estimated to be approx. $400 million and it would not be understating to say that the Resources Sector plays a vital role in the Shire past, present and future. Almost 50% of the total people employed (total is 1,269) in the Shire in 2016 worked in the Mining/Resources industry whilst Agriculture took up 19% of the total employment6. Construction, Public Administration and accommodation and Food Services make up the remainder of the employed people.

The North West Queensland regional unemployment rate in 2017 was 8.2% whilst the Shire’s unemployment rate was 4.8% in 2017 which is lower than the State’s average rate. The Queensland average unemployment rate was 6.5% as per June 20187. It is commonly stated that if you don’t work in Julia Creek, you don’t want to work.

1 No current estimates are available 2 https://www.south32.net/what-we-do/places-we-work/cannington 3 http://www.fmrinvestments.com.au/mining_operations.shtml 4 The St Elmo mine is currently being assessed in the approvals process of the Queensland Government 5 A little marsupial which is on display at the VIC and is part of a breeding program (Julia Creek Dunnart) 6 AEC Group Ltd Economic Development Plan for the Shire 7 http://lmip.gov.au/default.aspx?LMIP/LFR SAFOUR/LFR UnemploymentRate

5 3. Challenges As a Queensland Outback town, the Shire faces many serious challenges on a regular and continuous business. The following topics are of particular interest to Council and the community.

3.1 Population Retention and Demographics The Shire’s population has been decreasing for years from its peak in 2011 at 1,085 residents to 810 in the Census 2016. It is expected that the floods of 2019 have led to a further decline in population. The current demographics are unfavourable with 56% male and 44% female, a median age of 41 versus the State’s average of 37 years. The State’s forecasts8 for the population changes and size are not good either. It is expected that the Shire will have a population between 521 (worst case) and 726 (best case) by 2041. The population change is expected to be around -/-192 persons (medium scenario) by 2041, while the best (-/-84) and worst (-/-289) scenarios also show a significant decline.

The forecasts are unfavourable and the flow-on economic limitations are numerous. With fewer people residing in the Shire, the costs for living i.e. rates payable to Council, will be higher. Subsequently, the investment (capital works programs) and operational budgets of Council decrease and the local businesses will suffer due to higher costs, fewer customers and lower revenues. This downward spiral created by the forecast decline in population will have a significant impact on the Shire and accelerate the downturn.

It is therefore not an understatement to say that population retention is the largest challenge the community and Council face.

Looking at the composition of the population – especially at the younger and older ends of the spectrum – we see the following current and projected data emerge.

3.2 Housing & Population Attraction The lack of adequate housing opportunities is significant. Private development of dwellings is non- existent and although Council owns multiple houses in Julia Creek, it is no longer sustainable to buy and develop houses on Council’s account. As unemployment figures in the Shire are half that of the region’s average, there is no shortage of employment opportunities. The lack of available housing has, however, proven to be a limiting factor in attracting and retaining employees and their families. Also, the risks associated with investing in remote areas are higher than urban or coastal areas while the same rules apply.

3.3 Extreme Weather Events The relentless pressure of a next disaster is always present. Whether it is rain followed by flooding or drought, the Shire has seen its fair share of extreme weather events over the years. Examples of extreme weather events are the Monsoon Trough Flooding which occurred in February 2019 and the continuous declaration of a drought9 affected Local Government Area.

History has shown that the frequency and severity of the events limit investors’ appetite – whether public or private – to invest in the outback.

8 Queensland Statistician’s Office 2019 9 https://www.longpaddock.qld.gov.au/drought/drought-declarations/

6 Unfortunately, the outback lifestyle comes with the extreme weather events and forms an intricate part of the landscape. Although it is hard to manage and prepare for those extreme events, the Shire may endeavour on other related issues to ensure the community see an increase in disaster readiness, preparedness and resilience and recovery. Community collaboration with regional, State and Federal Governmental Bodies is essential in combining forces and face the consequences of extreme weather events. Council will ensure continued focus on the effects of extreme weather events.

3.4 Healthcare & Social and Digital Connectedness Due to the Shire’s vast open spaces, large properties or stations, small townships and limited population, the continued social and digital connectedness is an important challenge. It is well known that mental health issues – such as depression, suicide and schizophrenia – are abundant compared to coastal and urban region, but remain largely unaddressed. Access to remote health services – Royal Flying Doctors, Allied Health Services – is essential in providing high quality health services throughout the Shire. However, specialised health care is absent and a visit to Townsville or Brisbane is necessary to visit a GP or specialist despite having a hospital and medical centre in Julia Creek.

As unlimited high-speed internet has become an indispensable part of many city dwelling Australians, the satellite feeds on the stations is not overabundant. The bandwidth and data available on the stations is often limited and what is available is used to provide School of the Air activities for the children on the stations. Although understandable, that position limits their access to digital services and social media exposure. Especially when living remotely10, the availability of e.g. psychiatrists is very limited. Research has shown that social inclusion and digital connectedness (e.g. Facebook, Facetime and Instagram) are essential in battling mental health issues.

3.5 Resilience and Sustainability of the Local Economy The local economy highly depends on Mining (49%) and Agriculture (19%)11 and the desire to become more resilient and sustainable means that innovation and diversification are essential. The dependency on these two sectors has proven to be vulnerable to external, hard-to-manage threats with devastating effects. The price of commodities, such as silver and copper, is vulnerable to geopolitical and market disturbances. Competition is global and fierce.

Agriculture was hit hard during the Monsoon Trough earlier this year and saw the loss of over 300,000 cattle. With an estimated $1,000 per cattle value, the losses accumulated to well over $300,000,000 in this Shire alone. However, the losses did not end there. Without cattle, there are no revenues to cover costs and many have struggled to get back on their feet and maintain operations. Although supported and helped by Federal, State and Local Governments and insurance funding, but that does not restock the cattle farms. The effects of the losses will be felt in coming years and then the bridging funds have dried up.

In other words, the dependency on these two main sectors is understandable and simultaneously dangerous. Innovation and diversification are paramount in ensuring sustainability of the local economy. With the lack of produce and thus revenues and cash flow, investments in innovative

10 https://www.ruralhealth.org.au/sites/default/files/publications/nrha-mental-health-factsheet-dec-2017.pdf 11 Queensland Statisticians Office and AEC GROUP LTD ED Plan

7 methods, risk mitigating strategies and diversification are limited. More effective and efficient grazing methods or beef production methods, for example, are business model areas that are prone to fierce competition. The lack of the ability to invest and thus compete will subsequently see farmers and property owners struggling to produce and survive. Competition with more resilient and innovative beef graziers in other parts of Queensland and Australia are more likely to be lost adding more vulnerability to the fragile local economy.

3.6 Seasonality & volatility in revenues for local businesses The cattle farmers are prone to seasonal effects on both their produce and their revenue stream. To counter the volatile nature of their revenue streams farmers are allowed to – temporarily – store money on a designated account. The aim of the account is to counter seasonality and produce a less volatile revenue stream. Local businesses are affected by seasonality too as the Shire sees the vast majority of tourists between April and October whilst in the other months, tourism comes to a standstill. Local businesses in the Shire depend on outside customers, too. Recent estimations indicate that local businesses earn up to 50% of the revenue in the high-season-months (May – September) – although actual objective data is yet to be obtained12.

3.7 Tourism Although tourism opportunities are well visited, the challenge for Council is to provide sufficient reinvigorations to remain appealing over the years. Innovation, new attractions and expansion of existing ones are essential in attracting visitors and have the flow on spending into the local businesses and community. Currently, most – if not all – of the tourist attractions are owned and operated by Council. It is preferred that external parties set up commercial tourism attractions. However, attracting external – commercial - parties has proven to be a very difficult way forward.

4. Opportunities Fortunately, the outback provides a lot of different opportunities as well. The community is resilient, experienced and willing to collaborate. With the help of Council, local businesses and groups, the residents will see delivery of new projects and ideas. Diversification, training, and a broad range of services are essential to provide a more solid foundation to retain the population. If the stakeholders are able to offer services for all age groups, population retention should be attainable which is regarded as the backbone of any opportunity.

4.1 Sustainable Economic Development & Collaboration As part of their regional diversification strategy, the Queensland Department of State Development, Manufacturing Infrastructure and Planning (DSDMIP) have identified multiple themes and initiatives13 to further develop the diversification strategy and provide a solid base for sustainable economic development in years to come. Council is determined to contribute and reap the benefits of that strategy to ensure future success. The proposed Vanadium Mine near Julia Creek is expected to generate economic output with more employees, more accommodation, food and shopping associated.

12 A program to collect, store and process data is currently in the early stages of development 13 See QLD DSDMIP/NRME publication Draft NWQLD Economic Diversification Strategy 2019

8 Taxation volatility – seasonality of local businesses As part of the sustainable economic development, consistent revenue streams and profit generation are essential. As a remote area in the outback, seasonal peaks are abundant. Local property owners and graziers – or primary producers in the eyes of the ATO - have the option to temporarily stall profits with a lower tax profile than regular businesses and corporations14 - current measures are e.g. Tax Averaging for Primary Producers. The non-graziers are local businesses prone to the same seasonality but without the ability to average their tax returns to the same extent. This creates an undesirable level of volatility and insecurity and hence limits the risks the business are willing and able to take. It would be preferable to extend the Tax Exemptions, Offsets or other measures to a regional approach instead of a sector approach thereby enabling tax smoothing for all businesses affected by seasonal effects.

Housing issues – salary sacrifice The Banking Scandal has not helped Australians in securing loans for their homes. Mortgage rates have changed, deposit requirements have become stricter and the overall experience of buying a house have seen a steep decline among Australians. It would be beneficial if employers could construct a salary package and the employee could use part of that package to directly – with tax benefits – use that part to invest in the purchase of a house or land to build a house. This level of flexibility may encourage prospective employees to move to regional areas and start a new life.

In general, tax exemptions or other tax benefits will help level the playing field and provide an additional opportunity to local businesses and potential employees to work in remote areas.

4.2 Business Model Innovation & Education Council is actively seeking collaboration with Queensland Departments and Federal Departments to provide platforms for station owners and local business owners to implement new and innovative ways of doing business. Whether it is new technology, cost-saving, risk-reducing or revenue- increasing programs, in order to become or stay profitable, businesses will need to address their current way of doing business and look for diversification strategies.

An example Council is currently working on is to actively offer farm stays at several stations. Although in early stages of development, preliminary results show that there is a demand for real outback experiences conducted by visitors. This would qualify as a diversification strategy in the sense that it ensures additional revenue in the off-season.

Education or the lack thereof is a prime example of kids having to move out of town. Some locals choose to send their kids to boarding school when they turn 12, whilst others move to towns that provide high school education facilities and universities. With fast and reliable internet and digital services Council may venture in School of the Air facilities and or remote learning (online courses).

14 https://www.ato.gov.au/business/primary-producers/in-detail/tax-averaging-for-primary-producers/

9 4.3 Digital Innovation and Connectedness Council have successfully secured funding to build a Smart Hub envisioned to provide a broad range of digital services for individuals, groups, businesses and public institutions to use. The availability of high speed, reliable internet and conferencing and training facilities will contribute to the objective of population retention. Council may provide training or outsource the operational activities of a Council asset to a commercial party via a leasing construction.

4.4 Renewables, Resources Recovery & Sustainability The extreme weather events also provide an opportunity. Over the autumn and winter months particularly, there is an abundance of sunshine. Solar power in particular, is an interesting product that Council should consider in collaboration with energy companies. Also, given the availability of water from the Artesian Basin Council and State may consider an export possibility to other Shires and/or overseas. This will create substantial economic development and investments with a realistic investment return. The transition from an energy user to a net energy producer and export is considered a diversification strategy.

However, the current energy supply and distribution infrastructure cannot effectively and efficiently transport the energy generated. As an example, near Hughenden, Queensland, a solar farm was erected aimed at providing green energy for the region. However, the current infrastructure is deemed inadequate to transport and store the power generated. Renewable energy is absolutely an opportunity that requires significant investments to upgrade the current power grid.

Job opportunities here relate to the construction, operations and maintenance of renewable energy plants or grids.

Other opportunities for future diversification of employment are resources recovery and recycling. By itself, Council is not large enough and does not have sufficient funds available to venture into a recycling facility. However, by combining forces and expertise from other Shires, the region may implement new and improved resource recovery and recycling initiatives and share the risks and the benefits. Operational, maintenance and construction job opportunities are abundant.

4.5 Resources Research in Mining With the third mine hopefully opening this year, the Shire plays an intricate role in the resources industry. State and Council should seek collaboration with the mining companies to source locally as much as possible whether labour, materials, equipment or services. The mining sector has seen many innovative ideas and methods as well as a surge in sustainable land use and exploration. The mining industry is subject to intense scrutiny and consequently will have to abide by stricter rules and regulations going forward. These innovations will help solidify the foundations of the Shire and surrounding ones and provide a multitude of job creation and economic development.

4.6 Tourism – Operations & Ownership A large incentive exists to facilitate and commercially exploit tourist attractions in the Shire. Council acknowledges that it is a big step to go from Council owned and operated to a fully commercial company. To provide a bridging period and remove angst for potential buyers, Council could consider selling or leasing current assets (e.g. Caravan Park) with a transition period.

10 New tourist infrastructure or facilities should be an attractive investment opportunity with viable financial incentives to support the investment.

5. Long Term Planning With the forecast decline in population and the subsequently expected decrease of ratepayers, and thus revenues, McKinlay Shire’s long-term planning depends on external funding and partnerships. Grant funding opportunities as well as other indirect financial incentives such as tax exemptions, are necessary to continue to invest in regional Australia.

Council’s longer-term planning scheme is comprised of three main components.

 The maintenance and operational control of current assets to ensure continued service within the required standards of those assets  Expanding current use of or constructing new infrastructure aimed at taking away barriers to staying in the Shire, and attract more visitors  Changing the operational control and/or ownership structure of current and new assets to free up monetary means

Essential services and facilities Council have to provide – such as roads, water, waste and sewerage – are to be maintained and operated by Council. However, non-essential services such as community facilities, tourist assets (caravan park, and the VIC) may be outsourced to commercial parties to free up monetary and operational means. However, due to the lack of available private investors and the high-risk connotation associated, outsourcing operational control or ownership is difficult to obtain.

Ultimately, all the challenges and opportunities warrant a thorough and collaborative debate on the future of regional jobs to exchange ideas, knowledge and experiences.

Council staff are looking forward to working with higher levels of Government to take those next steps.

McKinlay Shire Council

September 2019

This report has been written for the sole purpose to provide information to the Committee in regards to the future of jobs in regional areas. The information provided in this report is confidential and any reproduction of that information shall not be done prior to approval received from McKinlay Shire Council.