Mandurah: Overcoming regional inequality Challenges and Opportunities for Sustainable Regional Growth

Regional Inequality in Australia

Senate Standing Committee on Economics

April 2018

Introduction

The is pleased to provide a submission to the Senate Standing Committee on Economics’ inquiry into the indicators of, and impact of, regional inequality in Australia.

Mandurah is well placed to comment on this issue, having long been the subject of regional inequality. However, Mandurah’s inequality differs from most other regions in that due to its physical location just south of the Metropolitan Region, Mandurah’s regional status has historically been overlooked by both State and Federal Governments.

Along with its geographic and political challenges, Mandurah also faces a range of socio- economic and environmental challenges. However, the City has in place a plan to not only overcome these challenges, but to become a thriving, prosperous and sustainable city.

For this to occur, all three levels of government must work together. This can be achieved via a combination of service delivery reforms, financial assistance grants reforms, an equitable distribution of Royalties for Regions funding, and by investing in Mandurah as part of the recently announced Perth City Deal.

Mandurah – an Overview

Mandurah is an inner-regional Western Australian city with a population of more than 83,0001, making it WA’s largest regional city, and the 10th largest local government area in WA. After more than half a century of relentless rapid population growth, Mandurah’s population has recently begun to slow, but it is nonetheless forecast to keep growing steadily to reach a population of around 120,000 by 20362.

In addition to being an area of rapid growth, Mandurah has a disproportionately high percentage of older residents and a low proportion of young adults. Mandurah also suffers from high unemployment and low labour force participation.

Mandurah’s unemployment rate is currently 7.0% (December 2017), compared with the WA average of 5.9%3. Mandurah’s labour force is currently at around 35,000, or approximately 42% of its total population. This compares unfavourably with neighbouring metropolitan fringe local government areas such as Rockingham (51% labour force participation), Kwinana (51%), and Cockburn (55%).

Whilst Mandurah’s low labour force participation can be partly attributed to its popularity as a retirement destination, Mandurah has comparatively low labour force participation levels across all age groups between 25 and 64, with particularly low participation in the 55-64 age group4.

As a result of sustained rapid growth on the urban fringes of Perth, Mandurah face a range of sustainability challenges, including:

 Creating jobs and improving access to local employment;  Growing and diversifying the regional economy;  Improving education and training outcomes;

1 Australian Bureau of Statistics; Regional Population Growth, Australia; released July 2017. 2 Informed Decisions; Mandurah forecast id; October 2017. 3 Australian Government Department of Jobs and Small Business; Small Area Labour Markets Australia; December Quarter 2017; released March 2018. 4 Australian Bureau of Statistics; 2016 Census Community Profiles; Labour Force Status by Age by Sex. 2 | P a g e

 Ensuring community health and wellbeing, safety and security;  Preserving the natural environment and waterways;  Attracting and retaining young people;  Meeting community infrastructure needs;  Improving public transport infrastructure and connectivity;  Addressing social disadvantage, including affordable and crisis housing needs;  Maintaining Mandurah’s regional identity.

Despite these challenges, Mandurah has significant potential to become a dynamic and vibrant southern city within a diverse and thriving region. However, in order to achieve this, a supportive and collaborative State and Federal Government relationship is required.

Inequality Challenges

Due to a combination of rapid population growth, metropolitan urban sprawl and limited government investment, Mandurah’s regional status is under threat, and its regional inequality heightened.

Regional Service Delivery Models

Mandurah’s non-stop rapid growth has with it brought numerous challenges, and coupled with the relentless southward expansion of the Perth Metropolitan Region, this has seen the physical gap between Perth and Mandurah all but disappear. Concurrently, State Government policy has resulted in essential government services being withdrawn from the Region and centralised in Perth. Examples of this include:

 Policing - Mandurah and Murray are contained within the South Metropolitan Police District, along with Cockburn, , Kwinana and Rockingham;  Health – Mandurah and Murray are contained within the South Metropolitan Health Service, along with Melville, Fremantle, Cockburn, Kwinana and Rockingham;  Education – Mandurah and Murray are contained within the South Metropolitan Education Region, along with Melville, Belmont, Canning, Cockburn, Fremantle, East Fremantle, Kwinana, South Perth and Victoria Park;  Planning - Mandurah, Murray, Serpentine-Jarrahdale and Waroona are contained within the South Metropolitan Peel Planning Sub-Region, along with Armadale, Cockburn, Gosnells, Kwinana and Rockingham;  Emergency Management – Mandurah, Murray and Waroona are contained within the South Emergency Management District, along with Cockburn, East Fremantle, Fremantle, Kwinana, Rockingham and Melville.

This Perth-centric approach has resulted in diminished government service delivery in the Peel Region. Whilst this has no doubt provided financial savings for the Western Australian Government, it has impacted negatively on Mandurah and the Peel Region, both in terms of ensuring effective regional service delivery and in maintaining our regional identity. The City seeks a return of regional service delivery models to Mandurah and the broader Peel Region.

Australian Government Grant Programs

Mandurah has faced significant challenges when dealing with Australian Government grant programs. The greatest challenges have been with the National Stronger Regions Fund, Building Better Regions Fund and the Regional Growth Fund.

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Between 2014 and 2016, the Australian Government released three rounds of the $1 billion National Stronger Regions Fund (NSRF), designed to promote economic development in Australia’s regions. The City applied for NSRF funding in all three rounds for its Mandurah Eastern Foreshore Redevelopment project, and was unsuccessful in all three rounds.

In late 2016, the Australian Government released the $481 million Building Better Regions Fund (BBRF), designed to create jobs, drive economic growth and build stronger regional communities into the future. Unfortunately, Mandurah was deemed ineligible to apply due to its location within an ‘excluded area’5.

Following two rounds of the BBRF in 2016/17, in March 2018 the Australian Government replaced it with the $272 million Regional Growth Fund (RGF), designed to fund major transformational projects which support long-term economic growth and create jobs in regions undergoing structural adjustment. However, Mandurah was also deemed ineligible for the RGF.

To determine BBRF and RGF eligibility6, the Australian Government utilised the Australian Bureau of Statistics’ Australian Statistical Geography Standard (ASGS). This is despite the ABS’s advice that the ASGS’s purpose is solely to release and analyse statistical data, not to determine whether or not an area is ‘regional’.

Introduced at the 2011 Census, the ASGS provides a common framework of statistical geography structures which enables the production of statistics that are comparable and can be spatially integrated. This includes Mesh Blocks, Statistical Area Levels 1-4, Urban Centre and Localities (UCLs), Significant Urban Areas (SUAs) and Remoteness Areas (RAs).

To determine Round 1 BBRF eligibility, the (then) Department of Regional Development, Territories and Local Government utilised 2011 Census SUA structures, despite the ABS’s advice that this was inappropriate. At the 2011 Census, all of Mandurah and the western half of Murray were contained within the Perth SUA, and were therefore deemed to be ‘excluded areas’.

Significant Urban Areas are individual UCLs or clusters of related UCLs with a core urban population over 10,000 persons, using aggregations of SA2s. SUAs can also include related peri-urban and satellite development and the area into which the urban development is likely to expand. SUAs are designed to incorporate any likely growth over the next 20 years.

Delineation of labour markets, derived from Census commuting data, is also used to determine the composition of SUAs and Greater Capital City Statistical Areas (GCCSAs). At the 2016 Census, the Perth SUA had a population of 1.91 million.

Under the ASGS, Mandurah was defined as being part of the Perth labour market, and therefore part of the Perth SUA. In contrast, other large Australian cities such as Gold Coast and were defined as separate SUAs from their capital cities, primarily because Census commuting data showed that they were separate labour markets. As a result, east coast inner-regional cities such as Gold Coast and Geelong were deemed eligible for BBRF funding, whilst Mandurah was not.

Local government areas (LGAs) with high unemployment and low employment self- containment - such as Mandurah - are more likely to be incorporated within their capital city labour market than LGAs with low unemployment and high employment self-containment. As a result, they are more likely to be included as part of their Greater Capital City Statistical Area.

5 Australian Government Department of Infrastructure, Regional Development and Cities; Regional Growth Fund Mapping Tool; www.maps.infrastructure.gov.au/RegionalGrowthFund. 6 with the apparent exception of Darwin, and . 4 | P a g e

This inclusion results in inner-regional cities such as Mandurah being penalised by government for having high local unemployment and low employment self-containment. Rather than being supported by the Australian Government to overcome high local unemployment, Mandurah is being punished for it, and its existing inequality is being further entrenched. Apart from using ABS data for other than its intended purpose, the Australian Government has taken a ‘one- size-fits-all’ approach to grant funding, completely ignoring ’s unique regional structure.

WA is the only state with an established Regional Development Commissions structure in place, with nine distinct Development Commission Regions defined under the Regional Development Commissions Act 1993 (, Goldfields-Esperance, Great Southern, Kimberley, Mid West, , South West, Wheatbelt and Peel). Mandurah is contained within the Peel Region, clearly separating it from the adjacent Metropolitan Perth Region.

As a result of its inclusion within the Peel Region, Mandurah is ineligible for Metropolitan- specific funding under the Metropolitan Region Improvement Fund (MRIF). The neighbouring is eligible for the MRIF, due to its location within the Perth Metropolitan Region.

Mandurah is also contained within the Regional Development Australia (RDA) Peel Region, part of a national network of 55 regional committees established by the Commonwealth Government in 2009. There are nine RDA committees in Western Australia, including one for metropolitan Perth. RDA Peel shares the same geographical boundaries as the Peel Development Commission Region (PDC).

Despite this, the Australian Government – via its grant eligibility criteria – has arbitrarily determined that Mandurah is not regional.

By not utilising existing Regional Development Australia and Regional Development Commission Region boundaries to determine BBRF and RGF eligibility in Western Australia, the Australian Government has completely undermined the relevance of both WA’s existing State regional structure and its own Federal RDA network in Western Australia.

Financial Assistance Grants

More than half a century of sustained rapid population growth has seriously impacted upon the City of Mandurah’s ability to provide the necessary infrastructure for its community. The accumulation of Mandurah’s rates revenue and its borrowing capacity have been far outstripped by the growth of its population, and with it, the demands on infrastructure and service provision.

‘Double-handling’ of Commonwealth funding via the states has resulted in an inequitable funding distribution to individual local governments. The most obvious inequity lies with the distribution of Financial Assistance Grants (FAGs).

Since the introduction of FAGs in 1974/75, their allocation as a percentage of Commonwealth taxation revenue has gradually declined, from 1% in 1996 to 0.57% in 20177. In response, the Australian Local Government Association (ALGA) has repeatedly - but unsuccessfully - called for the national FAGs allocation to be increased to a minimum of 1% of total Commonwealth taxation revenue.

7 Australian Local Government Association; 2018-19 Federal Budget Submission; December 2017; p.10. 5 | P a g e

The Australian Government’s decision to freeze FAGs indexation between 2014/15 and 2017/18 exacerbated an already difficult situation for local governments. The City of Mandurah estimates that the indexation freeze has reduced the City’s annual FAGs grant by approximately $280,000 per annum from what it otherwise would have been.

Whilst FAGs revenue comprises only a relatively small proportion (approx. 4%) of the City of Mandurah’s total income, it is nonetheless an important contributor to the City’s revenue stream. However, the current method of distributing the General Purpose grant component of FAGs requires complete overhaul.

Under the current FAGs distribution model, there are two stages to the grant process. The General Purpose grant component is first apportioned by the Commonwealth Grants Commission to State and Territory Grants Commissions on a ‘per capita’ basis i.e. based on the population of each State and Territory. However, when the subsequent intra-State distribution occurs, these grants are then apportioned to local governments based on the principles of ‘full horizontal equalisation’ and the ‘minimum grant’.

As a result of the existing Commonwealth-State-Local distribution method, outer metropolitan and inner regional Councils in populous States such as NSW and Victoria automatically receive significantly larger grants than their WA counterparts, regardless of their actual need.

The table below highlights the inequity of having two separate methodologies for inter-state and intra-state General Purpose grant allocations. The existing model favours States with large populations and small geographic areas, at the expense of states with large geographic areas but small populations, such as Western Australia.

A comparison of three similar Urban Fringe Medium (UFM) councils; Mandurah (WA), Camden (NSW) and Nillumbik (VIC) reveals the growing inequity between Western Australian and eastern states councils. Although Mandurah currently has the largest population of the three LGAs, it receives the smallest grant, simply because it is a Western Australian council.

Local Local Population General Purpose per General Purpose Government Government (June 2014) capita Grant Actual Grant Actual Area Classification Entitlement 2014/15 Entitlement 2014/15

Mandurah (WA) UFM 80,683 $20.50 $1,654,393 Camden (NSW) UFM 63,248 $32.78 $2,073,327 Nillumbik (VIC) UFM 62,724 $35.36 $2,218,196

Source: Australian Government Department of Infrastructure and Regional Development; Local Government National Report 2014-15; p.174, 181, 187; released 2017.

Furthermore, unlike its interstate counterparts, Mandurah is a minimum-grant council, despite having the same UFM classification, and being a similar distance from its capital centre as Camden and Nillumbik. Mandurah has been a minimum-grant council since before 2000, and was for many years, until recently, the only Urban Regional Medium (URM) council in Australia to be on the minimum grant.

Western Australia currently has more minimum grant councils than any other state (31 councils), and in percentage terms (22.5%), is only surpassed by the Northern Territory (27.8%) and South Australia (23.0%). As a percentage of total state population however, WA has by far the highest percentage of its population (75.5%) living in minimum-grant councils8.

8 Australian Government Department of Infrastructure and Regional Development; Local Government National Report 2014-15; p.28-31; released 2017. 6 | P a g e

Western Australia’s disproportionately large share of minimum-grant councils can be partly attributed to its comparatively large number of councils (currently 138), but primarily it is the result of the existing inequitable Commonwealth-State-Local General Purpose grant distribution method.

To overcome the existing inequity, the Commonwealth Grants Commission should introduce a ‘national distribution’ model, providing General Purpose grants directly from the Commonwealth to local governments (bypassing the states), based on their relative ‘need’ (horizontal equalisation), rather than their state’s population. If the Commonwealth Government is truly serious about overcoming regional inequality, each council should be assessed against all other Australian councils when contending for FAGs funding, rather than against only those councils in their respective state.

To restore regional equality, the City of Mandurah recommends the following:

 Increase Financial Assistance Grants to at least 1% of total Commonwealth taxation revenue;

 Replace existing Federal-State-Local distribution with a direct National-Local distribution model, based on full horizontal equalisation principles;

 Revise the Financial Assistance Grants escalation methodology to reflect actual Local Government cost increases;

 Include long-term rapid population growth as a disability factor for the purposes of determining the General Purpose grant allocation.

Royalties for Regions

A further example of regional inequality in Western Australia is the inequitable distribution of Royalties for Regions funding.

The Royalties for Regions program, introduced in Western Australia in 2008, was created to deliver the equivalent of 25% of WA’s annual royalties for regional infrastructure, services and capacity building projects. It subsequently invested more than $6.9 billion into more than 3700 projects in regional WA9.

Royalties for Regions has three main components; the Country Local Government Fund, the Regional Community Services Fund and the Regional Infrastructure and Headworks Fund. Each year between 2008/09 and 2015/16, the Department of Regional Development released its Royalties for Regions Progress Report, outlining the program’s expenditure and achievements.

The Progress Report revealed that the Peel Region consistently receives by far the lowest Royalties for Regions funding of Western Australia’s nine regions, both in real and per-capita terms. In 2015/16, the Peel Region received less than one-third the R4R funding received by the second-lowest funded recipient (Great Southern), and less than one-tenth the funding received by the highest-funded recipient (Pilbara).

9 Government of Western Australia, Department of Regional Development; Progress Report July 2015-June 2016; p.58-89. 7 | P a g e

Royalties for Regions – Expenditure by Regions 2015/2016 Region Country Local Regional Regional Total Government Community Infrastructure Expenditure Fund Services Fund and Headworks (Excluding admin Fund costs of $4,380,965 per region) Pilbara $430,646 $42,401,677 $183,303,391 $226,135,714 South West $485,431 $56,005,860 $57,373,689 $113,864,980 Kimberley $1,706,909 $62,105,966 $43,760,008 $107,572,883 Wheatbelt $1,139,921 $36,706,992 $59,356,805 $97,203,718 Goldfields- $494,085 $24,274,623 $53,581,805 $78,350,513 Esperance Mid West $488,275 $26,180,562 $44,607,711 $71,276,548 Gascoyne $451,902 $14,498,027 $49,542,032 $64,491,961 Great Southern $528,906 $27,524,507 $33,902,063 $61,955,476 Peel $373,843 $13,088,282 $3,396,061 $16,858,186

Source: Government of Western Australia, Department of Regional Development; Progress Report July 2015- June 2016; p.58-89.

Over the period 2008/09 to 2015/16, Royalties for Regions expenditure was allocated between the nine Development Commission Regions as follows:

Total Royalties for Regions Expenditure by Region 2008/09* to 2015/16 Pilbara $1691.3m Kimberley $972.2m Wheatbelt $615.8m South West $541.2m Mid West $433.2m Goldfields-Esperance $431.6m Great Southern $358.3m Gascoyne $350.1m Peel $155.0m

Source: Government of Western Australia, Department of Primary Industries and Regional Development; Regional Progress Reports; www.drd.wa.gov.au.

*2008-2009 Progress Report provided Country Local Government Fund allocations only.

Over this period, the Peel Region received just over half the R4R funding received by the second-lowest funded recipient (Gascoyne), and less than one-tenth the funding received by the highest-funded recipient (Pilbara).

Following the 2017 Western Australian State Election, the Department of Primary Industries and Regional Development has commissioned a series of evaluations of previous regional development investment. The City looks forward to the outcome of this evaluation, and to receiving a more equitable future funding distribution.

Mandurah is a city facing significant challenges, including limited education outcomes, high unemployment, lack of industry diversity, limited community infrastructure provision and social disadvantage. Australian Bureau of Statistics 2016 Census data confirmed that Mandurah’s socio-economic index (SEIFA) condition has declined between 2011 and 2016. 8 | P a g e

Socio-Economic Indexes for Australia: Local Government Area Index of Relative Socio-Economic Advantage and Disadvantage 2011 SEIFA 2016 SEIFA 2011 2016 2011 2016 2011 State 2016 State Score Score State State State State Percentile Percentile Ranking Ranking Decile Decile 974 958 59 52 5 4 43 38

Source: Australian Bureau of Statistics; Socio-Economic Indexes for Australia, 2016; released 27 March 2018. Australian Bureau of Statistics; Socio-Economic Indexes for Australia, 2011; released 18 July 2013.

Faced with a myriad of geographic, political, socio-economic and environmental challenges, Mandurah has a daunting task ahead of it. However, with the right partnerships in place, the City will overcome these challenges, and set itself on a pathway towards sustainability and prosperity.

Overcoming Challenges

Mandurah-Murray Economic and Employment Plan

To overcome its challenges, the City of Mandurah is demonstrating leadership and taking control of its future, via the Mandurah-Murray Economic and Employment Plan. The Plan aims to create industry diversity and stimulate employment via targeted public and private sector investment in identified programs and projects that respond to Mandurah’s natural competitive advantage, and align with State and National priorities.

High-impact projects that have potential to drive economic growth and stimulate employment will be identified and promoted. Some projects may be sub-regional in nature, whilst others may be at the local level. The Plan has identified the following broad programs for further investigation and potential investment:

 Water Science;  Nature Tourism;  City Centre Renewal.

Under the Mandurah-Murray Economic and Employment Plan, comprehensive business cases will be undertaken to determine the economic credentials of potential projects. On completion of this process, investment partnerships will be sought with both the private sector and government. The City will subsequently invite the Western Australian and Australian Governments to invest in our city and our region, and by doing so, further stimulate the state and national economies.

Perth City Deal

City Deals are an Australian Government initiative, designed to bring together the three levels of government, community and private enterprise to create place-based partnerships, align planning, investment and governance, accelerate growth and job creation, stimulate urban renewal and drive economic reform. The Australian Government seeks to utilise City Deals to help secure the future prosperity and liveability of cities, via six focus themes10:

10 Australian Government Department of Infrastructure, Regional Development and Cities; City Deals; www.cities.infrastructure.gov.au/city-deals. 9 | P a g e

 Infrastructure and Investment;  Liveability and sustainability;  Housing;  Innovation and Digital Opportunities;  Governance, City Planning and Regulation;  Jobs and Skills.

On 27 April, the Prime Minister and Western Australian Premier announced that the Federal and WA Governments will sign a Memorandum of Understanding to negotiate a Perth City Deal over the next 12 months. The City Deal is aimed at leveraging joint Federal/State investment in Perth’s new public transport program, Metronet, to deliver enhanced land use planning, affordable housing supply and smart infrastructure across Perth and inner-regional WA11.

The Perth City Deal provides a significant opportunity for tri-level collaborative government investment in Mandurah, which will create new industries and jobs, invest in transport infrastructure, improve housing supply, and enhance Mandurah’s liveability and sustainability. Investment in Mandurah via the Perth City Deal will also achieve the objectives of the Mandurah-Murray Economic and Employment Plan, stimulating economic growth and job creation, and reshaping Mandurah as the economic anchor to the Perth southern region.

Conclusion

Adversity brings with it opportunity. The recent announcement of a Perth City Deal, coupled with the concurrent establishment of the Mandurah-Murray Economic and Employment Plan, provides a significant opportunity to invest in Mandurah’s future.

To address the challenge of regional inequality in Mandurah, the City recommends the following:

 Restore regional service delivery models in Mandurah and the Peel Region;  Increase Financial Assistance Grants to 1% of total Commonwealth taxation revenue;  Introduce a direct National-Local Financial Assistance Grants distribution model;  Provide Mandurah and the Peel Region with equitable Royalties for Regions funding;  Ensure that the Perth City Deal incorporates significant investment in Mandurah;  Invest in Mandurah and the Peel sub-region via the Mandurah-Murray Economic and Employment Plan.

Mark R Newman Chief Executive Officer

11 Media Release; Prime Minister, Premier of Western Australia; Major Jobs and Infrastructure Boost for Western Australia; 27.4.2018. 10 | P a g e