Submission to the House of Representatives Standing Committee on Infrastructure, Regional Development and Local Government on the Inquiry into the impact of the global financial crisis on regional Australia. State of the Upper Lachlan Region The resources boom which Australia has enjoyed over the last decade has passed rural Australia by. Instead of a share in this national prosperity, farmers have suffered a decline in export prices for agricultural products and increased costs for machinery and other imports in consequence of the higher Australian dollar caused by the mineral export boom. Farmers and local businesses also have lost out on their ability to hold onto labour – they cannot afford to compete with wages offered by mining operators. These disadvantages have been compounded by seven years of drought, which has wiped out reserves and diluted equity for most farmers and many local businesses. For Regions which do not have significant mining activity, the consequence has been a steady, continuous slide into poverty for all sectors. Businesses are stretched because their customers have no money. Pubs and clubs (the social heart of most small communities) are struggling and in many cases have closed. In this environment, rural Shire Councils have been unable to increase their rates harvest because the ‘capacity to pay’ of their communities is reducing. At the same time, Local Government’s share of the national tax cake has been steadily reducing. At present, Local Government receives around 0.6% of total Federal Government income tax revenues; not so many years ago, this was over 1%. It seems that the redistributive function of our national tax system is not working effectively; areas most in need are receiving a progressively reducing share. The ratio of Local Government own-source revenue to GDP is about 2%, the ratio of rates revenue (the only tax instrument of Councils) to GDP decreased from 1.0% to 0.9% between 1990- 91 and 2005 06. This problem has been compounded by ‘cost shifting’ by State and Federal Government to Local Government; whereby Local Government progressively has been required to pay increasing fees for ‘cost recovery’ of expenses formerly met by those other levels of Government. Also there is a pattern of new regulatory roles being imposed on Local Government without any recompense for consequential increases in costs. Not only is Local Government being given a smaller slice of the cake; it is being required to contribute more to the ingredients. The continuing drought, also, has impacted directly on Council’s own responsibilities. It has made the task of road maintenance that much more difficult. Sustained periods of hot, dry weather, speeds up disintegration of gravel road surfaces, and increases the frequency, cost and effort necessary to keep such roads trafficable, particularly in granite country. Page 1 of 6 Submission to the House of Representatives Standing Committee on Infrastructure, Regional Development and Local Government on the Inquiry into the impact of the global financial crisis on regional Australia. The Upper Lachlan Shire Local Government Area was formed in 2004 through amalgamation of the former Crookwell Shire with most of the former Gunning Shire and parts of Mulwaree Shire. The roads infrastructure which Council was bequeathed present a compelling case for substantial ‘catch up’ infrastructure funding to put this Shire on an even footing. For State Roads which are entirely the responsibility of State Government, Upper Lachlan is the only Shire in the south eastern region of NSW which has a State road (Crookwell – Bathurst) which is not yet fully sealed. About 13 kilometres of rough gravel sections still feature in this important tourist and commercial traffic link. Of the 250 kilometres of Regional Roads in the Shire, 53 kilometres (21%) are still unsealed. Council receives funding from the Roads and Traffic Authority to maintain and upgrade these roads under the RTA Block Grant Program and the RTA REPAIR Program. At the current construction costs, $15.9 million will be required for the sealing of all remaining sections of Regional Road in the Shire. Regional Roads are main transport routes for freight, commercial, private and tourist traffic through and within the shire and are vital to the local economy. At the bottom of the roads hierarchy, Local Roads (to be funded entirely from Councils’ rates and General Purpose Grants), Upper Lachlan Shire has been especially disadvantaged, with 160 metres of unsealed roads per head of population compared with adjoining Shires – Cowra 55 metres, Goulburn/Mulwaree 13 metres, Oberon 94 metres and Yass Valley 42 metres. Upper Lachlan Shire Council has 1200kms of unsealed local roads with an estimate of $240m to seal these roads. There are arguably a number of local roads within Upper Lachlan Shire which should be declared Regional roads (Bigga to Reids Flat, Collector to Gunning and the Grabine State Park Road) and substantially funded by RTA Grants monies. The present level of grant funding received from the RTA however is only sufficient to bitumen seal one kilometre per year which results in a timeframe of 53 years for sealing all of the remaining sections of road; which makes it currently impossible for Council to bring these important roads up to the standards generally expected by the community at large. This is totally unacceptable and has a negative impact not only on the economy of this Shire but of the region as a whole. The Upper Lachlan Shire Council sits within the Sydney to Canberra Corridor and as such should be funded accordingly to allow appropriate roadworks to be undertaken to ensure road safety for all road users. Recent appraisal of our local by our new engineering management has concluded that Council’s major gravel road capital program, (i.e. re-sheeting) currently exhibits an 80 year replacement cycle, whereas a cycle of around 15 years is the maximum consistent with gravel roads being of adequate standard. The situation is so serious to the point that people claim to be deterred from taking unnecessary trips because of discomfort and potential vehicle damage and are genuinely concerned for the safety of their families and schoolchildren travelling on these roads. Many of these roads are school bus routes. Page 2 of 6 Submission to the House of Representatives Standing Committee on Infrastructure, Regional Development and Local Government on the Inquiry into the impact of the global financial crisis on regional Australia. The availability of trafficable roads is fundamental to the social interaction, schooling and health care requirements of rural populations. It is vital also to support agricultural, pastoral and tourism industries. The inadequacy of Council’s roads is a serious impediment to the objective of “keeping people in their own homes” which has been a tenant of Government health care policy over the last decade. All roads contribute to tragedy, too many people die on Australia’s roads. There are many contributing factors, but the condition of roads is a major and avoidable cause. Further, because of the impact of the drought, the invasion of noxious weeds has boomed out of control in consequence of loss of groundcover, reduced financial capacity of farmers and reduced affordable labour resources. This effect is causing long term damage to flora and fauna as well as substantial, possibly irreversible, reduction in productivity of pastoral lands. Council’s farming villages and towns have lost their young people. The gloomy prospects for agriculture follow on impacts on other local businesses and the opportunity for high wages in the mining industry have caused an exodus of youth. This has amplified the proportion of aged people in local communities which, by and large, have focussed on providing recreation facilities (sporting grounds and the like) mainly for the young. To strike a better balance in social wellbeing for Council’s communities, there needs to be more invested in facilities and special needs for the aged. Aside from this compositional effect, the Upper Lachlan Shire Region is being impacted by the general ageing of the population. There has not been adequate funding provided for aged care needs. The constant reductions in medical facilities and services and the inadequate provision of aged care accommodation, is forcing older people to relocate to cities and larger centres, at the very stage of their lives when they most want the comforts of family, established friendships and a familiar environment. To summarise, the Upper Lachlan Shire Local Government Area and doubtless many other rural Shires, already were in a crisis prior to the advent of the global financial crisis, which has multiplied the effects already being felt by Council’s residents and ratepayers. Potential Impacts of the Global Crisis It is difficult to predict the pace and depth of the impact of the deepening financial crisis on this community. It is expected that the extent of new subdivision, housing and industrial developments will slow dramatically. Page 3 of 6 Submission to the House of Representatives Standing Committee on Infrastructure, Regional Development and Local Government on the Inquiry into the impact of the global financial crisis on regional Australia. Council in its own planning is assuming a 15% fall in revenues from fees on such developments for the 2009/2010 and 2010/2011 years. In US dollar terms, the price of wool has fallen over 60% since January 2008 despite being now at unprecedented low production levels. Wool fibre is a clean green product. It would be a calamity if the wool industry does not survive this upheaval. This now is a very real prospect. Wool is harvested only once a year for each producer, so the full effects of the market have not yet flowed through to all producers. By mid spring, prices had fallen generally to well below the cost of production and the situation has further deteriorated sharply since then.