Is Tasmania really Australia’s freeloading State?

Some thoughts on Professor Jonathan West’s article in Griffith Review “What’s wrong with Tasmania, Australia’s freeloading state?”, January 2013

So Tasmania is the mendicant state, less capable even than rust belt South Australia of adjusting to a post-industrial world.

Dependency on government jobs and payments is not unique to Tasmania. Scratch any regional centre across Australia and you’ll find growing numbers and proportions of people employed directly and indirectly by government, and also supported in their unemployment or life outside the labour force by government payments. In fact, the public sector employment statistics for Tasmania are not appreciably different from any other non-metropolitan locations. For example Wagga Wagga (population about the same as Launceston) has 35% of its population employed in predominantly public sector industries , compared with Launceston’s 30% and Tasmania’s 29.9%. Even a much smaller town – Sale in Victoria, for example – has 35% employed in these industries.

Three broad drivers underly the growth in public sector jobs and government income payments.

Continuing growth of the service sector as Australia bumbles up the ‘development ladder’, meaning that we value and pay for ever-higher levels of services in health care, education and social services. National jobs forecasts have consistently tagged health care and social assistance as the source of the greatest number of new jobs for years. Over the next five years that industry alone is expected to account for some 323,000 new jobs nationally, around one quarter of all new jobs . So the shift in Tasmania’s employment in this direction reflects its keeping pace with national trends and aspirations, not that it is drifting into becoming a community of spongers.

The second big driver is the rapidly growing number of Australians in or approaching retirement, living on a combination of their own funds and government payments and subsidies. NATSEM tells us that average wealth for the baby boomers in this group varies widely – with the wealthiest quarter’s wealth almost 20 times that of the poorest quarter . Tasmania has a large retiree population (16% over 65 years old), but again the proportion is not out of step with the Australian average, and is significantly less age-heavy that the sea change retiree communities on the mainland’s east coast (26% for the NSW Sapphire Coast south of Sydney). Tasmania’s east coast itself mirrors this grey haven quite nicely too, despite the chillier water temperatures for the Swansea icebergs out there. Tasmania may have more retirees drawing pensions, but it is the wealth mix that is the issue here, not just the number of older Tasmanians.

The third big driver is the flip side of the current resources boom, which is the steady shift in domestic economic activity from extractive industries and minerals processing towards the tertiary and higher services sectors. Well chronicled by many, Ibisworld’s Phil Ruthven is a great crusader on understanding the strength and implications of this restructuring. In Tasmania, the intensity of this has been greatly exacerbated by the artificial government-led public investment in mining, logging and energy intensive minerals processing. “Electric Eric” Reece borrowed from Canadian experiences to drive the hydro-industrialisation in Tasmania that enabled the growth of mighty factories for the likes of Comalco, Ti-Oxide and Electrolytic Zinc. Global competition, market changes and review of local policies have led to most of these disappearing, with those remaining employing a small fraction of the workforces of their heyday. The artificial run-up of employment dependency on these businesses in the name of economic development has left Tasmania with a much bigger crash to work through as that bubble steadily loses air.

Rather than complacency underpinning Tasmania’s ‘malaise’ it is more that Tasmania’s external challenges have swamped the jaundiced economy and muted its ability to adapt. In discussions with small business owners from around the State as part of preparation for the State’s Economic Development Plan, it was very clear that far from cosy complacency, these business people are looking for a way forward for their own business in a very challenging economic environment, facing competition from across the nation and overseas, and a sometimes fickle customer base. These are not necessarily bad things overall, as the businesses that work their way through them can remain strongly competitive. But many said they were barely hanging on after a series of difficult years, desperately looking for ways to adapt, for new products, services or markets and ways to reinvigorate their staff and their business.

Professor West is clearly worried about the lack of a ‘personal stake in economic development’. While it’s true that there is nothing like personal interest and a bit of ‘skin in the game’ as the venture capitalists like to say, antipathy amongst the populace does not mean that poor decisions are inevitable. Put another way, is lack of lobbying really a bad thing? Perverse outcomes sometimes arise from effective lobbying combined with poor understanding of complexity by policy makers, advisors and ministers.

So what is the right role for government and government policy in Tasmania’s economic development? Is it an Abbott style ‘development of the north’ but down south? We had that in Tasmania for two glorious decades from the mid 1950s to the mid 1970s. It was great while it lasted, but governments and politicians are lousy at picking winners and at managing change, with inbuilt controls that seem to work to resist change, desperately wanting to maintain a crumbling status quo. How much more inventive and creative could the Tasmanian economy have become by now without the persistent subsidy and policy support for those dinosaur industries? The profits were taken during the good years, and once again it’s been left to the community to mop up afterwards.

Recent OECD reviews of what drives regional economic development highlight the importance of getting the mix and sequencing right of major changes in areas like infrastructure, competitiveness, education, human capital and innovation, with experiences showing that if balance is not maintained (ie if there’s a strong push towards education without the jobs being there for those being educated) then the initiatives can have a negative impact – more population drain, for example.

Professor West is quite right to emphasise again that people matter. Putnam in 1993 described the importance in regional development of the enfranchisement of people, and their ability to influence the world about them. But Professor West is pessimistic about the people, clearly seeing a blanket of comfortably numb underachievement lying heavily over the people of Tasmania.

It could be, though, that in Tasmania’s case it’s not that people don’t care. In fact it is clearly not the case that business people don’t care – manifestly the opposite. And shared values have been well articulated in the Tasmania Together process. If implementation runs aground on shoals of NIMBY-led disagreement, then perhaps it’s time to empower people and communities, not just to endlessly consult them and not let them follow through. Tasmania’s small business owners are certainly full of ideas and are strongly motivated to act.

Dr Kim Houghton
Director, Strategic Economic Solutions
1 March 2013

The comparison used here is total employment in 2011 in three public sector dominated industry classifications: Public Administration & Safety, Education & Training, and Health Care & Social Assistance. This is a consistent measure across different regions as opposed to an entirely accurate measure of government direct and indirect employment. The definition is always tricky – are Australia Post jobs public sector? Using these three as a proxy both misses and adds some jobs. It misses government contract jobs in other industries (cleaning or security, for example) while also inadvertently including the private sector employment in these predominantly public sector industries – ie there are many private education and health providers .
Australian Jobs 2012, DEEWR
AMP-NATSEM Income and Wealth Report 16, 2007

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