A New Economic Direction for Tasmania

David Bartlett Premier

There’s a Saul Eslake quote that I have had pinned to my office wall for a few years now and it goes something like this:

“… Tasmania’s future cannot possibly lie predominantly in the volume production of essentially unprocessed commodities at lower prices than competitors with better access to larger and cheaper resources of labour and capital, or better access to markets; but, rather, depends on its capacity to produce and market highly-differentiated goods and services embodying a high intellectual content and for which customers are willing to pay premium prices.”

He’s saying we need to shift further away from being a traditional commodity-based economy to a modern innovation-based economy and I, for one, tend to agree with him. Of course, big energy-intensive industries, together with resource extraction-based industries, will remain a significant part of the Tasmanian economy going forward. On that note, I support the pulp mill proposal as a way for Tasmania to convert a low-value commodity into a higher-value commodity.

A New Economic Direction for Tasmania

Acknowledgements:

Michael Kent – TCCI President

Ron Ward – TCCI Vice President

Introduction

It’s a pleasure to be here tonight to address you on Tasmania’s future economic direction.

I’ve been looking forward to speaking with you because a strong, vibrant and diverse economy is central to my view of where Tasmania needs to be in the next ten years. And, as you know, the Tasmania that I want to see in the next ten years is one that is clever, kind and connected.

So tonight, I want to start a conversation with the business community about some of the biggest challenges and opportunities that face Tasmania for the next decade. A conversation about how the business community and the State Government can work together to maximise employment, investment and development in areas that will help underpin the state’s long-term growth. A conversation that draws a line over the last decade of stellar growth and gains we have seen and focuses on a continuation of the transformation of our economy for the next decade.

Strength In The Economy

I want to see more Tasmanians employed and to see our economy growing to support families and give them security.

I want to see a growing economy grow our participation in the workforce, the productivity of our industries and the population of our state. In turn, I want to see increasing participation, productivity and population grow our economy.

I’m here to share my views on how we can position Tasmania to continue to outperform the national economy in the years ahead.

The Past Decade of Growth

There is no doubt that since 1998, Tasmania has undergone an economic transformation.

We’ve seen 41,200 additional jobs created.

We’ve seen our state economy improve from being the weakest to the fastest-growing in Australia.

We’ve seen our unemployment rate cut from 10.2 per cent to 4.2 per cent.

We’ve finally brought our jobless rate down to the national average.

We’ve seen Gross State Product grow by more than 20 per cent on a per capita basis.

We’ve seen business confidence rise to levels previously thought unattainable.

We’ve seen business investment grow by more than 75 per cent.

And we’ve seen our population grow by 23,700 people – roughly the equivalent of the entire population of the City of Devonport.

We will soon welcome – either at the Spirit of Tasmania terminal or at a maternity ward – the 500,000th Tasmanian.

Business and Government working together on shared goals have served Tasmania well over the last decade.

As many of you know, I spent two years of my career as Chief Advisor to former Treasurer Dr. David Crean and one of the strongest lessons I learned from that time was that we, business and Government, must develop detailed plans and attach aggressive targets to those plans if we are to achieve the outcomes in our economy we desire.

The reforms that have been implemented over the last decade have turned Tasmania around. We have worked as a community to achieve much but there is still much to achieve.

In the late nineties, we set about developing a clear Fiscal Plan that is now paying dividends in the strength of our state finances. We made our tax regime the most competitive in Australia, we eliminated State Debt and we have managed recurrent spending in such a way that we can now afford to invest more in infrastructure for the future.

We also developed and implemented a critically important Energy Plan, incorporating Basslink, gas supply and wind, that now not only strengthens our energy supply but strategically positions Tasmania to realise significant opportunity in a carbon-constrained world.

Together, we also put in place a clear Industry Development Plan commencing with the most comprehensive set of industry audits ever conducted in Tasmania. The plan that emerged was about plugging the gaps and fixing the issues that had bedevilled our economy for decades. That plan is now bearing its fruits.

But I believe the community has long since collectively ‘banked’ the improvements that these plans and the resulting strong economy have delivered.

The Next Decade’s Challenges

There are tens of thousands of young people working now who were in school when Tasmania’s economy was on its knees. Back then – with double-digit unemployment – it was demand, not skills and labour, that was acknowledged as the biggest constraint to business growth.

These factors alone mean we need to develop and implement new plans to ensure we are providing a contemporary framework that will underpin another decade of growth. Just as we did a decade ago, we now need to take stock and re-evaluate what will work for us into the future.

Now it’s time for me, as the incoming Premier, to articulate plans to continue the transformation of our economy.

The macro challenges of Climate Change and Demographic Change together with uncertainty in world markets will set the scene for our work ahead.

I believe it is now time to draw a line over the gains we have made for the last 10 years and turn our attention to the decade ahead.

How will a future Premier in 2018 describe the preceding ten years of Tasmania’s economic performance?

There’s a Saul Eslake quote that I have had pinned to my office wall for a few years now and it goes something like this:

“… Tasmania’s future cannot possibly lie predominantly in the volume production of essentially unprocessed commodities at lower prices than competitors with better access to larger and cheaper resources of labour and capital, or better access to markets; but, rather, depends on its capacity to produce and market highly-differentiated goods and services embodying a high intellectual content and for which customers are willing to pay premium prices.”

He’s saying we need to shift further away from being a traditional commodity-based economy to a modern innovation-based economy and I, for one, tend to agree with him.

Of course, big energy-intensive industries, together with resource extraction-based industries, will remain a significant part of the Tasmanian economy going forward.

On that note, I support the pulp mill proposal as a way for Tasmania to convert a low-value commodity into a higher-value commodity.

Jobs will remain in the resource-extraction industries and those sectors will continue to make a significant contribution to our Gross State Product for decades to come.

In fact, a recent study conducted by Dr. Bruce Felmingham into major industry in Tasmania shows that five of the businesses making up the Major Employers Group (Nyrstar, Rio Tinto, TEMCO, Norske Skog and Zinifex) accounted for 12% of Tasmania’s Gross State Product and 46% of Tasmania’s exports interstate and overseas.

However, it is my assertion (and I think Eslake’s) that we cannot and should not rely on jobs growth coming from those sectors. And we should not necessarily rely on export growth from these sectors either.

In fact, the Felmingham report also concludes that the businesses that make up this group are almost exclusively price-takers, operating in volatile and unpredictable markets.

You may be surprised to hear that jobs growth in Tasmania over the past decade has not come from those sectors.

The University of Tasmania quotes ABS figures that 75 per cent of the almost 16,000 new jobs created in this state between 2002 and 2005 went to university graduates. This is a trend we can expect to see continuing to strengthen.

Now is the time for us to be planning the way forward by identifying future demands, future opportunities and developing the strategies that will best build our future capacity to take advantage of these future opportunities.

Ten years ago we, commenced the transformation of our economy. The challenge now is to complete that transformation to meet new challenges and take full advantage of the opportunities ahead.

It’s a challenge I’m looking forward to.

If the last ten years was about getting the fundamentals right, the next ten needs to be about connecting Tasmania to a modern 21st Century global economy. Such an economy requires, first and foremost, much higher standards of educational attainment than Tasmania has historically been able to achieve.

We know from OECD figures that for every year we add to the average level of school attainment for Tasmanian youth, we will add 8% to productivity and up to 2% to Gross State Product.

We know that increasing participation in the workforce and the productivity of those workers is directly linked to levels of educational attainment. That is why I chose to be the first Premier in 50 years, since Robert Cosgrove in 1958, to retain the Education and Skills portfolio.

Central to any economic plans we have must be the improvement of the education and skills of all Tasmanians.

Central also to our plans for the future must be a clear and considered debate about energy security and opportunity for Tasmania.

In a carbon-constrained world, we must consider carefully not only the opportunities that we can access with our largely renewable energy resources but also the opportunity cost of continuing doing things in the same way we always have.

Historical context

To comprehend the future, I believe we need to understand the past. Some sort of historical context must inform our direction.

I’m not talking just about the last decade but about the history of development in Tasmania dating back 50 or more years.

I spent 4 years of my career in the development of innovation, science and technology sectors in Tasmania and as the Executive Officer to the Tasmanian Innovation Advisory Board.

I used to use this little homily to try to illustrate the importance of the work I believed we were doing.

From memory, I got it from the late John Button – who you would all know as one of Australia’s greatest industry ministers – and I was pleased to know as a mentor, friend and board member of the Tasmanian Innovation Advisory Board.

John used to say…

the first one hundred years of US history were about who could run the biggest farm, that’s how wealth was created. The second one hundred years were about who could build the biggest, most efficient factory. But the third one hundred years, which started in 1976 in the US, of course, will be about who can have the best ideas.

How do we put this wisdom in context for Tasmania? With due respect to the 40,000 years of aboriginal history that has come before us, perhaps we could say the first one hundred years of Tasmanian history was about farms and prisons.

That’s how we created wealth. The second one hundred years was definitely about resources: wood, water, wind and metals. That’s how we have created wealth for ourselves and will continue to create some of our wealth for many decades to come.

But to create growth for the decades to come, knowledge, skills, information, innovation and creativity, or as Button would say ‘ideas’, will need to drive much more of our growth than ever before.

Looking back at Tasmania’s post-war industrial development, we can see it was based on a narrow economic strategy based largely on hydro-industrialisation.

That’s not to be interpreted as a criticism of hydro development. On the contrary, through control of power prices to major industry, we attracted a range of private investments that have been the backbone of their communities and the economy. Over the decades, they have employed thousands of Tasmanians and played an important role in driving growth.

Every Tasmanian family, every Tasmanian post-war immigrant and every Tasmanian worker over the past six decades of Tasmanian history understand the importance of Hydro industrialisation – the dams, the poles, the wires and the industries that it brought to our shores.

Previous Premiers, Ogilvie, Cosgrove and particularly Reece would have rightly stood in the equivalent business forum of the day and trumpeted the successes of Hydro industrialisation.

However, this Premier accepts that for the next fifty years of Tasmanian history, we will only realise our full potential if we educate our community to the highest levels possible, if we reconsider our use of the renewable energy that we produce and if we invest in new infrastructures such as optic fibre and flexible, low-emissions transport.

History tells us we need to keep adjusting our economic sights or we are left exposed.

Key challenges – Demographic Change

Looking ahead, I see some key challenges for Tasmania over the next decade and beyond. We need to prepare for them and factor them into our thinking.

Demographic change, like climate change, is real.

To put this into proper context, if Tasmania were a country, current projections indicate that by 2050 we may have the third-oldest population in the world behind Italy and Japan.

The Tasmanian population is ageing faster than the rest of the nation. It presents challenges to government in terms of providing public services, particularly in health and education. There is likely to be a higher dependence on hospitals as we live longer.

Conversely, falling enrolments will force us to consider closing some schools. I believe we will need about 30 to 35 fewer schools by 2018.

The government will need to look carefully at how we provide more of the services that are increasingly in demand whilst managing on tax revenues from a reduced percentage of people in the workforce.

We will need to do more with less.

A focus on the key goals of raising our productivity, our participation and our population come even more acutely into focus when we consider them in the context of demographic change.

Key challenges – Climate Change

I’m also a realist about climate change.

Taking serious steps to tackle the problem will have economic consequences.

The challenge for business – and Government – is to respond, adapt and innovate.

We must also be realistic – Tasmania is responsible for 1.5% of the nation’s total emissions, and, in turn, Australia accounts for only 1.2% of all global emissions.

We must realise that while it is important to show leadership and adaptability, by the time we meet our soon-to-be legislated target of 60% reduction of 1990 emissions by 2050, we will not have saved the world alone.

However, for all the threat we see in Climate Change and Demographic Change there are also significant opportunities for our island state.

I see a great opportunity for Tasmania to benefit from a national emissions trading scheme through our generation of renewable energy. Professor Garnaut certainly recognised this in his recent report.

Unfortunately, with free permits on offer to coal-fired power stations under the Federal Government’s Green Paper proposal, the positive impact of this opportunity for Tasmania and, indeed, for Australia may be diminished from Garnaut’s position.

The Hydro and its subsidiary, Roaring Forties, are positioned to be one of our greatest knowledge exports for the coming decades, with a sharp rise of investment in renewables across the globe.

Our geographical position in the Southern Oceans and proximity to Antarctica increase our ability to attract research capability here. By building on our already-strong research capacity in this area, we can not only connect Tasmania to the world, we can start to see science and research as a key sector in a growing economy.

Further opportunities will present themselves in key agricultural areas such as wine and dairy.

Research tells us that climate change will present significant issues for major wine-growing regions of the world, making the relatively lesser changes in Tasmania’s climate an ideal attractor of further investment and massive expansion of this sector.

The Climate Change Framework that I recently released includes many initiatives that look for opportunity, particularly in our innovative, high-value agricultural sector.

Key challenges – Energy Security

Energy security is another key challenge for Tasmania, directly related to climate change.

Logically, drought conditions harm our ability to generate hydro electricity.

Most of our major storage dams have hovered at less than 20 per cent of capacity for the last couple of years. The challenge is exacerbated considering the demands for more energy created by a growing economy and population.

We will need to aggressively look at expanding our investment in alternative means of generation, such as wind power. In the context of rising energy prices, it will be a challenge to maintain the heavy industrial base which has underpinned the Tasmanian economy for much of the last century.

Reform Agenda – Micro Economic Reforms

This new Government will be a Government characterised by a strong reform and improvement agenda.

There are four areas of reform and improvement that I want to touch on this evening.

Firstly, economic reform.

Future growth will depend on having the fundamentals of our economy in check. And that means continuing with reform of the things that underpin our economy.

The demand on water and sewage services, for example, will continue to grow. Tasmanian councils have struggled to maintain and develop the infrastructure required to underpin new development.

So it is that the Tasmanian Government has now entered into an agreement with local government to assist in the provision of these key services that will see hundreds of millions of dollars of investment in the coming decade.

Tax reform is another issue that I know is dear to the heart of the business community.

Of course, Government needs a tax base to be able to provide the services the community properly expects. Those expectations will only continue to grow into the future.

Many of you will be aware that the Government is currently involved in negotiating a new wage deal for state public service employees. Unions have rejected our offer, which equates to a pay rise of 20-29 per cent for those people occupying around 11,000 full-time equivalent positions.

It’s a generous offer – many of you would argue too generous.

I’ve made it clear that this is the very best offer the Government can afford – and it will be the final offer.

I lead a Labor Government and I do recognise that people are our greatest asset and they need to be paid fairly. But I am not prepared to compromise our financial and economic strategy to make a political problem go away. I am also conscious of the impact public sector wages have on salary demands in the private sector.

The public sector wage negotiations are a good example of the competing demands on the public purse.

But I am willing to talk with the business community to examine what opportunities there are for further reform. That discussion needs to acknowledge that Tasmania’s taxation regime has already undergone significant change over the last decade.

We have changed from being one of the highest-taxing states to among the lowest.

Having said that, my mind is not closed to further reform. As you may be aware, the Treasurer announced in the Budget about six weeks ago that a top-level reference group would be formed to examine red tape and taxation reform.

This group’s aim is to liaise with the Government and business and then provide feedback on reform proposals. I encourage you to get involved in this process to ensure your views are represented.

Let’s have the debate. But there will need to be new arguments on both sides.

As Planning Minister as well as Premier, I recognise that our planning system needs to function effectively for developers and for the broader community. It needs to respect the views of the people at the same time as giving those with ideas to generate jobs and wealth a fair opportunity to have their concepts tested.

This needs to be done in a timely fashion.

It cannot be left open-ended. There must be certainty and clarity. I want to enable growth by having a consistent approach to regional planning. That’s why we are funding three regional planning projects and reviewing the planning system.

Good planning should act as an enabler to the best developments and a filter for those not up to scratch. It should not present a series of road blocks to those proposing to invest in our state.

I also have a view that, at local government level, we need to be working together as regions rather than individual councils. I intend to breathe new life into our partnerships with local government, particularly at a regional or multi-council level.

I am encouraging councils to get together and come to the State Government with proposals that benefit their wider geographic regions rather than just a single town or municipality.

Already, I’ve put money on the table for councils that want to work together with the State Government to develop a new network of cycle paths. It’s a small-scale example of the approach I want to foster.

Reform Agenda – Education Reforms

Education reform is also fundamental for our future.

Our post-year 10 qualification rates are much too low to build the diverse, value-added and innovation-based economy the future will increasingly demand. We must foster a belief in education as a means of growing our skills base and our economy. The TCCI has a role to play in this.

As Premier, I see education as a key economic portfolio. The Student@theCentre reforms to education, together with the additional $70 million we have put into literacy and numeracy and our Early Years programs are the building blocks.

We know that 86 per cent of jobs in Australia today require a post-secondary qualification. That figure will only increase over time – and we need to adapt our approach to ensure Tasmanians are skilled to meet the demands of the modern workplace.

The Tasmania Tomorrow reforms will mean more young and mature Tasmanians will be able to take a course that meets their aspirations and suits their learning style.

Three new organisations will be created from our senior secondary colleges and TAFE Tasmania, each focussed on a specific role.

The Tasmanian Academy will focus on academic learning, with a curriculum and academic pathway for Year 11 and 12 students seeking university entrance. It will be chaired by Kim Boyer.

The Tasmanian Polytechnic will be geared towards practical learning, with a vocational pathway, supported by academic courses as well, for year 11/12 and mature students seeking employment outcomes or university articulation. Dr Mike Vertigan will be the chair.

And Training Tasmania will focus on skills development for employees in enterprises, in-line with their enterprise’s skills needs. Dr James Cretan will be the chair.

Leaders from business, education and the community will be appointed to each of the boards. We are bringing school and work closer together for the benefit of employers and prospective employees.

Reform Agenda – Role of Government

Thirdly, we must reform Government and democratic engagement. That is why my first act as Premier was to commit to establishing a Parliamentary ethics body.

Rightly or wrongly – there is a perception among some in the community that transparency, accountability and adherence to good process have been lacking within the State Government sphere.

I see one of the vital roles in my new job as Premier as addressing the perceptions and reality, where it exists, of secrecy.

We need to let some sunshine in on government decision-making.

Greater openness and transparency within government can only benefit business. Confidence in government processes will encourage private investment. I have re-instituted an ongoing series of community forums around regional Tasmania. This is taking the entire Cabinet and the heads of government agencies out of Hobart and into the towns to meet real people living in the real world.

It’s about keeping our priorities in tune with community expectations.

I want to encourage a debate of ideas and create a culture where people feel able to participate without fear or intimidation.

Recently, I attended my first COAG meeting as Premier. I want to use the opportunity of sitting around the table with the Prime Minister and the other premiers as a chance to deliver for Tasmania.

One of the first big opportunities I see is emerging carbon trading scheme proposals. Given Tasmania’s high contribution to the generation of renewable energy, I want to ensure we benefit properly from a national emissions trading scheme.

I am determined to make sure Canberra properly recognises our contribution to the generation of clean energy. And I want to ensure that we benefit properly from the financial rewards. This will lead to massive opportunities for new investment and development in Tasmania.

Reform Agenda – A New Economic Plan

Tonight’s speech is the first in a series that I will make over the coming months that will start to flesh-out in more detail some of the ways forward in facing our challenges and making good our opportunities.

Over the coming weeks and months, I want to work with the Tasmanian business community and senior Cabinet ministers to develop new plans for Tasmania’s economic direction.

These plans will underpin our growth for the next decade.

Tasmanian Skills Strategy

We are already well underway with developing the Tasmanian Skills Strategy and it will be released later this year.

The strategy will bring together all those activities occurring across Tasmania to raise the level of skills by government, business and the community and then place them in a strategic framework for now and into the future. The framework has been built around the three primary drivers operating in all economies: population, participation and productivity.

Following extensive consultation with industry, our state will be in the unique position of understanding more clearly than elsewhere in the nation how our skills initiatives, in operation or development, are underpinning sustainable economic growth.

The Tasmanian Skills Strategy is absolutely critical to the future of the Tasmanian economy. More than placing the State’s current and developing initiatives to raise the level of skills in a strategic framework, it allows – for the first time – a detailed analysis of where our effort as a state can be maximised.

It will provide an understanding of what lies ahead: more people leaving the labour market than entering it within two years; and more elderly than young within seven years.

As the Tasmanian Skills Strategy is further developed, an even clearer path will be plotted to tackle these dramatic and inevitable changes in our community and ensure the skills of Tasmanians will support a continuing, prosperous economy.

But to fully flesh-out a new plan for our economic direction there are still a number of missing pieces of the puzzle.

Innovation Strategy

I believe also we need to develop a comprehensive Innovation Strategy for the state.

Such a strategy would identify the opportunities available to us through an increased investment in innovation – in both our traditional sectors of economic strength and emerging sectors. It would identify the key roadblocks to increased innovation in key industry sectors.

A good example is Haulmax, an innovative company that has moved its operations from Queensland to Tasmania’s North-West Coast. The move was principally because of the network of innovative small businesses in the North-West that could augment Haulmax’s own operations.

As a result, Haulmax will now use Tasmania as the base for manufacturing its specialist trucks for the mining industry which sell for around $1.5 million each. Haulmax represents a fantastic new investment – and new jobs – for Tasmania on the back of our emerging culture of innovation.

It proves the point that innovation breeds innovation.

The way forward for our state lies in focusing on those industries that are most likely to deliver the biggest benefits for the Tasmanian economy. That means planning our accelerated expansion into sectors like information and communications technology, advanced agriculture, aquaculture and tourism.

I want our development to be underpinned by an Innovation Strategy that targets the richest opportunities.

Ten-Year Infrastructure Strategy

We also need much more certainty and clarity in the planning for both traditional and emerging infrastructure. I believe we need to develop a Ten-Year State Infrastructure Strategy that clearly underpins our economic direction.

Investment in optic fibre telecommunications is a good example of infrastructure that we must plan to invest more in. I am confident our investment to date will start to pay dividends soon.

Low-cost, high-speed telecommunications will become even more critical to how we create wealth for the future. The emerging opportunities are vast.

I see the development of a competitive broadband market as central to the future of the Tasmanian economy as hydro development has been to our past.

The optic fibre investment is the modern equivalent of our dams, poles and wires. Just as Hydro industrialisation did decades ago, our optic fibre network will deliver prosperity now and for future generations.

Developing our water infrastructure is also critical. We need to better capture our rainfall and use it to benefit the economy. It’s critical that we invest in new irrigation and water storage systems to make the most of our natural advantages. This will be a key sustainable strategic advantage for us in coming decades.

Development of our transport systems must also figure prominently in Tasmania’s direction. Ongoing fuel price rises will demand a new look at how we move goods and people. The relationship between road and rail will need to change to increase efficiency and drive productivity.

Public transport will need to evolve well beyond the Metro bus fleet. We need to be planning for all these infrastructure investments and they must clearly underpin our economic direction.

A Ten-Year State Infrastructure Strategy will be informed by the key growth sectors and opportunities identified in the Innovation Strategy. We will want to work with the business community on developing these strategies.

I will provide you will more information in the coming weeks and months on how we will achieve that.

These three key strategies in skills, innovation and infrastructure will underpin our economic direction for the next decade.

In Conclusion

In conclusion then, I believe we need to draw a line over the last ten years of economic growth and start planning and acting for the next ten years.

We need to continue the transformation of the Tasmanian economy.

We need to drive productivity, participation and population in Tasmania through planning a new economic direction that incorporates raising our skills levels, investing in innovation and building infrastructure that drives economic growth.

This Government will be pleased to take the lead in the debate on how to achieve this.

It will also require your input.

As I said at the outset, this is the start of a conversation with the business community and I thank you very much for the invitation to address you tonight.

This is an exciting challenge that will determine the quality of life of future generations of Tasmanians.

I look forward to working with you to get it right.

Thank you.

David Bartlett