The Tasmanian economy has almost reached the point where it will be forced to change from a past era of relying on polluting industries that rely on cheap electricity with little regard to the environmental damage they cause. Many Tasmanians seem to want a clean, green and clever community. But that is yet to eventuate. Tasmania is in transition and the data shows it is still yet to move from a dirty, brown and dumb community. The Commonwealth government understands there is a problem both in terms of the budget and jobs in this state. Soon a deal will be finalized to move away from logging old growth forests that has been done since early settlement in Tasmania. The Commonwealth government clearly sees the need for Tasmania to diversify its economic activity and take advantage of the current push for regional development. But is this state ready to step up to the challenge of supporting new economic activities and allowing new entrepreneurs into the many opportunities that this state has to offer. I can see that a considerable amount of economic planning work needs to be done before Tasmania is ready to entice new economic activity and take advantage of the Commonwealth money available at this time.
You will always have the doom and gloom people exaggerating the difficulties. Some get so pessimistic that they think the sky is going to fall in and they are preparing for a subsistence lifestyle. We have had people saying things like Tasmania will become an old people’s home in a native forest and then Dr Julian Amos saying Tasmania is at risk of “withering and dying” unless change occurs. Well Dr Amos is a botanist after all. Indeed doing a survey of people that do not know what to do is also not the solution. The Premier has also been a bit melodramatic with a statement that there is no more hay left in the barn. That is not a very technical statement.
It is important to recognize that Tasmania is not yet clean, green and clever. This is still rhetoric and people believing their own media releases. Very little has been done so far to introduce Environmentally Sustainable development. There are still some dirty industries here because of the large discounts they get on electricity. There is still a battle going on, taking up otherwise important resources, to protect the old growth forests and prevent the pulp mill being built. Tasmania is certainly not clever if you look at the levels of educational attainment as a measure. The state has 2/3 as many graduates as Victoria in its workforce. It has a retention rate of 64.8% of student going on to year 12 compared with 74.5% for the nation and only 49.3% of Tasmanians between the age of 15-74 are literate enough to operate in today’s society. And so Tasmania is starting from a long way behind. So while I agree with Saul Estlake that education has to be an important priority it could take 5-10 years to work through the system into the workforce. Only around 10% of the Tasmanian workforce currently produces things that can be sold into Australian and overseas markets.
Too Much Pessimism
I am quite sure that the economy of Tasmania will only get stronger over the next twenty years because it has such strong yet untapped and potential economic opportunities. I have led many corporate planning sessions for large corporate entities and one of my favorite sayings is when the going gets tough the tough get going. Sometimes it does not hurt to have a few challenges as it focuses the mind of those that have the potential of coming up with answers.
It first has to be recognized that Tasmania needs a more diverse economy. This was mentioned by the Prime Minister, Julia Gillard when she was here most recently and she and her government are willing to direct considerable funds to this issue. But how do we diversify our economy. Nearly all of the papers written by the government and commentators have only listed out the industries that we already have such as fish farming, cherry growing, wine making and tourism etc and how we might grow those industries. Even the papers on innovation focus in on those industries that we already have. That probably is because the task of diversifying our economy is a much harder venture and we have to re-establish the discipline of regional economic development and to think back about successes and failures in the past in this sort of economic planning.
How does Tasmania Attract New Entrepreneurs and New Economic Activity
There is a long history of countries trying to get economic activity and industries out into the regional areas. Economic activity has a tendency to be draw to the large cities such as Sydney and Melbourne in Australia’s Case. However there are disadvantages with having too much activity in one place. There is more pollution, traffic becomes congested and land prices skyrocket.
There have been lots of theories and policies about how to get economic activity spread out across nations. Economic geographers and planners have been at the forefront of this work rather than economists. In the 1950’s an 1960’s it was thought that tax breaks, the provision of infrastructure, access to markets and the availability of skilled labour were the drivers.. Industry incubators and seed beds were tried. Then in the 1990’s it was decided that industries looked for the advantage of clustering together as in the making of cars were the brake makers and engine producers located with the car factories. Then in 2002 a person called Richard Florida developed the idea that urban and economic development followed the “creative classes”.
Then in Australia there was a move to decentralization out to regional areas like Aubrey-Wodonga and Bathurst-Orange. That did not work well because Australians do not like living away from the sea and while the workers would move there the bosses and manager would not move as they could not display their wealth like they could in say Sydney. More recently the NSW government has had a policy of not allowing big subdivisions around places like Taree to develop unless they made available a significant parcel of industrial land.
But Tasmania is different. Recently the Bureau of Infrastructure, Transport and Regional Economics (2008) prepared a large document (334 pages) called A Regional Economy: a Case study of Tasmania which concluded that Tasmania has a very different and complex economy and it did not come up with clear strategies on how to move forward.
Now remember there is only so much that can be done by extending current industries like wine making or fish farming. What Tasmania has to do is diversify its economy so if there is a problem in one market area the state will not die. So here is a list of what I think Tasmania should do:
• Try and attract more people to live in Tasmania
• Try and specifically attract entrepreneurs to come because of the opportunities and lifestyle in Tasmania.
• Insure that the infrastructure is seen as very efficient.
• Improve productivity to match the other states.
• Improve the level of skills in the workforce
• Take advantage of the current Commonwealth Government political circumstances concerning spending money in regional areas. All of Tasmania has been classified as a regional area and there are large amounts of money set aside specifically for such purposes.
• Tasmania will soon have the fastest internet in the world via the NBN. This means businesses from around the world that only need to have good communications with their clients and markets can come to Tasmania.
• Encourage companies that develop computer based services in such fields as education and health to come to Tasmania.
• Encourage small entities to come together to market their products internationally.
• Bring about more marketing of the opportunities and the lifestyle to people in Australia and around the world.
• Improve the planning system to make the development of economic activities more efficient.
• Introduce a land supply agency that can co-ordinate and be proactive in developing industrial land.
• Discourage the group of people that want to do nothing in terms of development in Tasmania
• Educate people to understand that you can have sustainable industries and economic development along side of eco-tourism and protecting the environment.
• Open up the debate about diversifying economic activity in Tasmania.
There are a couple of other important points to be made. There is a serious problem with the lack of co-ordination of regional development in Tasmania and lack of resources being applied. There are three groupings of local councils that have units working on regional plans. The southern group has produced a detailed and effective plan. The north and north western units have produced strategies that are very descriptive and fluffy without clear directives on the way ahead. Then in addition to this there is the Commonwealth Government group called the RDA (associated with Minister Simon Crean) that is supposed to be co-coordinating requests for Federal money for regional development. This group has a board supervising it but it has been poorly resource with people having to volunteer their time for it and hence it has had non-experts on it with people more interested in the provision of social services. This situation needs to be remedied very quickly if Tasmanian is not to miss out on the large amounts of Commonwealth money going to regional areas. In addition the Commonwealth government should be helping the small state of Tasmania with research and advice on how this state can diversify its economy. At the moment the Commonwealth is standing back demanding that the state does things otherwise it will not receive funds. It would also seem that the Commonwealth government is giving out significant grants to entities in Tasmania without any cognizance of regional planning and development.
The Governments Role
The Tasmanian Government has to be very careful about its role in the diversification of the State’s economic base. It is most important that the bureaucrats do not try a have the government assume the role of entrepreneur. In my experience bureaucrats are not good at judging business opportunities, managing risk and directly operating a workforce. The Government must not try and pick economic winners. Its role is to ensure that it clears the way and that there are the least possible impediments to economic activities starting up. It is responsible for making the place conducive to investment and to tell the world how good a place Tasmania is as a place to invest, work and live. The Government must not get in the way of those that want to invest in this state. It must ensure that it focuses on what is core business for state governments before it gets involved in esoteric matters that happen to be of interest to elected politicians. As I have mentioned before Tasmania has a very small population, the size of four local government areas in Melbourne. First and foremost the government must ensure that there is good infrastructure and services and taxation levels are equivalent to the other states.
On another issue, many of the strategies that the government is seeking to put into place may not come to much other than the infrastructure and transport strategies. They contain mostly description of what is and the rest is like a marketing pamphlet with a lot of fluffiness. Strategies can sometimes be what you produce when you do not know what else to do. I do not think the proposed Economic Strategy will change the world as such reports quickly become out of date. Remember the Industry Plan produce a few years ago. The state budget should be the economic plan. New economic activities will not follow a government plan but will take their own particular course as entrepreneurs make their decisions.
The Private Sector’s Role
The private sector has a very important role to play in making Tasmania a better economic environment. The business community and existing entrepreneurs probably have to lift their game and provide good customer service to new economic ventures. Existing businesses may have had it too good for a long time and made a lot of money and now are a bit lazy in terms of what they put back into the community. The private sector should not sit around blaming the government for it is not the state’s role to run business.
Wrap up
So the bottom line is that Tasmania has to have a more diverse economy in to the future as the old dirty and unsustainable industries close down. That is not just going to happen by itself. The state has to be sold to the world as a good place to operate, with good services and an attractive lifestyle. Tasmania has to have many more people in the workforce producing product for the Australian and global markets. The Government’s role is to get its core business in order and then attract entrepreneurs to set up their businesses in this great state.
(References can be supplied if people want to see them)
