pwc.au

1. pwc.com.au Prioritising and delivering infrastructure regionally to transform and leverages business activity locally Strictly Private and Confidential Scott Lennon, Partner, Economics and Policy July 2012

2. Agenda Page

3. Regional Growth

4. Regional Growth • Australia has had moderate GDP growth since GFC. Forecasted GDP growth in FY13 is 3% • GDP growth is likely to be achieved by 3Ps: • Population – facilitate new housing, new business activity and migrant settlements • Participation – improve childcare, create working opportunities for older citizens • Productivity – enhance road capacity, decrease red tape, consult with local businesses to fix constraints to expansion, enhance broadband speeds • Encourage local population growth & at the same time enhance infrastructure • Population growth is beneficial to regional growth as it: • increases the size of the economy, • expands the community’s skills base • stimulates demand for housing, infra & services • drives growth in investment and employment Population and employment growth Australia GDP and VIC State Final Demand (SFD) VIC SFD as proportion of GDP (%) Source: ABS 2012 1

5. Regional Growth • Historically, population growth rate in regional centres has significant variability eg....... • 2006-11 Latrobe population growth was 1.3%, which is as four times growth 2001 to 2006. • Popn growth in Bendigo & Ballarat above Victoria & national growth driven by new services & infrastructure • Strong economic growth is achievable with integrated strategy and plan • Examples include........ • Greater Shepparton City Council initiated Community Engagement Strategy with more involvement in identifying areas best suited for growth & necessary accompanying infrastructure • Latrobe City Council developed a Economic Sustainability Strategy focused on continued job creation & reducing unemployment rate, economic growth & a smooth transition to a low carbon economy. • Latrobe Transition Committee recently identified opportunities to help grow and diversify the region's industry base and labour market. These include encouraging greater participation in higher education & infrastructure to support industry growth eg upgrades to the La Trobe Airport & to Sale RAAF base , Gippsland Logistics Precinct, Lurgi Heavy industry site, the Gippsland Gateway at the Warragul Station Precinct, Sale Education Precinct, redevelopment of the Latrobe Regional Hospital, Macalister Irrigation District (MID) upgrade, extension of the NBN rollout and port development options at Hastings or other sites along the Gippsland coast Population and employment growth Graph 2: Compound Annual Growth Rate (CAGR) of local population, VIC and Australia Source: Cat. No. 2003.0, ABS 2012 2

6. Regional Growth Population and employment growth • Planners should target growth industries as they invest in new facilities & employ • Consecutive strong growth is observed in construction, retail trade and health care industry as well as arts and professional services • Regional Victoria to grow from 1.5m to 2.3m by 2051 (CAGR of 1.1%) • Popn > 60 growing faster in Mildura, Latrobe, Geelong, Warrnambool, Shepparton, Bendigo & Ballarat • Working age popn drives regional economic growth • Ageing population will have significant influences on infrastructure and services needs e.g. health facilities Graph 4: Employment by industry Graph 3: Forecasted population in key regional centres by age groups Source: Cat. No. 2003.0, ABS 2012 Source: Victoria in Future 2012 3

7. Regional Growth Regional Growth Plans • Key initiatives: • Comprehensive land use & urban planning including infrastructure to support regional population & jobs growth • Assess the growth potential, land supply,employment precincts and housing needs • Improving urban design and sustainability in growth areas consistent with Regional Strategic Plans • Provide consistent approaches to address common issues across the region Customise regional growth plans reflecting local strengths & competitive advantages. Ensure plans are.. 4

8. Approaches to analyse & forecast future infrastructure requirements to inform investment planning for new Regional Growth Plans

9. Approaches for analysis & forecasting Prioritise a growth strategy enables viable projects to be delivered with a focus on economic & infrastructure capacity in regional areas most at risk from an undersupply of resources Prioritising according to the needs 1 Understand current service level and efficiency & identify infrastructure bottlenecks 2 Develop sustainable options meeting the challenges & future community needs to support business development & regional collaboration 3 Test potential options through socio-economics impact modelling such as Cost Benefit Analysis 4 Assess affordability & develop funding plan culminate into developing regional growth plan 6

10. Approaches for analysis & forecasting Prioritising according to the needs • CBA is a socio-economics impact analysis determining the feasibility & justification of an investment. It compares all the alternative options by evaluating the total life benefits vs cost • A hypothetical CBA • Country town A has experienced traffic congestion. A CBA is conducted on two feasible options relative to a base case of no new infrastructure • Option 1: expanding the existing bridge from 2 to 4 lanes • Option 2: constructing a new highway bypass town A 7 Options culminate in Tradeoff decision between retailer interests & regional road user travel times. CBA & EIA assist in quantifying & evaluating this difficult tradeoff

11. Approaches for analysis & forecasting Target investment in key projects • Establish a robust evidence based investment planning approach for guiding capital allocation • Pursue major projects for regional growth e.g. mines, hospitals, IMT, hotels, business parks, warehouses etc • Streamlining and improving planning approvals & outcomes, building capabilities & lifting workplace productivity • Encourage innovative projects to achieve maximise outcomes and benefits local community & surrounding regions • Form strategic partnership with 3 levels of government & private sectors, for the benefits of: • Develop regional prospectus to explain strengths & growth outlook • Support investment and infrastructure delivery via private ownership and operation • Create economies of scale in the management of different funding sources • Delivery significant gains locally and transform into municipalities • Create employment opportunities by enhancing labour mobility into your region • Provides improved services and increases work participation opportunities • Develop sustainable services and integrated infrastructure linking communities into your region 8

12. Attracting new investment to regional areas To achieve regional economic growth requires detailed analysis of a regions key attributes, industry and employment base and key advantages for SMEs considering a new base Local solutions to local problem – For example.........10 Big Ideas in NSW Central West (NSW Business Chamber) 9

13. Approaches for analysis & forecasting Attracting new investment to regional areas • Embed this evidence into Regional Growth Plans setting out economic, environmental & social vision for the region including: • articulating the drivers of change • identifying strengths, weaknesses and opportunities • listing priorities for action • Riverina regional action plan – developed based on communities participation on “Have your say” website 10

14. Case Studies Bendigo as a health precinct An intermodal terminal in regional Victoria New irrigation water pipelines

15. Bendigo as a health precinct • Bendigo provides access to progressive health services & collocated Uni / medical training in Loddon-Mallee region • A investment of $630 million to redevelop the Bendigo Hospital in a public-private partnership (PPP) • The construction will commence around December 2012 and expect to be completed by 2016 • The direct and indirect benefit to communities: • Able to treat an extra 10,000 patients p.a. (double its current capacity) • First class health/medical teaching & university facilities • New staff accommodation, ambulance facility, new mental health facility including a Youth Care Service • New GP Super clinic & collaborations between government, private & NGO health service providers • Require 735 direct construction jobs and approximate 2,000 jobs in total attracting new residents • Additional 600+ FTE hospital jobs after commissioned (current hospital has over 3,000 jobs) • Reduce the needs of travelling to Melbourne for treatment • Create investment opportunities both during and post construction 12 Source: Newbendigohospital.org.au

16. Intermodal terminals & relocating railyards away from town centres • An IMT is a location for efficient and cost effective transfer of freight between road, rail and sea • The demand for an IMT infrastructure in regional Victoria is driven by increasing rail’s share of the freight demand and reducing congestion on roads • The Department of Transport partnership with local government and private sectors are planning IMTs at Dooen, Gippsland, Shepparton and West Warrnambool • Railyards in town centres can demarcate CBD & retard development. Level crossings create congestion & delays • The direct and indirect benefit to communities: • Increase supply chain productivity and freight efficiency • Support local government to achieve economic and social objectives • Provide a central location for freight handling facilities & improve service delivery to regional export industry • Deliver potential safety and environmental benefits by shifting freight from road to rail e.g. decrease in accident rate, road congestion & track noise • Improved CBD amenity & connectivity leadingto more investor & tenant interest in commercial office developments 13

17. New irrigation water pipelines • Wimmera Mallee Pipeline (WMPP) was funded by the Government partnership with Grampians WM Water • The total cost was estimated at $688 million. • Substantial private landholder investment has followed justified by reduced risk from better water security • WMPP enables long-term sustainable management of water resource in Western Victoria • The project commenced in Nov 2006 and completed in Apr 2010 within budget and on time • The direct and indirect social benefit to communities: • >85% of water was being lost through evaporation and leakage. • Improved current farm practices & increased tourism activity, recreational opportunities • Enables new business and industry investment in the WM, such as intensive animal enterprises and food packaging • Strengthening the regional economic base and encourage diversification of agriculture, grain and oilseed processing • Potential environmental benefits from pipeline water saving for regional river systems, landscape • Enhance regional sustainability from improved standard of living supporting move to higher value agricultureegbiofuel, lambs, beef feedlot, nuts, herbs, flowers, olives etc Source: GWM Water 14

18. Questions? Scott Lennon Partner – PwC Economics & Policy scott.lennon@au.pwc.com (02) 8286 2765 15