What Research Reveals: Pathways to More Prosperous Regions

1. What Research Reveals:Pathways to More Prosperous Regions Presentation to Regional Perspectives 2006 Regions are Big Business Bureau of Transport and Regional Economics Professor Andrew BeerAndrew.beer@flinders.edu.au&Dr Terry Clower Tclower@unt.edu

2. Purpose • Using regional cities as an indicator of change within the Australian economy and system of settlement • Cluster analysis as a tool to understanding change over time amongst regional cities • Analysis of factors that have contributed to higher or lower rates of growth • Implications for the economic development of Australian communities

3. Regional Cities, 2001

4. 1961 small number of regional cities • Simple structure • Agriculture/mining and some manufacturing

5. 1976 • Growth in number of regional cities • Strong ‘regional’ functions (cluster 6) • Mining and manufacturing clusters

6. 1991 • Growth in ‘seachange communities’ (Cluster 3 & Cluster 4) • Growth in some administrative centres • Population and workforce loss in manufacturing based centres – eg Whyalla

7. 1996 • Greater complexity again • Maintained strong growth in ‘seachange’ centres • Further decline in manufacturing and some mining and utilities centres

8. 2001 • Greater complexity • On-going strength of ‘seachange’ locations • Consistency in some classifications – eg mining centres, utilities • Emergence of Agribusiness centres (Cluster 7).

9. Population and Workforce Growth Rates and Standard Deviations by Cluster, 2001

10. Understanding Growth Processes • What factors have contributed to the faster or slower growth rates of individual regional cities? • Is it specialisation in industry structure? • Cluster analysis suggests that regional cities across Australia as a whole have become more specialised • Specialisation as part of cluster formation (Porter 1990) • Globalisation pushes specialisation at the local level • Is it diversification? • Don’t have all your eggs in one basket • Greater resilience to shocks/less volatile • Diversifying into key sectors • What implications for the change management strategies of individual communities?

11. Understanding Growth Processes • The evidence base is mixed • For specialisation • Small communities should specialise to kick start their economies (Page 2002) • Clusters in rural areas contribute to growth (Henry and Drabersstott 1996; Gibbs and Bernat 1998) • Regional clustering important for the process of economic development (Enright 1996) • For diversification • Overspecialisation can lead to stagnation (Watkins 1963) • Specialisation = volatility (Barkley, Henry and Kim 1999) • For highly specialised, diversification might be the answer (Page 2002)

12. Index of Specialisation Essentially modified Herfindahl Index First used by the Dept of Home Affairs and Environment 1983 also Beer, Bolam and Maude 1994

13. Our Analysis • We found that if the economy became more specialised: • the population increased or decreased at a slower rate • The labour force increased or decreased at a slower rate • Specialisation was not directly related to economic performance, but change in specialisation was positively related to growth

14. Our Analysis • For the period 1996-2001 regional cities that became more specialised had – on average - the most success in terms of population and labour force growth • Economic development is a process and the economics of the global economy are likely to guide regional cities into more specialised roles • The direction and focus of that change – ie what the economy moves into – may well matter • In addition, modifying a peripheral economic base is rarely successful (Shearmur)

15. Implications for Managing Change – The Process of Change • Lessons for managing change and planning for growth: • Initial search for a diversity of growth opportunities • Testing of those opportunities relative to growth potential and global markets • Specialisation around the sectors with greatest prospects • Deepening of productive capacity and market presence leading to economies of scale in production, marketing and labour force development • Eg Pt Lincoln and aquaculture, Gladstone and manufacturing

16. Implications for Managing Change- The Direction of Change • The cluster analysis suggests that more ‘niches’ are opening up within the Australian economy as a consequence of globalisation (eg Cluster 13 – remote tourism) • This suggests a greater range of opportunities for communities and regions • The clusters to decline from 1996-2001 were focussed on mature industries (Cluster 9 – manufacturing; Cluster 12 – mining) • The clusters to grow most quickly had a strong focus on services and regional functions • Clusters 3 and 4

17. Conclusion • The pathway for planning for economic growth is clear • Understand the opportunities & challenges offered by economic globalisation • Think outside the square, link to global markets • Seek out diverse economic futures, but recognise that not all prospects will be productive, specialisation into one or two industries may be inevitable • The direction of change is important – focus on growth sectors • Regional economies are now more likely to see real benefits from endogenous development strategies than previously because of the capacity to exploit global markets