Monday, 19 May 2014

Background briefing: Federation White Paper, Regional Governance

This paper provides background on regional government issues for the Australian debate about its federal structure.                              
It was prepared for the  Australian Institute of Risk Management  (a non-political non-profit policy body).

Enlighten festival Canberra 2014 - images thrown onto walls of the old Commonwealth Parliament

Australia - High Levels of Urbanization

The Australian Federation is characterized by a small number of states, each dominated by a single very large urban conglomeration.  In particular, the state of New South Wales is highly urbanized along the coast and in the area around Sydney.

In an Australian Productivity Commission Roundtable on sustainable population held at old Parliament House in 2011, Graeme Hugo from the University of Adelaide broadened the debate from a consideration of how many people could live in the country to where those people should live and addressed the question "Is decentralisation the answer?".  The question was prompted by the unique patterns of population in Australia.
Hugo said:
"Australia also has one of the most spatially concentrated populations of any nation. This pattern of concentration has a number of dimensions (Hugo 2003):

  • 87 per cent live in urban areas. 
  • 64 per cent live in capital cities. 
  • 81 per cent live within 50 kilometres of the coast.  
  • 0.8 per cent live in the 70.5 per cent of the land area of the continent with a population density of less than 0.1 people per square kilometre. 
  • 76 per cent live in the 0.33 per cent of the land area within 100 people or more per square kilometre."

In answer to the question of decentralisation, Hugo said:
"The answer is that we don’t know. However, a policy of regional development based on a sound understanding of the economic and environmental potential of regional areas may be one of the ways Australia can move towards a more sustainable future."

While the basic population patterns have not changed for some time, there is reason to suggest that high levels of urbanisation is continuing.

The Foundation for Regional Development Limited undertakes analysis of population growth in regional NSW.   The most recent report tracks a decline in the population in many regional communities.  This report gained some media attention in the Sydney Morning Herald (Sunday 18 May 2014 p30) where the Foundation chief executive stated that growth in Western Sydney was putting more money into that area, money that would “normally have gone to the regions”.

What are Australian Governments doing to address the issue?

In 2002 at the 11th Biennial Conference of the Australian Population Association in Sydney, Paul Collits, Manager Regional Policy NSW Department of State and Regional Development summarized the governance issues in play in a useful paper Australian Regional Policy and Its Critics.  Little has changed since the paper, which remains a significant contribution to understanding the political processes involved.

Collits said:
"Policy development and policy change are complex processes with multiple dimensions and explanations. In Australia, with its three tiered system of government, short term  6 electoral cycles, spatially differentiated electorates, vigorous political debates, varying geography and widely (and increasingly) divergent regional issues, it is not surprising that regional policy would be subject to shifts in emphasis, changing levels of resources, and the comings and goings of intellectual fashions. Regional policy is also, of course, hostage to many other areas of policy which inevitably have varying and often unforeseen impacts on regions."

The scope and impact of regional policy has varied from time to time.  In the mid 1970's the NSW Government made a concerted effort to create new regional cities, purchasing and managing large areas around a number of targeted rural centers to prevent land speculation.  When this program stalled, subsequent Governments moved to different measures including the movement of state infrastructure and employees to some regional centers.  Today the measures include an incentive for city dwellers to buy a home in the bush ($7,000).  This particular measure is not well known - reportedly only assisting 3,466 homeowners at a cost of $24 million.

Collits identified the cyclical nature of this change:
"...there have been two processes occurring in Australian regional policy. The first is essentially a political process. Interest in regional policy has waxed and waned over time, especially in Canberra. Generally, Coalition governments have tended (1949, 1976, 1996) to view regional policy as the proper preserve of the States, and have wound back inherited regional programs. On the other hand, in the States, the process has been more evenly evolutionary and bipartisan, though, on occasions, there have been more dramatic overturnings (Greiner in 1989)."

Throughout, the political and financial imbalance that arises as between urban and regional areas has been a constant source of concern.  Since early in the history of federation there have been proposals to split New South Wales into smaller governing units.  In 1953, 21 NSW councils held an unofficial referendum on the issue and gained overwhelming support for the creation of a new state.  The Northern Separation Movement (more recently called the New England New State movement) eventually forced a referendum on the creation of a new state in New England area – which was narrowly defeated in 1967 (reportedly after moves to include large urban areas in the electoral area to maximise the possibility of defeat).

Commission of Audit - 2014

Political discontent with the fair distribution of political and economic power within the states has gradually seen the Commonwealth government move to providing direct funding to regional areas.  This trend has been challenged by the Commission of Audit which has re-emphasised the separation of powers between the Commonwealth and State Governments.

The Commission said:

“Governments should also operate at their natural levels. Policy oversight for national issues should go to the Commonwealth with responsibility for regional and local issues predominantly going to State and Territory governments.
Under the principle of sovereignty, as far as practicable, each level of government should be sovereign in its own sphere.”

In addition, the Commission recommended the removal of a number of Commonwealth programs which it thought did not meet this delimitation.  The removal of these programs, with no concomitant guarantee by states to maintain funding in like areas may create additional interest in re-examining the existing political structure of states.

The follow extracts are from the Commission of Audit

Relocation Support
Support now exists to assist young long-term unemployed people to move. Based on existing policies, relocation assistance of $6,000 is available if an unemployed person moves to a regional area to take up a job or $3,000 if they move to a metropolitan area. A Job Commitment Bonus of $2,500, and up to $4,000, is available for people who, having found a job, remain off welfare for a sustained period of time. 

Tourism initiatives and management
Approximately $185 million of Commonwealth funding is directed towards tourism initiatives and management. Most of this funding is for Tourism Australia, although other programmes now administered by Austrade include ‘Tourism Quality’ grants and the Tourism Industry Regional Development Fund. The Department of Foreign Affairs and Trade is responsible for tourism policy.
Nearly two thirds of Tourism Australia’s budget is directed to advertising and other promotional activities. While tourism is one of Australia's main exports, most of the benefits of tourism accrue to the tourism operators. There is no clear reason why significant funding should be provided to tourism above other Australian export industries. 
The States already provide a marketing budget for tourism. However, it is arguable that marketing Australia as a destination for international tourists should be undertaken at a Commonwealth level rather than on a State-by-State level. The Commission proposes that grant funding for the tourism industry be ceased, and funding for Tourism Australia be reduced by 50 per cent, to focus on international marketing, with the function incorporated into a commercial arm of the Department of Foreign Affairs and Trade. 

Tourism Industry Regional Development Fund
The Tourism Industry Regional Development Fund programme supports investment in tourism-related accommodation, infrastructure, experience and facilities. The aim of this programme is to attract tourists to regional areas and encourage them to stay for longer, and in doing so provide jobs, investment and growth in regional Australia.
Most of the benefits accrue to tourism operators. 
The continued funding of this grants programme should cease, consistent with the Commission's recommendation in its Phase One Report to limit industry assistance to areas of genuine market failure. 

Support for Regional Universities
Cooperative Research Centres should be abolished, with funding rolled into the Australian Research Council Linkages programme. As part of this transition, consideration should be given to allowing longer funding periods for Australian Research Council grants. The Collaborative Research Network programme — which provides funding for larger universities to collaborate with smaller, less research-intensive and regional universities — should also be abolished, allowing researchers to determine their own collaboration priorities. 

Infrastructure and Regional Development

There are 55 Regional Development Australia committees within the Department of Infrastructure and Regional Development. Regional Development Committees are funded by State, Territory and local governments in some jurisdictions. 
The Commonwealth appropriates approximately $20 million for these committees, an average $360,000 each. These committees develop regional plans, help to identify solutions that address the region’s needs and hold regional forums. 
For example, in 2012-13 Regional Development Australia Barossa engaged in activities such as: improving digital literacy for business, establishing a digital cluster for start up creatives, roundtables to discuss the potential of live music in the region, a region cycle route mapping project and assisting people with their resumes and job applications.
Consistent with the subsidiarity principle and the Commission’s Principles of Good
Government, the Commonwealth is not best placed to meet the needs of specific regions. Accordingly, the Commission recommends that the Commonwealth withdraw its involvement in these committees and transfer responsibility to State and local governments recognising that they are better placed to address region-specific issues.

Relocation scholarships
These payments provide income support for young people who are unable to work full time as they are studying. There is scope to change some of the payments’ eligibility to better target this assistance.
Currently, Relocation Scholarships are available to dependent Youth Allowance recipients who move away from the family home to study. The scholarships provide a minimum of $4,145 in the first year and $1,036 in subsequent years of study to all eligible students, with a higher rate of $2,073 provided to students moving from regional or remote areas in their second and third years of study. The scholarships are automatically provided to all eligible students and are provided to students moving within capital cities. 
In addition to Relocation Scholarships, all students receiving Youth Allowance also receive Student Start-up Scholarships of $2,050. Legislation is currently before Parliament to convert Student Start-up Scholarships to an income-contingent loan, to be paid back after any Higher Education Loan Programme debt is fully repaid. 
Assistance with the costs of relocating may be important in enabling some young people to participate in education. However, this assistance could be better targeted. It is recommended that Relocation Scholarships be converted into a voluntary income-contingent loan, similar to the Student-Start-up Scholarships. This would require students to decide if they really needed this assistance. The Commission recommends that the relocation loans be limited to the first year of relocation, and that they no longer be provided to students moving within their home capital city. 

Seatbelts on Regional School Buses
The Seatbelts on Regional School Buses ($3 million over 4 years from 2013-14) programme provides funding for eligible school bus operators to subsidise the installation of seatbelts on new buses or retrofit existing buses. The programme aims to increase the number of seatbelt-equipped school buses operating on high speed roads in rural and regional areas. 
Accountability of government spending would be enhanced if these and other tied Commonwealth grants ceased, and to the extent that programmes are identified as priorities, local or State governments provide them to the communities they serve. 

Recommendation 22: Payments to local government 
The Commission’s Phase One recommendations on addressing the degree of vertical fiscal imbalance within the Federation propose that the States have access to the personal income tax system so they are in a better position to fund their own priorities. This will include support for local government. In this situation, the need for separate tied funding from the Commonwealth will diminish. 
The Commission recommends that tied grants to local governments cease, and to the extent that programmes are identified as priorities, local or State governments provide them to the communities they serve.

Peter Quinton
May 2014

[A note on spelling in this paper.  Increasingly, I have departed from ordinary Australian spelling conventions to ensure that the entirety of the text can be automatically translated.  Those who know how much I detest spelling, will understand how few tears I have shed over this.]

No comments: