Scott Morrison makes pitch to battlers in regions

The Australian 12:00AM December 14, 2016

Simon Benson

Scott Morrison has ­directed the Productivity Commission to identify as a matter of urgency the hardest-hit regions and towns most at risk of job losses and economic decline as the mining investment boom ends.

In a direct pitch to disaffected communities that the government fears could be lost to One Nation, on a belief that they are being left behind economically, the terms of reference will include the controversial issue of skilled migrant workers, typically those on 457 visas.

The Treasurer has insisted the Productivity Commission deliver its interim findings before the May budget, in a signal the government will be aiming to roll out a major regional policy program next year focused on infrastructure.

Mr Morrison was one of the first to identify the Australian ­implications of the Brexit shock, having warned after his September meeting with world finance ministers at the G20 in Chengdu, China, that “disaffected” Australians could be lost to minor protest parties if the government didn’t listen to their concerns.

In his referral to the Productivity Commission, to be ­announced today, Mr Morrison says he wants the study to identify which communities are most vulnerable to being left in the wake of the new “two-speed economy”. He says a “metric” will be developed to measure the economic and social health of regions most affected by the mining boom contraction.

“A combination of forces driving the transition of our economy will unavoidably create friction points in specific regional areas and localities across the country, while being the source of considerable growth and prosperity in ­others,” the Treasurer says. “The different impacts across the geographic regions of the Australian economy occur because of variable factors such as endowments of natural resources and demographics. Some regions may also have limited capacity to respond to changes in economic conditions; for example, due to different policy or institutional settings.”

Mr Morrison says the economic transition will create growth and prosperity in some regions, while presenting challenges for others. “While Australia continues to benefit from strong commodity export growth, and a transition to broader-based growth is under way, there are some parts of Australia doing it tougher than ­others,” he says. “The study will help to determine how well different regions are adapting to the transition and the factors which influence the capacity of a region to adapt to changes in economic circumstances.”

Senior government sources said the study was a product of the government having identified the potential local economic and political disconnect. “We clearly have concerns about the potential for those ­people, the disaffected, to express themselves in a protest vote,” one source said. “We need to bring these people on board.”

The announcement of the study comes on the back of pleas last week from the struggling ­resource states, Western Australia and Queensland, for a multi-­billion-dollar commonwealth infrastructure bailout to arrest economic downturn and address growing fears of widespread ­regional job losses. Both states are claiming victim status in the changing economy and are fast-tracking capital works projects in their appeals to the federal ­government, which already has a $50 billion infrastructure plan, for further funding.

Queensland, however, is refusing to sign up to the federal government’s asset recycling scheme by ruling out asset privatisations that would attract compensatory commonwealth funding in return.

Both resource states are facing elections next year — Western Australia’s on schedule and Queensland’s expected to be called a year early — in which One Nation will be a critical factor.

The Palaszczuk government this week committed $20 million to manufacturing firms and coal royalties will pay for a jobs package for regional Queensland.

Economist Chris Richardson, a partner at Deloitte Access Economics, cautioned against federal government or Reserve Bank intervention to arrest what was now a reversal of the two-speed economy of 15 years ago when Western Australia and Queensland were booming on the back of commodities at the expense of states such as NSW and Victoria — which are now the strongest performers on the back of strong property ­markets.

“There will always be two speeds, and occasionally three speeds … but we should not see that as bad news or weakness in some states or sectors, but success in others,” Mr Richardson said. “The success of NSW and Victoria won’t be permanent either … with silly house prices that will eventually bite you on the bum. Whether you are the Reserve Bank or the federal government … the priority must be a national one.”

The national accounts released last week showed that Western Australia recorded negative growth of 9.5 per cent compared with a national contraction of 0.5 per cent. Queensland recorded growth of just 1.2 per cent while Victoria grew by 2.5 per cent. NSW was the best performing state with a growth rate of 5 per cent.