Download The economic opportunities and issues facing

The economic opportunities and issues facing Launceston City
This paper was initially prepared on 27-6-14. A full revision was undertaken on 4-7-16.
Background
This paper has been prepared to identify the significant matters that impact on the economy
of Launceston and the opportunities for economic development. It is prepared on the basis
that we are living in the middle of a knowledge and technological "revolution" that is
disrupting business models and accepted modus operandi.
Significant and fundament economic drivers are changing. As examples: Uber, the world's largest taxi company owns no vehicles
 Facebook, the words most popular media owner creates no content
 Alibaba, the world's valuable retailer has no inventory
 Airbnb, is the world's largest accommodation provider and owns no real estate.
Rather than informed and rationale response there appears to be poorly informed knee jerk
reactions to what are systematic changes in the fundamental drivers of the economy.
The paper provides a commentary on:1. A little of what is happening globally
2. A little of what is happening nationally
3. What is happening in the state
4. What is happening in Launceston
5. Recent reactions
6. What is missing
7. Opportunities
For the past four years I have been concerned that we have lots of information, but we are
not having a robust discussion about what is going on in a context of global, national, state
and local matters.
This is not rocket science. The information collated is widely available but, rarely is it put
together. This data presented is a matter of fact and should not be confused with a negative
view of the world. It could be a starting point for conversations of how to move forward, make
hard decisions and crystalize opportunities.
The information has been collected from a range of sources, but many of assertions are not
specifically referenced. The sources include ABS stats, studies undertaken with the
development of the Greater Launceston Plan, Remplan Industry Sector Performance for
Launceston and the north East, Reserve Bank data, IMF updates [e.g. Global financial
stability, Australian Ambassador to People Republic of China seminars and other reports],
Bloomberg, Financial Review, Melbourne Port Authority reports, Productivity enquiry into
Tasmanian ports and shipping, Diversifying Tasmanian Economy Analysis and Options,
Launceston City Council Community Profile Report, State of the States report, Report to the
Treasurer on Budget Risks, Grattan Institute Budget pressures on Australian Governments,
Labour market trends, recent surveys of vacant premises, outcomes of a recent Asia
engagement roundtable, Greater Launceston Plan, Launceston Retail Audit and Activity
Centres Strategy etc.…
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This a personal view and is not endorsed by any organisation.
International forces
General background
1. Business are now in global competition, [not state or national competition]
2. Rapid rates of digital and technological change are underway and will continue.
3. Australian labour costs are high and our manufacturing sector [except advanced
manufacturing] is not globally competitive.
4. The financial crisis of 2007–08, also known as the global financial crisis is considered
by many economists to have been the worst financial crisis since the Great
Depression of the 1930s. It threatened the collapse of large financial institutions,
which was prevented by the bailout of banks by national governments, but stock
markets still dropped worldwide. In many areas, the housing market also suffered,
resulting in evictions, foreclosures and prolonged unemployment. The crisis played a
significant role in the failure of key businesses, declines in consumer wealth
estimated in trillions of U.S. dollars, and a downturn in economic activity leading to
the Great Recession of 2008–2012 and contributing to the European sovereign-debt
crisis. The active phase of the crisis, which manifested as a liquidity crisis, can be
dated from August 9, 2007, when BNP Paribas terminated withdrawals from three
hedge funds citing "a complete evaporation of liquidity". The bursting of the U.S.
(United States) housing bubble, which peaked in 2004, caused the values of
securities tied to U.S. real estate pricing to plummet, damaging financial institutions
globally. The financial crisis was triggered by a complex interplay of policies that
encouraged home ownership, providing easier access to loans for subprime
borrowers, overvaluation of bundled subprime mortgages based on the theory that
housing prices would continue to escalate, questionable trading practices on behalf
of both buyers and sellers, compensation structures that prioritize short-term deal
flow over long-term value creation, and a lack of adequate capital holdings from
banks and insurance companies to back the financial commitments they were
making. Questions regarding bank solvency, declines in credit availability and
damaged investor confidence had an impact on global stock markets, where
securities suffered large losses during 2008 and early 2009. Economies worldwide
slowed during this period, as credit tightened and international trade declined.
Governments and central banks responded with unprecedented fiscal stimulus,
monetary policy expansion and institutional bailouts. In the U.S., Congress passed
the American Recovery and Reinvestment Act of 2009. Many causes for the financial
crisis have been suggested, with varying weight assigned by experts. The U.S.
Senate's Levin–Coburn Report concluded that the crisis was the result of "high risk,
complex financial products; undisclosed conflicts of interest; the failure of regulators,
the credit rating agencies, and the market itself to rein in the excesses of Wall
Street." In the immediate aftermath of the financial crisis palliative monetary and
fiscal policies were adopted to lessen the shock to the economy. The Dodd–Frank
regulatory reforms were enacted in the U.S. to lessen the chance of a recurrence,
and the Basel III capital and liquidity standards were adopted by countries around the
world. The Australian government announced the first of its stimulus packages aimed
to jump-start the slowing economy. In January of 2009 US President Obama
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proposed federal spending of around $1 trillion in an attempt to improve the state of
the financial crisis. The Australian government also proposed another stimulus
package, pledging to give cash handouts to tax payers, and spend more money on
longer-term infrastructure projects.
5. By the end of Feb 2012, the Arab spring has resulted in rulers being forced from
power in Tunisia, Egypt, Libya, and Yemen and civil uprisings had erupted in Bahrain
and Syria and major uprisings had broken out in Algeria, Iraq, Jordan, Kuwait
Morocco and Sudan. The rise of ISIS, the 10 million displaced people in the current
Syrian conflict are examples of growing instability.
6. British withdrawal from the European Union is a political goal that has been pursued
by various individuals, advocacy groups, and political parties since the United
Kingdom joined the precursor of the European Union (EU) in 1973. The UK
electorate addressed the question on 23 June 2016, in a referendum on the country's
membership. This referendum was arranged by Parliament when it passed the
European Union Referendum Act 2015. The result was 51.9% in support of an exit
(17,410,742 votes) and 48.1% (16,141,241 votes) to remain, with a turnout of 72.2%
of the electorate. The exact process for the UK's withdrawal is uncertain under EU
law, although it is generally expected to take longer than two years. Article 50 which
governs the withdrawal has never been used before. The timing of leaving under the
article is a strict two years, although extensions are possible, once Britain gives an
official notice but no official notice seems forthcoming until after a new British Prime
Minister is selected later in 2016. The British Prime Minister David Cameron
announced he will resign by October, while the First Minister of Scotland Nicola
Sturgeon has said that Scotland may refuse legislative consent to dropping EU law in
Scotland.
World Growth and Stagnation
7. Broadly speaking world growth has been flat for an extended period post GFC,
except for Asia and emerging economies.
8. The G20 highlighted that there is a risk of low potential growth in both advanced and
emerging economies, and is focussed on commitments to global growth. There is a
concern that the euro area and Japan could face an extended period of low growth
that could turn into stagnation.
9. In contrast the economy of China has been growing at 7.5%, now projected to be 6.4
% [July 2016] which means its GDP will double between 8 to 11 years.
10. The conclusion drawn from Davos 2015 is that the global economic climate is low
inflation, low growth, high debt and high unemployment and a lot of the process is
about shifting debt liability into the future. On historic modelling, an interest rate cut of
3-4% is needed to correct a downturn. However, this option is now not possible
across the globe. If a major downturn comes there are no traditional mechanisms
available to address it.
Economic Stimulatory Policies /Quantitative Easing
11. A number of significant economies [America, Japan and European Union [EU]] are
concerned about deflation and have undertaken significant and unheard of economic
stimulatory policies. In November 2008, America began quantitative easing and up to
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US $85 Billion per month was used to purchase treasuries. In June 2013 tapering
was announced. US $45 Billion a month was used to purchase treasuries.
Quantitative has since ceased in America. The EU adopted negative interest rates in
June 2014 and in September 2014 flagged its intention to commence a quantitative
easing process, similar to America and Japan.
12. In October 2015 Mario Draghi flagged that the risks to the euro area growth outlook
remain on the downside and that European Central Bank would continue asset
purchasing of Euro $60 billion per month through until September 2016 and beyond if
necessary. This reflects the deflationary cycle that is beginning to establish;
according to Eurostat, euro area annual HICP inflation was -0.1% in September
2015, down from 0.1% in August. This resulted in bond respective yields turning
negative at -0.32%, -0.292% and -0.014% in Germany, France and Italy. As at 28-416 Bloomberg reported that of the bond yields of 15 of the 19 Eurozone countries it
monitors (countries that use the euro as their currency), 13 of them currently have
negative interest rates for two-year government bonds.
13. The Financial Review 4-7-16 claim that there are now US$ 12 trillion of bonds [more
than 33% of global bonds] trading at negative interest yield worldwide. This impacts
negatively on the profitability of banks and adds to the challenges of making profits in
a low interest rate environment.
Impact of Monetary Easing Policies on World Markets
14. Much of the success of management of the GFC has been due to loose monetary
policy and there are now many public and private balance sheets that will be stressed
if interest rates go up. It is estimated that 35% of corporate debt is at risk of being
unable to be serviced in emerging markets.
15. August 22, 2015, David Murray [ex CEO Commonwealth Bank and chair of Future
Fund] warned that a correction in asset prices inflated by unprecedented global
monetary stimulus is imminent. Earlier this week Reserve Bank Chairman, Glenn
Stevens made raised similar concerns and that investors have become complacent
about global market risks.
16. Since at least 2014, world markets have attached interest rate rises, as a low
probability.
17. Since June 2014, the USA stock market has trading at or around all-time record
breaking highs. The Dow Jones peaked in May 2015 at 18,312 and is trading at
17,830 on 22 June 2016.
18. The world is being flooded with liquidity by central banks. In simple terms the
Financial Review reported 5-8-15 that world debt has increased five-fold [from USD
$34 trillion to USD $185 trillion]. In an environment of lower and declining world
economic growth, how will this debt mountain be serviced?
19. In February 2015, McKinsey and Company released "Debt and Not much
Deleveraging" … "seven years after the bursting of a global credit bubble resulted in
the worst financial crisis since the Great Depression, debt continues to grow. In fact,
rather than reducing indebtedness, or deleveraging, all major economies today have
higher levels of borrowing relative to GDP than they did in 2007. Global debt in these
years has grown by $57 trillion [now totalling $199 trillion], raising the ratio of debt to
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GDP by 17 percentage points. That poses new risks to financial stability and may
undermine global economic growth.
Brexit
20. As at 1-7-16, according [Financial review] the early result of Brexit will be the loss of
AAA rating by Standard and Poor's. Standard's and Poor' also claim that the debt
debt rollover that is due over the next 12 months is 755% of Britan's external receipts
and large sums have to be rolled over continuously. This is the highest debt rollover
for the 131 rated Countries and the concern revolves around mismatch in either
currencies of maturities.
21. At 1-7-16 The Brexit had already triggered a banking crisis in Italy where the
government is struggling to put together a Euro 40 billion rescue but is paralysed by
constraints of Euro membership.
22. At 1-7-16 the value of equities [FTSE 100] has returned to pre Brexit levels but falls
are embedded at 6%, 10%, 13% and 14% in Germany, France, Spain, Italy, Ireland
and Greece respectively. The fall in the exchange rate of the Sterling is acting as a
shock absorber.
23. Danske Bank believes that Britain and he Euro zone will both crash into recession
later this year.
24. Six says after Brexit the UK has no government, no opposition and no
implementation plan. There is no policy in place to direct the next steps forward.
World Debt Levels
25. Since June 2014 the world’s most powerful financial institutions and think tanks, the
BIS [Bank for International Settlements], G-20, ICMB [International Centre for
Monetary and Banking Studies], IMF [International Monetary Fund] and the Fed have
all warned about excessive leverage, asset bubbles, slow growth and systemic risk.
They are doing this publicly and seemingly in a coordinated fashion. All of these
warnings were issued within 100 days from late June to early October 2014.
26. The debt ceiling in America had increased from USD $14.3 Trillion in 2011 to $17.2
Trillion in Feb 2014. In March 2015 it was extended to $18.1 Trillion and at 22 June
2016 it stood at $19.3 Trillion. This demonstrates that the American Government has
been borrowing significant and increasing amounts of money to cover the gap
between government expenditure and tax collection over at least the last 5 years.
The debt level of $19.3 Trillion dollars exceeds current GDP.
27. The debt levels in Japan are also at historic highs. The Financial Review on 15-6-15
reported that the Japanese debt to GDP ratio is currently 240%, which is higher than
Greece.
28. There has been little inroad on debt reduction in the EU since the Global Financial
Crisis [GFC]. As at 2-9-14 the EU [except Germany] continues to hold significant
levels of high public debt which has increased in the entire EU except Germany. At
February 2016 eight of the ten countries debt levels have increased compared to last
year.
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29. As at 2-9-14, Government budget balances across Europe are all negative [or in
case of Germany now 0] which means Governments are increasing borrowing to
service operating expenses. This situation is unchanged as at Feb 2016.
30. As of 17 Feb 2016; [Fin Review], national debt as a percentage of GDP is now at
unprecedented levels estimated to be 387% Japan, 270% Europe, UK 260%, USA
248% and 230% China. The reason this is not currently a critical issue is that global
interest rates are so low and the debt can be serviced. Where the debt is allocated is
another matter. Ferguson 2015, confirms that 20 of 29 countries have debt ratio's
that are above 200% and this includes Australia. His analysis of history is that once
GPD burdens rise above 90% countries typically endure slower consumption and/or
financial crisis and their debt levels remain high.
31. In February 2015, McKinsey and Company released "Debt and Not much
Deleveraging and stated that "China’s debt has quadrupled since 2007. Fuelled by
real estate and shadow banking, China’s total debt has nearly quadrupled, rising $28
from $7 trillion in 2007 to trillion by mid-2014. At 282% of GDP, China’s debt as a
share of GDP, while manageable, is larger than that of the United States or
Germany. Three developments are potentially worrisome: half of all loans are linked,
directly or indirectly, to China’s overheated real-estate market; unregulated shadow
banking accounts for nearly half of new lending; and the debt of many local
governments is probably unsustainable. The challenge will be to contain future debt
increases and reduce the risks of a crisis, without putting the brakes on economic
growth."
32. McKinsey and Company says in 2015 that only four countries grew their debt-to-GDP
ratios by more than China from 2007 through 2014 being Ireland, Singapore, Greece,
and Portugal and three of those four countries are crippled by debt and 10% plus
unemployment.
33. The shadow banking sector in China is now 30% of commercial lending and growing
rapidly now worth $4 trillion or half of China's GDP
34. The spread and magnitude of systemic risks created by these quantitative easing
measures are unprecedented and not known.
Global Interest rates
35. Central banks have moved into negative deposit interest rates. At February 2015,
Sweden, Denmark, Switzerland and Finland central banks had moved to charging
negative deposit rates. In December 2015 Mari Dragi and central Bank of Europe
moved official rates below zero to -0.3%. At January 2016 the central bank of Japan
adopted negative interest rates. [Financial Review]. JP Morgan benchmark bond
index reported that 255 of all bonds issued by Governments in their index now trade
at a yield below zero = ($7.8 Trillion AUD) i.e. if these bonds are held to maturity they
will lose money [Fin Review Feb 2016]. The adoption of negative interest rates is part
of the strategy to induce inflation or devalue currency. However, inflation is
stubbornly low everywhere.
36. Australia is a significant player in the global carry trade, where funds are shifted from
countries of low interest [USA, EU, Japan etc.] to those offering higher interest rates
such as Australia and developing countries.
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Global Unemployment
37. As at 2-9-14 the EU has disastrous levels of high unemployment [between 10.3 and
27.2%] in Greece, Spain, Portugal, Italy, Ireland and France. As at February 2016,
there has been minimal improvement [between 8.6 and 24.5%].
38. In the USA the argument is that unemployment levels are OK at 6.2 % July 2014, but
this masks the fact that 7.5 million workers or 30% of part time workers are
underemployed and that approximately 20% of unemployed workers have dropped
out of the unemployment statistics and have abandoned seeking work. In March
2016 Mohamed El Erian reported the civilian labor force participation rate reached a
recent historic low of 62.4 percent in September 2015, a full seven years after the
eruption of global financial and economic instability. This compares to 66.2 percent at
the beginning of 2008. In the most recent data, contained in the jobs report for
February 2016, it stood at 62.9 percent. Meanwhile, the employment-population ratio
(for those 16 and over) fell from 62.9 percent at the beginning of 2008 to a recent
historical low of 58.2 percent in January 2011. It has recovered somewhat, but, at
59.8 percent in February of this year, it also is well short of where it was and could
be.
Climate Change
39. The international Panel on Climate Change released its Fifth Assessment Final
Report on 1st November 2014. This completely debunks the position on climate
change taken by the Australian Government. It concludes that the science is
unequivocal and that climate change is human induced and the evidence of impacts
is now widespread. If we are to hold increase in Global temperature to +2 degrees C
relative to pre-industrial levels, immediate action and meaningful reductions need to
be evident with reductions of 40-70% in emission by 2050 and a further reduction to
zero emissions by 2100. On 13th November 2014 China and the USA announced an
historic climate deal where China will cap its emissions by 2030 and the USA has
committed to emit 26-28% less carbon than it did in 2005. China and the USA
account for 42% of global emissions.
Commodity Prices
40. The oil price hovered around USD $110 per barrel from 2011 to 2014 and has since
dropped to a low of USD $30 per barrel and then rebounded to $50 USD per barrel
22 June 2016. This is having an impact far beyond the world's energy and
commodity markets. Usually a drop of this magnitude is generally good for global
growth and the economy. However, by maintaining production and market share
OPEC will push American shale oil producers into bankruptcy, potentially bring about
the default of Venezuela and recession in Nigeria and Russia etc. and this could lead
to political instability.
41. The knock on effect is now impacting on USA shale oil producers, as at 12 Feb 2016
48 companies have filed for bankruptcy with debts of AUD $24 billion [Fin Review].
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Summary
42. Although the world markets have stabilised since the GFC, and are growing
moderately, the world economy is still very fragile, with fragility possibly
underestimated. There is also growing concern about the longer term impact of
financial stimulus provided by quantitative easing in USA [now ceased], but recently
introduced in Japan and Europe. The world is awash with capital at zero interest
rates. Currency wars are in progress and the price of energy and commodities is at
an all-time low and yet there is a low or no growth environment, and threat of
deflation.
43. On Jan 18 2016 Nouriel Robini neatly describes all the current opportunities and
challenges for the global markets on youtube Economic Outlook for 2016 at the
following address [20 mins] https://www.youtube.com/watch?v=CqqimGKQh8I
44. On Jan 26 2016 Mohamed El-Erian neatly describes a range of current opportunities
and challenges on youtube The Global View with Mohamed El-Erian at the following
address [20 mins] https://www.youtube.com/watch?v=UN1SXGoVHiE
45. In Davos 2016 - The Growth Illusion, there is a panel discussion about world growth
[1 hr] [https://www.youtube.com/watch?v=94ZVtT_AyO0
National / Federal Government Forces
General Background
1. This paper has been prepared on the eve of the 2016 Federal Election.
2. The federal government has a special interest in reforming the Tasmanian economy
as outlined in the Economic Growth Plan for Tasmania 2013, but it is not clear what
exactly has been achieved and no new monies or initiatives or resources have benn
allocated to drive the plan.
3. The Joint Commonwealth and Tasmanian Economic Council was formed on12-12-13
and four business members were appointed on 23-4-14. The Council is part of the
Federal Treasury portfolio, and functions in an advisory capacity. It has held five
meetings the most recent being 7th August 2015. This was a supportive initiative of
Prime Minister Tony Abbott. No action plan has been released. There has been no
media release since April 2014. The effectiveness of the Council is not known.
4. The Tasmanian Major Projects Approval Agency was formed in 1 July 2014 and is an
Australian Government initiative to provide a ‘single point of entry’ into the Australian
Government for proponents of major investment and developments in the Northern
Territory and Tasmania. To date no major project has been announced by the
Agency.
Free Trade agreements
5. Saul Eslake 25 June 2015, indicated the recent free trade agreements signed with
China and Japan will bring real opportunity and 10-20 year head start for Australian
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business to access and grow agriculture, accountancy, healthcare, legal, education
and other services into these markets.
6. As at November 2015, Australia has three recent free trade agreements signed off
and in place, with Japan, Korea and China. This represents tariff reduction [to zero
eventually] on 97%, 99.8% and 96% of exports to these three countries respectively.
This represents nearly 40% of Australian international trade. A Trans - Pacific
Partnership agreement has also just commenced between Australia and another 11
pacific nations, and Indonesia has expressed an interest in joining this The
development of a free trade agreement is in progress with India. These
developments are positive news for exporters.
Exchange rates
7. Through to most of 2014, the Australian dollar [AUD] was historically high and was
impacting on the ability of Australian companies to export [it was 15% higher than
long term trend]. By January 2015, it approached long term trends [United States
Dollar [USD] 75-80c]. Australian joined the currency war with interest rates below the
emergency levels of the global financial crisis with an aim to keep the Australian
dollar below 70c and to counteract the quantitative easing instigated in Europe and
Japan. The exchange rate has since fluctuated between USD 70-78c. The lower
exchange rate supports our exporters.
National Economy
8. Australia is now in the grip of the most sustained fall in national income since the
early 1990's."Macroeconomics" a Canberra based forecaster, proposed in November
2014 that the Federal deficit is likely to extend well into a second decade [post 2025]
on what is now a national income recession and that deficits during that period could
be in the range of -AUD$15 to -AUD$30 billion annually.
9. The national decline in GST collection and the impact of the Commonwealths Grants
Commissions 2015 Methodology Review of GST Revenue Sharing Relativities
[published Feb 2015] and pressure from other states for a new distribution model has
potential to significantly and negatively impact on Tasmanian State Government
revenue
Interest Rates
10. Prior to the GFC the Reserve Bank of Australia cash interest rate reached 7%. Since
2008 the rate has been progressively reduced to 4.75% in July 201. Since then there
is a linear decline in interest rates to the cash rate of 1.75% we see at 22 June 2016.
This indicates that the Bank sees economic stimulus is required to boost the
economy. The recent decline in oil prices is estimated to be equivalent to a further
0.75% cut in cash interest rates.
Australian Debt
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11. As of February 2015, the Government is borrowing $32 million a day [$1 billion per
month] just to pay the interest on debt [just to meet the ordinary expenses of
Government. Without structural change this will grow to $95 million a day over the
next decade.
12. Since 2011 the terms of trade have fallen by 20%.
13. In the last ten years house prices increased by 147 per cent, while incomes in
comparison grew by 57 per cent. In 1991 the median house price was five times the
average income. In 2011 it is seven times the average income. Australia’s housing
debt to disposable income ratio is at a record level. In September 2014 we had the
highest housing prices comparable to disposable income in the world.
14. Increasingly negative public comments are made about the lack of a return on $
investment made in Tasmania vs other states by other State Premiers [WA treasurer
comments 7/8/14 Examiner].
Australian Government Policy and budget allocations [could change after July 2nd 2016]
15. Reduced spending on the welfare sector will impact more significantly on Tasmania
as we have 35% of households directly reliant on Government welfare as primary
source of income
16. The reforms to accessing employment benefits will bite harder in Tasmania than
other states.
17. A further 35% of households will be impacted by reduced Government spending
[Federal and State] into the Government employment sectors. Reduction in number
of public servants will increase unemployment
18. Significant cost shifting from Federal to State Governments in health and education
will impact and reduce expenditure in State budgets
19. National Health Reforms, National Disability Insurance Scheme and Students First
reforms will impact
20. The federal Government is embarking on an infrastructure program and the required
level of matching funding from the states for infrastructure investment in road and rail
will impact on Tasmania State budget, this poses a potential $184.7 million cocontribution in matching funding from the State Government.
21. The federal Government has demonstrated it will not subsidise and support
uncompetitive industries [e.g. SPC, car industry, QANTAS etc. either stand on their
own viability and be globally competitive or they will be allowed to fail]. However it
appears to OK to fund the creation of a marine defence industry capability, but it is
unlikely that Tasmania is positioned to capitalise on this opportunity .
22. The federal Government has moved away from a 3 year commitment to fund the
Mersey Hospital and it is not known if the Federal Government will continue to
funding over the forward estimates.
23. White Papers on reform of the Federation and Taxation will consider vertical fiscal
imbalance and horizontal fiscal equalisation and clarify roles of Government. The
outcome of these major reviews will have implications for the State budget.
24. Reform of Universities = 20% less funding for Universities will impact on UTAS since
most of it students are local and they are less able to support funding an increase in
fees. This may cause student numbers to decline
25. Existing budgets indicate a decrease in financial assistance to local government
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State forces
Opportunities
1. There is potential to significantly expand the irrigated agriculture sector [dairying,
high value horticulture, wineries etc.] with the development of dams, irrigation
schemes, drought proofing. This will be a 20 year process and desperately requires
investment [external investors]. Tasmanian Irrigation's 10 Tranche One projects,
when completed, will activate total direct capital expenditure of $584 million. This
comprises of $229 million from the State and Federal governments, $90 million from
private contributions through the sale of water entitlements for scheme capital
expenditure and $265 million on on-farm capital expenditure. This is expected to
deliver a direct economic net present value benefit at the farm gate of $192 million.
The additional net economic value-add of Tranche One irrigation schemes is put at
$384 million.
2. It is forecast that the roll-out of the five Tranche Two projects will lead to an additional
$413 million investment in irrigation infrastructure. This comprises of $140 million
from the State and Federal governments, $53 million from private contributions
through the sale of water entitlements for scheme capital expenditure and $220
million on on-farm capital expenditure. It has been estimated the five Tranche Two
irrigation projects will deliver a direct economic NPV of $120 million, with an
additional $240 million post-farm gate economic benefit generated.
3. Tasmania's aquaculture industry is also set for further growth, and has grown at $1
Million turnover each week for the past 7 years, and is heading towards a billion
dollar industry.
4. There has been a steady increase in tourism numbers in the south of the State
[Mona effect]. However, numbers had broadly been flat in northern Tasmanian from
2010-2015. However, at May 2016 there is a clear increased tourism trend now
established in the north of the state albeit at a lower trend level than is occurring in
Hobart.
5. Potential to figure out what to do with the timber fibre resources both public and
private and develop a new Tasmanian forest industry. In 2014 UTAS established the
National Centre for Future Forest Industries. More recently in May 2015 it was
announced that UTAS will received $3.6 million to establish a $12 million Training
Centre for Forest Value and cement Tasmania's role as national centre for research
around forestry and wood products for post graduate and post-doctoral scientists in
Tasmania. This is positive news. Recent research by Bob Newman indicates that
with the demise of the MIS schemes, new plantation establishment effectively ceased
in 2009. The national targets for plantation establishment of 36 million ha by 2045,
will not be met without stimulation of planting softwood plantations. A presentation by
Tas Ports in May 2016 showed that wood chip volumes from the north had peaked in
2008 at 1.7million tonnes and had virtually stopped during the forestry crisis. They
are now tracking at 1.2million tonnes in 2015/16 and they are predicting an increase
to 1.6 million tonnes during 2016/17, so almost back to record levels. Wood chips
were selling at around $13 per tonne in 2013 and have now recovered to around $20
per tonne, shy of the $26 a tonne prior to the GFC [Private Forestry Tasmania June
2016].
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6. As at May 2016, Tas Ports claim that significant progress has been made in
increasing maintenance [record investment in recent years] and reducing port
infrastructure duplication and optimisation of port utilisation [now positive in cash flow
and contemporary in benchmarking against other ports in Australia. The multi-port
system is beginning to exploit existing capacity and is supporting logistics cost
efficiency. However, freight volumes projected out to 2043 are estimated to be only
marginally higher than 2008. Most [99%] freight task is handled through Tas Ports.
7. As at May 2016, Tas Rail claims to have undertaken a lot of civil works [120km of
track replacement, 190,000 tonnes ballast, 42 bridges upgrade or replaced 173 road
crossings upgraded ect.] and with the new rolling stock they have of increased
growth in freight by 20% and in containerised freight by 80%. The State Operating
subsidy has reduced from 19% to 8% this year in 2015/16. They are a fixed cost
business and really need some major industry growth [like bauxite mine in Campbell
town]. The rail system is now in good shape
8. Tasmania's top 7 trading partners are in Asia and they take 80% of our export
products. China is the top trading partner, taking 20% of our trade goods coming
from China [AUD$ 689 Million].
Regional Australia trends
9. With the exception of regional capitals, regional Australia has been in a long term
trend decline for at least 50 years. This trend is also reflected to continue into the
future.
Population trends
10. Tasmania's population is expected to grow but it will be below trend. The budget
papers 2014/15, confirm that net interstate out migration appears to have slowed and
that growth is estimated to be well below trend, but growing at 0.3%.
11. Data [20-1-15 Examiner] shows the following negative trend in net migration loss for
Tasmania. Net interstate migration has declined by about 5800 people since July
2010. Note the population growth does not reflect overseas migrants. In 2013/14,
1322 overseas migrants emigrated to Tasmania, meaning the net population gain
was actually positive +154 = 1322 - 1168
•
2013/14 -1168
•
2012/13 -1942
•
2011/12 -2612
•
2010/11 - 47
•
2009/10 + 664
12. In March 2015, the ABS estimated that Tasmania's population growth was the lowest
growth rate of all jurisdictions for the period.
13. "Population Projections for Tasmanian and its local Government Areas Dec 2014": 17 of the 29 LGA'S are predicted to grow in the period 2013 to 2037, of these only 3
are from the northern region [NTD]. Launceston ranks number 10 for growth, west
Tamar equal number 14 and Break O Day the lowest at no 17. Of the 12 LGA's with
declining population over this period 4 are immediately adjacent to Launceston being
Meander Valley, Dorset, George Town and Northern Midlands. These demographic
12
changes are estimated on birth rates, so the impact of a boom or declining economy
is factored in.
Economic issues
14. Tasmania's economy is forecast to grow 1.5% in 2014/15 the same rate as in
2013/14.
15. China is Tasmanian largest trading partner with 20% of total trade in goods coming to
or from China [AUD $689 million].
16. There are no State, Regional or Launceston economic development strategies. This
means there are no agreed principles, processes or formal collaborative
arrangements to progress economic development across the state, within the region
or within the City of Launceston.
17. On every economic metric available [as evidenced in the State of the States report,
Labour market trends, national media], Tasmania is the worst performing or close to
the bottom of any state in Australia.
18. Tasmania suffered a recession in 2012 and the early part of 2013 and the recovery to
date appears to be narrowly based Saul Eslake 1/10/14. Saul Eslake presentation on
25-6-15 indicates that this has now turned a corner on a state basis, with clear sign
of a recovery and improved business confidence. However high retail sales are
dropping back to closer to national trend and business investment remains weak and
below national trend. Positive improvements in tourism and visitor numbers, diary
production and beef production. Given that positive news, the reality is tha the
Tasmanian economy has and continues to significantly underperform when
compared to the mainland.
19. On 26 April 2016, The Examiner reported that Tasmania is set to lose $520 million in
GST payments over the next 4 years. The State currently relies on GST payments for
more than 40% of its total revenue. Currently the state receives approximately $2.5
billion in GST payments each year. On this basis, annual total State revenue
[approximately total of $6.25 billion] will decline by $130 million per year or 2% per
annum each year over the next 4 years.
20. The price collapse for manufacturing milk in early 2016 and the prediction it will
remain at or below the cost of production for a couple of years will have a negative
state wide impact on the dairy industry.
Retail spending
21. As at 2-9-14, household retail spending has returned to growth as shown in growth in
retail trade, but it is suspected that this is being riven by tourism spending.
Employment and jobs growth
22. [Mar 2015] The Department of Employment projects that employment in Tasmania
will grow by 4,975 jobs by November 2018. This will result from losses in the
manufacturing sector of 1,466 jobs, from the agriculture, forestry and fishing sector of
1,010 jobs, from the public administration and safety sector of 594 jobs and from the
mining sector of 581 jobs, offset by employment growth of 3,586 jobs in the health
13
care and social assistance sector, 1,688 jobs in education and training, 799 jobs in
retail, as well as 691 jobs in accommodation and food services. The concern here is
that most of the losses are in sectors that create wealth [grow the pie] and most of
the growth is in sectors that consume resources or simply redistribute wealth.
23. We have one public servant employed for every 14 Tasmanians, the highest ratio in
Australia [Examiner Dec 16, 2015].
24. There is a clear shift from full time to part time work and now there are almost 40% of
Tasmanian employees working part time.
State revenue, expenditure and budget impacts
25. Australian Government funding makes up 61% of the Tasmanian Government
revenue. The general Government revenue is estimated to be $4.95 Billion in
2014/15. General Government expenditure is estimated to be $5.25 Billion for
2015/16.
26. GST revenues in Tasmania are estimated to have decreased above expected by
$157 million in 2013/14 and it is estimated that a further decrease of $55 million will
occur in 2014/15. However, the May 2015 budget indicates revenues will increase
by $425.8 million and that this increase related to the increase in GST pool estimates
will continue to be a positive influence on GST revenues into the future.
27. Tasmania has a proportionally lower than average amount of GSP per capita, a
proportionally higher level of unfunded superannuation as a % of total liabilities and a
proportionally higher than average borrowings outside the GG sector. In other words
government business enterprises carry more debt.
28. The Government has flagged further cuts to staffing and services and these will take
the form of staff, department reductions/amalgamations and reduced budget
allocation to the public sector. In the 2011/12 budget a reduction of 1700 FTE's was
targeted, but by February 2014 a structural reduction of less than 700 FTE's had
occurred.
29. For the past decade [2003/4 onwards], there has been a growth in Tasmanian
Government expenditure which has exceeded growth in revenue [an average
difference of approximately 1.5% each year].
30. The Tasmanian budget has been in a deficit position since 2010-2011. The Report to
the Treasurer, Analysis of Budget risks April 2014 stated that the budget position
[growing deficits] was not sustainable.
31. As at 2-9-14 the Government proposed budget cuts net debt by $350 million over the
next four years. Without getting into microscopic detail this means that $350,000
million will be withdrawn from what is now an already declining economy.
Macroeconomic theory has confirmed that spending = income = output which leads
to employment … there is no such thing as growth via spending cuts unless the
spending "saved" is invested in stimulatory activity.
32. The Government Budget for 2015/16 states that the infrastructure program will drive
the economy and create jobs. However if the data is unpacked the average level of
infrastructure spending for 2014/15 and that proposed out to 2018/19 [ a 5 year
period] is actually below the average actual infrastructure expenditure for the
previous 6 years.
14
33. On top of this the Tasmanian Government is estimated to June 2015 to be carrying a
$5.45 billion in unfunded superannuation debt liability. The liability of this will continue
to grow until 2023 and then gradually decline over 5-6 decades. This is currently
about half of Tasmania’s total public liabilities, but it is not reflected as a liability.
Cash payment will increase by 88% over the next 16 years and will cost the
Government about $500 million each year.
34. Where the money is allocated is important. Whilst the 2014/15 budget adequately
addresses the budget risks, it seems to have very little focus on the growth
opportunities. About only 1 % of budget has been allocated to development of wealth
creation opportunities [where exports develop/grow and money flows into the State];
being $30 million for freight, $16 million for tourism, $31 million irrigation
development, digital technologies and fisheries and seafood. We will not grow this
economy by cost cutting alone and there is limited focus in the budget on how to
grow the economic pie.
Restructuring the Department of State Growth
35. It is concerning that the restructure of the Client Services unit within the Department
of State Growth, completed in July 2015 resulted in the joining of the Northern and
North West Regional Offices into a single Northern Office. Staff numbers in
Launceston have been reduced from 8 [seven years ago] to 2 people, now 3 [at July
2016]. Management of Northern Office has been transferred to the North West
Regional Office. Given the economic challenges facing Launceston it is imperative
that there is a local leadership and presence of State Growth which can focus on
growing Launceston and the Northern Region.
Health
36. Health funding from the federal Government will decline.
37. The impact of the review of the Royal Hobart Hospital redevelopment may impact on
capital and recurrent costs and funding allocations in the budget. The redevelopment
is a significant economic stimulator for Hobart with total funding of $689 million plus a
further $32 Million for the regional hyperbaric chamber.
38. Tasmania has a higher proportion of old, frail and sick people than the mainland and
this group is growing rapidly.
Population
39. Weak or stagnant population growth impacts on state final demand.
Exports Decline
40. The closure of Mount Lyell copper mine and winding down in operations of Henty
gold mine will impact negatively on international exports from Tasmania, with mineral
royalties having already declined by $50 million at April 2014.
15
Economic Decline
41. The economy is in decline with international exports declining by -5.9% during past
year to 23/6/14. Another source [State Growth] estimates a -9% decline in 2013/14.
DFAT Australia Trade by State and Territories 2013/14, confirms international trade
2012-13 to 2013-14 declined by -9%, but more importantly and concerning is that the
five year trend is a decline of -3% which indicates we are in a long term decline. The
budget papers of 2014/15 show that in the year to March 2015, the value of
international exports [$] was down 8% from the previous year. Volume also has
declined and is 20% lower than five years ago.
42. On 6th June 2015 Examiner reported Tasmania's monthly export totals have
weakened considerably over the past year monthly export sales for the 12 months to
end of April 2015 down by 12% compared with the same period of the previous year.
Average monthly export were $203.8 million vs $234.9 million].
43. The expansion of the Tasmanian Freight Equalisation Scheme from January 2016
will provide further support to international exporters. This will provide a $700 subsidy
for each container leaving Tasmania.
44. The major international exports from Tasmania are minerals, refined ores
[Aluminium, Zinc] or concentrates composing about 78% of major exports. Beef,
dairy and crustaceans make up on 17% of exports.
Investment
45. On March 30th 2015, a list projects across Tasmania that has been put up for
Investment and Innovation funding from federal Government was released from
Regional Development Australia.
The analysis of this indicates: Total funding commitment sought from Government of $13,360,000
 Total investment funding from the proponents of $40,056,000
 Total investment of $53,416,000
 Total expected jobs created 406 jobs
 There were 6 proposals [15% of total number] from the area covered by NTD
 NTD region Total funding commitment sought from Government of
$1,588,000 [12% of total funding]
 NTD region total investment funding from the proponents of $5,930,000 [15%
of total funding ]
 NTD region Total investment of $7,518,000 [14% of total funding]
 NTD region Total expected jobs created 51 jobs [13% of state total]
Of 41 projects proposals none were from the City of Launceston.
This indicates that the level of investment and new project activity in the NTD region
is currently around 15% that of the total State. Given the NTD area represents about
one third of the state, this indicates that this is below expectations. Given all things
being equal it could reasonably be expected to be around 33%.
46. The economies of Hobart and Launceston are tracking very differently. A review of
committed project funding for current and planned major development in Hobart and
Launceston in June 2016, shows huge differences in economic activity with $1,024
million vs $368 million total project funds committed in each City respectively. The
16
Launceston figure includes the $290 Million commitment to move UTAS to Invermay,
which has only just been announced. This indicates that compared to Hobart, there
has been a paucity of major development funds committed in Launceston
Credit ratings
47. As at 28-8-14 Moody's and Standard and Poor's credit ratings and economic outlook
were Aa1 [negative] and AA+ [stable] respectively. As at May 2015 and May 2016
[budget papers] the ratings remain the same.
Launceston and local forces
Overview
1. The Launceston City has less than half of the region's population but it generates
almost two thirds of the region's employment. As such, in its own right, the City of
Launceston is not a functional economic region. The Centre of Full Employment and
Equity has developed a new geography for Australia which is called CofFEE
Functional Economic Regions (CofFEE FER). CofFEE FER was created to address
Census data that is unsuited to the task of providing a systematic understanding of
level of economic interaction within and between neighbouring regions see link
http://e1.newcastle.edu.au/coffee/functional_regions/
2. The retail, healthcare and education sectors are the leading generators of
employment. The output characteristics of retail and health sectors are not regional
exports [wealth creators]. The wealth creating export sectors include financial
services, wholesale trade, metal and metal products manufacturing, agriculture,
tourism and forestry/sawmills/wood and paper.
3. A number of big box business have recently established in Launceston including
Coles, Bunnings, Target, Woolworths, JB Hi Fi. Dan Murphy has recently [mid 2016]
been approved to establish an out let in Launceston to develop the old office works
site.
Disposable income
4. The most significant single determinant of level of retail expenditure is disposable
income. And most retail expenditure increases directly in relation to disposable
income. The indication is that disposable income in Launceston has declined by $150
million as evidenced by decrease in salaries from 2006-2013 [data from ABS 20062011 + the data ID profile for 2011-2013 from web site].
Tourism
5. The numbers of people [tourists] coming into Launceston via the airport has
increased, but this is off a low base, and this has been relatively flat for 4 years. The
Tasmanian visitor's survey indicates that in the 4 years between 2011 and 2014
there was 31% increase in overnight stays in Hobart vs 13% increase in Launceston.
Incidentally 13% increase is equal to a very modest 3% annual growth rate over the 4
years. During 2014 overnight stays increased in Hobart by 8.1% and Launceston by
17
2% respectively. There has also been a decline in the number of night stays by .1
and .2 days respectively for Hobart and Launceston respectively and these declines
have occurred over the past 12 months.
Population
6. Population growth has been declining in Launceston since 2008, but it remained
positive until 2012. Over the past decade, 2012 and 2013 was the first years that the
total population of Launceston has actually declined [id estimates a net decline of -11
and -144 people in 2012 and 2013 respectively]. With net population for the state
increasing, it seems that real the decline in population is being borne by the north of
the state. The decline in population is also of concern because all of the key City
development strategies [Greater Launceston Plan and Launceston Retail and
Activities Strategy etc.] are based on scenarios of population growth in the greater
urban area [0.6% = 1850 persons during 2011- 2016] but not negative population
growth.
7. To put population data into perspective, on 5-5-2016 id released population data for
the 50 top cities in Australia. This summary of this is that
 Launceston's population has slipped form the 17th Largest City to the 21st
largest in Australia
 Launceston has the 4th lowest growth over 5 years rate of the 50 cities.
 The 5 year growth rate of Launceston is about 30% that of Hobart and
Hobart has the 7th lowest growth rate of the 50 cities.
8. The Regional Australia Institute released a report [April 2016] which discussed
Australia's small cities [Launceston is classified as one]. In the report it concludes
Launceston's population growth is one of the lowest in Australia and that there are 5
ingredients for cities to succeed and grow over time. We a have only two of these
The link below can take you directly to the report.
http://www.regionalaustralia.org.au/home/wp-content/uploads/2016/04/Deal-or-NoDeal-Bringing-Small-Cities-into-the-National-Cities-Agenda_April-2016_FINAL.pdf
Demographics
9. The demographic of the community that is currently growing significantly in
Launceston are the numbers of older people, sicker people and disadvantaged
people.
10. The federal Government will move to a health funding model in 2016/17 that bases
funding on population growth and price indexation. This will negatively impact on a
City like Launceston where the populations is aging faster than elsewhere in
Australia and is not growing, where costs will increase proportionally. The examiner
Mar 23, 2016 reported that North of state [Launceston] will lose $358 million in
funding by 2026.
11. Where population categories have increased, the increase is biggest in the age
group 60+ [approximately a 50% increase].
12. The biggest increase in demographic category has been in the number of people not
in the workforce [an additional 955 from 2006-2011].
18
13. The requirement for disability assistance increased by 646 people or 30% during
2006-2011 census period.
Disadvantage
14. Launceston has more social disadvantage than Tasmanian average or regional
Tasmania as measured by SEIFA. It has significant relative disadvantage as it has
25% of SA1s in the lowest 10% of Australian SA1s for economic resources. This
index focusses on financial aspects of economic disadvantage and is a summary of
indicators related to income and wealth, excluding education and occupation related
variable. The level of disadvantage is widely recognised but it is not widely
acknowledged as an economic development issue.
15. 50% of Tasmanians residing in the North of the State have poor medium to long term
economic and social prospects [UTAS March 2016]
Industry sector economic performance
16. Industry Sector Performance from Remplan review for GLP based on 2006-2011
ABS] indicates in the Launceston City: gross revenue in Launceston fell $140million
 gross salaries in Launceston fell $99 million
 regional exports in Launceston fell $245 million
 value adding in Launceston fell $116 million.
 In terms of economic output sectors, there were declines in 10 sectors; output
unchanged in 3 sectors and output growth was observed in 6 sectors, which
means declines or stagnancy in 70 % of sectors.
17. There has been further significant deterioration in the economy, especially since the
industry exits or restructures, Gunn's, FEA, Great Southern, ACL Bearings, Tamar
Milk, Watkins Removals, manufacturing [Just leather, and numerous small fabricators
have closed]… most recent 100 jobs lost to Bradken closure, 39 jobs redundant at
Boag's restructure plus 16 contractors [in addition to 18 casual jobs lost a year
earlier] = total 73 jobs and on 26 Feb 11 jobs lost due to closure of Dick Smiths.
18. ACL bearings has arisen over early 2015, to carve a place as high performance
bearing manufacturer for the USA racing industry, but with only 40 employees it is a
shadow of its former self.
19. The impact of these industry exits and the end of in Federal Government stimulus
packages around 2011 after the GFC is won’t be easily measurable until the next
Census. However, there are indications from the data prepared by iD Economic
Profile that is on our web site. This data indicates that the ongoing decline in the
economy during the period 2010/11 to 2013/14 is following the same trend as
established in the decline over the 5 years from 2006 - 2011. The indicators in iD
Profile have slightly different categories in the Industry Sector Performance but
performance in all indicators has deteriorated since 2010/11. In 2012/13 all indicators
except building approvals deteriorated further [but the increase in building approvals
was from a very low base in 2010/2011] as follows:
Regional Product declined by $139 million

Number of Jobs declined by 1,150
19





Worker productivity declined by $666
Number of businesses declined by 105 [or 2%]
Unemployment increased by 2.34%
Decrease in population by 119 persons
Decreased $ building approvals by $28 million
Unemployment
20. The classification of employed also bears little relevance to disposable income and
the ability able to live a sustainable lifestyle. It is calculated as follows… to be
classified as unemployed a person needs to meet the following three criteria: 
not working more than one hour in the reference week;

actively looking for work in previous four weeks; and

be available to start work in the reference week.
For a meaningful interpretation of unemployment figures we need to understand the
number of people who retire or leave the jobs market and also a sense of their
disposal income. On the criteria above an entire City could be living below the
poverty line and yet still classified as employed.
21. Unemployment for the City of Launceston [CoL] has been at or over 9% between
2013 and 2015 [Remplan, Jan 2015 CoL website] Unemployment is expected to drop
from 7.7% to 7.25% in 2014/15 and predicted to be flat at 7% through until 2017/18.
22. Unemployment is high by national standards. 8.1% in March 2014 and the average
job seeker duration of registration is 33 months. Unemployment for Launceston and
the North east was 7.7 % at December 2015 compared to 5.6%, 6.2% and 6.2% for
South East Tasmania, Hobart, and North West Tasmanian respectively.
23. June 22 2015, Examiner reported that Launceston and North East Tasmania job
market remained almost unchanged since 2013, with 200 less jobs and a 2.2%
decrease in participation.This was the only region in Tasmania to report an overall
drop in employment during that period.
24. August 14 the Examiner reported the North East experienced the biggest drop in
unemployment statewide last year falling 1.7%. Based on year on year ABS regional
employment statistics year on year data released on 13th August, average jobless
rate was 6.4% down from 8.1% in July 2014. It is hard to see why this drop in
unemployment has occurred as there is no evidence of economic turnaround in any
other metrics? It is possible that people have left the district and headed to the
mainland or Hobart for work.
25. On August 24th, 2015 the Examiner reported that analyst Martyn Goddard indicated
that unemployment rates could be as high as 18% in Tasmania when
underemployment was taken into consideration.
26. Youth [15-24] unemployment 'hotspots' across the nation were released on 14th
March 2016 by the Brotherhood of St Lawrence. They mapped - rural and regional
areas under most pressure and the unemployment level was 14th in Australia [1 =
worst] at 16.9 per cent in the Launceston and North East region of Tasmania,
including Northern Midlands, Flinders Island.
27. A meeting on 18 March 2015; of industry training and apprenticeship providers in
Launceston identified that: The north of the state is the worst affected region
20

Business decline seems to be plateauing out with significant losses of
apprentices in 2013, ongoing but less severe losses of apprentices in 2014
and now the occasional firm is begin "to put apprentices on".
 Northern Midlands has the most economic activity and but there is much less
growth in the north as compared to Hobart, and there is no big employer
growing in comparison to Hobart
 Things are doing well in meat, dairy salmon and seafood industries with
traineeships being taken on.
 There is evidence that timber harvesting is picking up and it is foreseeable
that we could return to previous levels of timber harvesting within 5 years,
Hamshire and Forico will drive this expansion. There will be a skills and
experience gap in the forestry sector
 It was suggested that City Heart, Silo, Inveresk, Northbank and Penny Royal
would help employment, but it was viewed that there was considerable spare
capacity in existing construction businesses and that gearing up would occur
in contrast to new jobs being created. At its peak there were 2400 positions
in construction, now it is about 1720.
 It was also noticed that retail activity is being significantly impacted except for
the large retailers. Accountants are supporting more business that will
inevitably close.
28. A meeting was held with a major State wide labour hire company on 27-7-15.
Launceston / northern region were described as the region which has traditionally
highest demand for labour hire. Three years ago the demand halved and it halved
again 18 months ago and continued to contract. In terms of apprentices, there are
currently about 40 apprentices on the north west coast, a similar number in the south
and only 3 in Launceston. There appears to be no light on the horizon to reverse the
trend in the north. Placement into labour hire is above target in the north west and
southern region, but the reduced targets for northern Tasmania are not being met.
Labour hire is a real indicator of the strength of the economy and there is no
evidence that the down turn in Launceston has plateaued or is at a point where it is
beginning to improve.
Large scale industries
29. There have been question marks over scale of operation and/or long term viability of
some of the large employers that support the city such as Bell Bay Aluminium and
UTAS.
30. In Bell Bay's case the world supply, price and cost of production of aluminium are
challenging in the immediate and long term = global oversupply at March 2016. Bell
Bay Aluminium is a fundamental business sitting outside the city and of State
importance as it provides the base load demand for 25% of state energy supply. The
reduction in power in Tasmania caused by low water levels in Hdyro's dams the
incident which closed down the bass-link electricity cable connection to the mainland
resulted in Bell Bay agreeing to take 10% less power for up to 4-5 months. This was
accommodated by slowing the chemical reaction to the minimum that will enable the
production lines to remain operational and resulted in a production loss of 10,000
21
tonnes or $21 million. But the real dangers as reported by Ray Mostogl Fin Rev 8-316 are: once market for the 10,000 tonnes in lost production is gone it will be near
impossible to be able to get the customers for this back, because they will
have negotiated contracts with rival suppliers [especially true in an globally
oversupplied market].
31. In the case of UTAS it is the second largest employer in the state. The recent policy
proposals by the Federal Government are unlikely to be favourable to a regional
University. Anecdotally UTAS has over many years shifted its core Centres of
excellence and senior staff appointments towards Hobart. Recent data obtained from
the UTAS Pocket statistics comparing 2013 to 2011, confirm a reduction of 85 staff
and 36 FTE's in Launceston between 2011 and 2013. In comparison Hobart staffing
has decreased by 15 staff and increased by 60 FTE's. This indicates growth in
resources in Hobart and a shift to full time appointments. The other big question mark
over the University sector, especially regional Universities is the rise in free tertiary
education MOOC. UTAS recently offered a MOOC in dementia care, half the entire
[total] student number since founding had completed that course [at May 2015] but
the University had not made a profit on the endeavour. This indicates the scale of
digital disruption that is occurring and the challenges it poses for Universities.
32. June 3 2015, the State Auditor General finds UTAS has Federal Government
revenues which exceed the Federal Governments own maximum threshold [65%]
and exposes the university to risk of changes in Government policy.
Vacancies in the CBD
33. Since 2013 vacant shop premises have been surveyed annually in Launceston CBD
and the surrounding retail centres of Mowbray, Wellington St and Invermay. There is
now strong evidence of growing vacancy rates most probably related to the decline in
the economy.
34. When last surveyed in August 2015, the level of vacant business premises in :a.
Launceston CBD was 13.0% [City Prom area of 570 premises]
b.
Wellington Street was 20% approach to the city [Most of the area
along Wellington St is free parking] [of 130 premises]
c.
15.0 % of Mowbray Shopping precinct depending on how you want to
manipulate the data [of 84 premises]
Contemporary literature suggests this level of vacancy is becoming an an issue. If
vacancies levels reach 20-25% in Main Street the opportunity to take action is
severely compromised and at best occurs over decades. Whilst shops are turning
over in the CBD, along Wellington St no empty shop has refilled over the 12 months
prior to August 2015 and vacancy levels have climbed from 15% to 20%.
35. Anecdotal evidence suggests that some landlords are not happy to meet the market
and are leaving shops untenanted rather than reduce the rent.
36. Anecdotal evidence also suggests that
a. a number of small retailers are struggling as evidenced by not paying
themselves
b. some business in the big end of town are struggling
c. further business closures and contraction is imminent
22
37. The biggest part of our economy is now is healthcare and aged care services, this
consumes resources in contrast to sectors that create wealth [i.e. bringing new
money into the economy and growing the pie].
38. The economy is also not growing and this means that the "pie" distribution of wealth
gets cuts thinner.
39. There are no known new significant businesses that generate and create wealth
[bring in new money external into the Tasmanian/Launceston economy] on the
horizon. But there is development and there were
 $109 million in development approvals in 2013 and
 a further $133 million in development approvals in 2014 comprising major
projects such as $20 million Pennyroyal redevelopment, $15.6 million UTAS
Inveresk student accommodation, $10 million Woolworths CBD and $16
million silo hotel development and
 there are planned project developments $9 million for Northbank
redevelopment [over 3 years] and City Heart CBD redevelopment [might now
be funded $17.5 million].
40. The impact of the digital economy is exacerbating the leakage of money from small
regional economies, further reducing the size of the economy and economic pie.
Online retailing is increasing at a rate of 10-12% per annum. Retailing is important to
the City yet we do not appear to have a strong adoption of online strategy or
presence in many businesses.
Economic development strategy
41. There is no collective agreement to a region wide economic development strategy or
a strategy for the City of Launceston. In April 2016, this was acknowledged in a
review of NTD and a number of other stakeholders see link to the report,
http://www.northerntasmania.org.au/client-assets/Final%20Report%20%20%20Review%20of%20Regional%20bodies%20in%20Northern%20Tasmania%2
017%20Feb%202016.pdf
42. That said, some economic development strategy can be developed from the GLP
framework.
43. Northern Tasmanian Development began a Regional Futures Project in late 2014. Dr
Anton Kris, University Newcastle facilitated this process and this may be the start of
the development of a private, public, government, industry economic development
project partnership.
44. As part of the development of the Launceston profile "id" have loaded a
comprehensive current statistical data base on the Council website which can be
accessed
until
December
2016
from
the
following
link
http://economy.id.com.au/launceston . On the left hand side of the webpage there is
a section called reports. Open this up and order any of 3 reports and custom design
the data provided. Check all of the boxes and get the full report. The report will be
emailed to you within about a working day and is very useful.
45. In April 2016, Regional Australia Institute released Deal or No Deal :- Bringing Small
Cities into the National Cities Agenda. Small city = greater than 50,000 people. They
identified 5 ingredients that enable small cities to succeed and grow consistently over
time.
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

Connectivity through physical and digital infrastructure [yes we have]
Strong human capital and ability to support a density of high paying
jobs [we don’t have, holding the 4th lowest rank of 31 cities]
 Globally competitive specializations that enable economic growth to
be captured [we don't have]
 Amenity [yes we have, ranked number 1]
 Network of high capacity institutions [we don’t have. We have the
organisations but not a coordinated network]
Population projection to 2026 is that Launceston will be either the lowest or second
lowest of the 30 cities.
46. The City of Launceston will finalise its economic development strategy for the City in
September 2016.
What's Missing?
1. It’s the economy… job creation and an absence in growth in enterprises that
generate wealth. [meaning new money into Tasmania, growing the pie, which is not
the same as operating a profitable business which can operate on recycled wealth]
2. Lack of confidence to grow business
3. Lack of risk taking by Governments
4. Lack of compelling stories as to why you would invest and what you could invest in?
5. Perceived attitude that Tasmanian is not open for business
6. Lack of investment, Rabo bank is doing investment tours to New Zealand to try and
grow the Dairy industry, Vivian Zhao our State Government representative in China
lacks business proposals to present to investors.
7. Lack of resources targeted to stimulate support wealth creation = people, programs
and $
8. Only 4 [Launceston, Meander Valley, Dorset and Break O'Day (vacant)] of 8 LGA's
have economic development officers, all LGA's with possible exception of Meander
Valley are under resourced compared to the mainland LGA's metrics [3.4 FTE's and
4.8 FTE'S is the national average for rural and urban LGA'S respectively]
9. The new Department of State formed in 2015. It is still not clear what they will do.
The Labour Governments 10 year Regional Economic Development Plan launched in
November 2012 was only in its second year of implementation when it was
abandoned by the Liberal Government. There is currently no economic development
strategy for the region or the State of Tasmania.
10. There is a lack of a seamless processes linking business to export markets
11. To date State Government Agencies have worked at industry strategy level and are
not "in the businesses" on the ground.
12. Saul Eslake believes in the 3 Ps of prosperity… population growth, productivity
growth and participation in the workforce growth… maybe we need to look at what is
happening to these.
13. In a 2008 landmark study of economic development in 45 small towns in the USA all
successful communities maintained a broadly held vision and goals and were
proactive and willing to act on a particular challenge before it became a problem and
demonstrated a willingness to embrace change, assume risk and work collectively.
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Recent Reactions
1. Rising anxiety in Launceston which has become public:a. Lots of private discussion on the economy and business concerns about
empty shops
b. Pop up shops project, 3P Consulting
c. City prom being requested to do something about empty shops = pop up
shops
d. Consultants seeking funding from Government for business revitalisation
services for City Prom
e. Recent face book page "save our city" gave public voice to these concerns
2. Looking to blame someone, the issue of moving the bus stops and angst about
impact of parking fees on CBD don’t address the underlying and real economic
concerns
3. Forums being held to address skills and training for youth, but these are not linked
with a targeted jobs market. The Federal Government 2015 Job Creation Forum and
"Youth X-Factor Project" are examples of campaigns responding to the major issue
of youth unemployment. However there seems to be no follow up from these
activities [the principal activity seems to be to hold the event] and there are few and
declining numbers of jobs to fill.
4. Local Government requested to support the CBD, by erecting screens, implementing
parking fee relief, develop a business prospectus, implement the City Heart Project
5. State Government actively promote/publicise business support programs e.g. Freight
Task Force and their online business support programs
6. State Government through the Premiers Local Government Council is progressing an
Economic Development Working Group, with an action plan to be released in April
2015. The actions and implementation process is not clear.
7. Federal Government seeking advice and taking action on:a. what services the City of Launceston offers to support business and how we
are actively promoting their online offerings for small business.
b. work for the dole initiatives
These actions do not address the underlying economic malaise that is causing the
challenges and the actions are not being coordinated across agencies. The reactions are
issue specific and not connected with the overall picture. They arise from pressure to do
something. This approach could stretch limited resources into areas that will provide little or
no return in terms of creating wealth opportunities.
There is an opportunity to focus on the long train home and not be distracted by knee jerk
activities.
Opportunities
Principles to identify opportunities
1. To identify opportunities we could have three base line assessment criteria.
Assessment as follows would knock out 95% of the dreamers:a. the opportunity must be wealth creative = bring new money into the economy
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b. the opportunity must rate high on a relative competitive index and be globally
competitive / profitable, and have supply capability [i.e. be able to compete in
the global world we live in]
c. the opportunity must have a high level of market attractiveness [i.e... have
high demand profile, price, size etc.]
Positive Fundamentals
2. Not many regional centres in Australia that have the benefit of positive fundamentals
as follows:a. geographically the city is the most central City in the State.
b. a university UTAS, Australian Maritime College
c. high quality secondary colleges that attract international students
d. an airport
e. significant NBN connectivity [most fibre connected city in Australia]
f. are within 1 hr of Melbourne or a large capital city
g. relatively affordable housing / business premises
h. relatively low wages
i. great proximity to and easy to access services
j. regional hospital
k. significant natural tourism assets and potential with Launceston as a gateway
l. significant investment in irrigation that will grow the agricultural sector
m. outstanding quality food and wine
n. City nestled into a river environment
o. tidal water flows associated with a 40 km natural deep water estuary
p. moderate Mediterranean climate
q. a city that is large enough to be a test environment for significant industry
development processes
Get people on the same page and support what we already have
3. Hold an annual economic development forum or exporters forum and educate and
engage
4. Share knowledge so everyone knows who is doing what and what is available, a bit
like a drought task force … Identify State and Federal programs that support
a. establishment of small businesses
b. existing businesses
c. businesses in difficulty
Tourism opportunities
5. Tourism is wealth generating and brings new $ into the economy. More people are
coming into the Launceston airport. Let's figure out how to leverage this opportunity
through better experiences [bike trails, golf, food, wine, ecotourism experiences]. In
practice we do not welcome Asian visitors, so a simple first step could be to begin an
education program for our business people. This is a growth market.
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6. Branding, Tasmanian has a story to tell, but it has to get the narrative right … what
does it have to offer the rest of Australia and the World… clean, green, safe, lifestyle,
naturalness story could be revisited etc.
Smart city and the digital economy opportunities
7. There must be opportunities in the digital economy. The entire city of Launceston
[approx. 34,000 business or residents] is now connected by fibre cable to the NBN.
It is the most fibre connected City in Australia. There is no plan developed to
capitalise on this opportunity. State Government might be interested in
supporting/developing programs to do this.
8. "Connected Launceston" is a group of industry and business stakeholders formed in
March 2016. It is facilitated by BOFA to leverage digital / nbn opportuinties for the
City of Launceston.
9. More creative and collaborative work could be done around extending Wi-Fi in the
city and providing an enhanced tourist experience using apps and mobile devices
and place making concepts. Make Launceston a SMART city.
10. The digital economy is a tool that could be used to provide opportunities to address
skills training, personal and professional development of: youth,
 unemployed
 poorly educated and socially disadvantaged
 socially excluded
 Aged.
11. http://www.decodethefuture.com.au/
12. http://www.nbnco.com.au/content/dam/nbnco2/documents/Super%20connected%20li
festyle%20locations_nbn%20report_FINAL.PDF
Contemporary forestry / fibre opportunities
13. Identify how to value add to the forestry estate. There is no plan or project as to how
we capitalise on this resource and the value add in Tasmania. We can take a position
on this and get active in supporting it. The UTAS student accommodation
development at Inveresk is an interesting and clever example of modern
contemporary prefabricated modular building design and construction using local
companies.
14. There is an opportunity to leverage opportunity from the Launceston based UTAS
Center for Sustainable Architecture with Wood.
15. E.g., formalise developing Launceston and Tasmania as a centre for innovative
development and use of wood products = adopt a wood first policy program using the
recently adopted policy in La Trobe City Council and Wellington Shire Council in
Australia or New Zealand Government or British Columbia etc. … we could facilitate
construction of building options using manufactured/laminated and innovative wood
products [a] develop a deliberate policy to encourage these constructions + [b]
identify local producers of these products and gaps in this market [with UTAS and
State growth] + [c] hold an investment forum to attract businesses and developers
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who may wish to grow these opportunities [UTAS, State Growth, Private Forestry
Tasmania, timber manufacturers…].
http://www.indesignlive.com/articles/projects/delta-by-grocon
http://www.architectureanddesign.com.au/news/nine-storey-melbourne-apartmentgoes-up-in-just-fi
http://www.completehome.com.au/tips-and-trends/15-fabulous-prefabricatedhomes/33836.html
Agriculture opportunities
16. Similarly there is no plan or vision as to what agricultural industry will look like under
the current irrigation development being rolled out across the state. It won’t be just
dairy development. What other industries will grow and where is manufacturing and
value adding in this story? If Tasmania produce is going to be exclusive, niche and
expensive what value adding processes will need to be in place the leverage the
value from pristine quality commodities?
17. Madeline Skerritt [RDA Board] suggests that the Netherlands is synonymous with
food innovation, and as a result it can claim the following:
 It is the second largest exporter of food after the US, and achieves this with
approximately the same amount of arable land as Tasmania.
 Agricultural productivity is five times greater than the European average.
 Of the world’s 40 largest food and beverage companies, 12 have a major
production and/or R&D facility in the Netherlands.
A number of factors have contributed to this, but one of the most influential has been
the creation of Food Valley NL. A little over a decade ago three local councils
recognised the importance of the agrifood industry to their region and in an effort to
support and encourage the industry they formed Food Valley NL . Today Food Valley
NL is a facilitator of partnerships, a project supporter, an encourager of innovation
and entrepreneurship, a matchmaker between research institutes, universities and
business, and a technology and funding scout . Its vision is simple – to help agrifood
businesses innovate.
Achievements at Food Valley NL include:
 135 Dutch company members and international memberships from Denmark,
Thailand, Japan and USA.
 The creation of DutchFoodInnovations.com, a searchable database of innovative
agrifood solutions.
 The annual Food Valley Expo and Awards which recognise the most groundbreaking and economically viable agrifood innovations.
 The formation of a relationship with Silicon Valley to explore the cross-pollination
of agrifood and information technology.
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 Collaborations with Seed Valley, a seed breeding and production region in the
north of the Netherlands; Food Connection, a Dutch agrifood sales and
marketing company; and Greenport Venlo, a cooperative horticultural and
agribusiness region/venture
A list of wealth creators
18. Council, City Prom, Chamber, NTD, RDA, State Government, Industry bodies etc.
could identify and commit to a public position to support key economic development /
wealth creation projects such as: Tourism
 Tree changers
 Golf
 MOFO equivalent
 AFL football and other sports events
 mining
 forestry/fibre production
 wind farms
 Asian engagement [become a city that welcomes Asian tourists]
 UTAS and creating a student city
 Why don’t we develop a celebration of the seasons...4 seasons and work
around that [Dark MOFO is an example of a seasonal celebration/event etc?]
Export ready
19. The decline in exchange rates [by 30%]; the extension of the freight equalisation
scheme; and the free trade agreements with Korea, Japan and China and TransPacific Partnership agreement are a great boost to the opportunities for export trade.
We could take a proactive role in facilitating and supporting export readiness and
development of business.
Opportunities to collaborate and support other LGA's
20. Support key economic development / wealth creation projects in neighbouring LGA's
such as George Town Industrial Precinct and Comalco. We need this precinct to
grow and prosper. The precinct is the largest area of undeveloped industrial zoned
land in Tasmania and the development of this should be supported.
21. A range of other activities are identified under the umbrella of the Greater
Launceston Plan. These include:  Bell Bay investment strategy
 Launceston Gateway Precinct
 Regional Migration Program
 Launceston City Heart Project
Ageing population opportunities
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22. Identify which growth and economic prosperity opportunities arise from a growing
Aged/Health Care sector and then pursue these. Can Launceston be developed as a
center of excellence for piloting Aged/Health programs and research etc. Can
Launceston become a destination for Retirees? What would that look like? How
would we market this?
Inner city living opportunities
23. Remove development barriers in the CBD. Identify how big the vacant CBD area is
and numbers of residential spaces that can be developed. If it can significantly
change the dynamics of the CBD then create a program, process, resources and a
team to drive a heritage building development train.
Understand local economic business trends
24. Identify what is happening in the manufacturing sector in Launceston and what will
this look like in 5 years on current trends?
Asia engagement opportunities
25. Become more active in supporting export enhancement programs to both the
mainland and Asia by lobbying for programs to support developing export readiness of our people
 providing better access to markets
 settle / sort out a Tasmanian brand and how this can be applied to export
products
26. Formalise developing Launceston as an Asia friendly City… we could facilitate [a]
welcome to airport and city [with TNT], + [b] enhance Wi-Fi to develop apps for place
finding, culturally sensitive information [language], promote business [with UTAS,
Cityprom] + [c] education of businesses re Asian tourists with [UTAS, Cityprom,
Chamber, State Growth]. This would wrap a number of initiatives into something
where the sum is significantly greater than the individual components and this is
really a do-able project. Bits are getting done but it is not bolted together.
Opportunities to develop new renewable energy industries
27. The Tamar estuary has characteristics that could be explored for the development of
tidal ocean current energy.
http://www.siemens.com/innovation/apps/pof_microsite/_pof-spring2011/_html_en/tidal-current-power-plants.html
http://www.marineturbines.com/Tidal-Energy
Opportunities to position the City of Launceston for the impact of climate change
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28. The IPCC identified on 1ST November 2014 that "Local government and the private
sector are increasingly recognized as critical to progress in adaptation, given their
roles in scaling up adaptation of communities, households, and civil society and in
managing risk information and financing". What is local government role here?
Opportunities to develop collective partnerships
29. We could develop an economic development project partnership with UTAS,
Industry, Chamber, City Prom, NTD, RDA, LCC etc. in researching and identifying
options and solutions to the existing challenges. There is currently no agreed
collective partnership or mechanism to do this. Meet with the University of Tasmania
- Tasmanian School of Business and Economics Advisory Board in Hobart to tease
out how / if UTAS can be involved in economic development collaboration. This
seems to be a perquisite when successful economic renewal occurs, i.e. you have to
have a collective of players on the same page and doing something.
Migration Strategy
30. A population growth strategy could be adopted. The recent Population and Migration
Strategy prepared by Professor David Adams for Hobart and Launceston on July
2014; indicates that "this should focus on actions which combine economic growth
and investment with city branding targeted at population growth via absorption from
major mainland cities, domestic/international sojourners and regional returners".
That said Professor Adams also indicates that "there is little evidence that traditional
local government led strategies around increasing population stocks will succeed to
scale and scope to warrant strategic effort from either Launceston or Hobart".
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