The Sunday Mail reported this morning that Queensland Federal Government MPs are “at odds over federal relief funding for Queensland” in response to the economic downturn in much of the State outside SEQ (e.g. note the large job losses in the Mackay and Queensland outback regions over the last twelve months in the chart above). It appears that Herbert MP Ewen Jones is opposed to a $100 million rescue package being proposed by Dawson MP George Christensen, noting “Queenslanders need to be better than just putting out their hand.’’ Nicely said. I sense that Mr Jones understands that any assistance package would not provide any long-term sustainable benefit to regional Queensland.
Rescue packages, or structural adjustment packages as they are referred to in policy circles, are typically found to be ineffective. Rather than trying to prop up faltering regional economies, it is usually better to allow the playing out of the natural economic adjustment mechanisms, which could include people migrating out of some regions to find employment in regions with more favourable conditions.
It is widely acknowledged that Australia’s record across all levels of government in structural adjustment policy has been poor. Clearly, structural adjustment packages are challenging to design well. Research by the Grattan Institute (see Investing in regions: Making a difference) has found that structural adjustment packages across a range of industries typically (p. 26):
- “have a high cost per job;
- do not appear to have significantly affected overall long term employment trends in the region; and
- did not result in the regions performing any better than other regions that lose a major employer but did not receive any government assistance.”
It appears pointless to devote funds to trying to promote new job opportunities, as ultimately economic fundamentals in the region will determine industrial and employment growth. As noted by the Grattan Institute (in the report cited above on pp. 26-27), regarding substantial amounts of structural adjustment assistance provided to Adelaide following automotive plant closures:
“…unemployment rates in Adelaide persisted above the national average for the last decade despite significant structural adjustment funds. Grants paid out under job attraction schemes introduced following automotive plant closures appear to have only temporarily reduced the region’s unemployment rate. Overall, local unemployment rates seem primarily driven by national economic factors and the lack of economic diversification and vibrancy in the area rather than individual plant closures or specific job attraction and retention programs.”
Generally, the view from many authorities, including the Productivity Commission, the Grattan Institute and CSIRO, is that government policy should not try to prevent the natural adjustment of regions to economic shocks from occurring, and should indeed facilitate that adjustment occurring, while managing any adverse consequences using other means. Hence so-called exceptional circumstances assistance would be undesirable. Instead, a range of policies designed to expedite adjustment, such as re-establishment grants or loans and assistance to obtain professional business advice, may be desirable.
Clearly, a significant part of regional adjustment is expected to occur through migration flows. A 2001 study by Paul McGuire, then at the Queensland Department of Employment and Training, found that a large part of a region’s adjustment to declining employment opportunities occurs via migration flows. Governments should accept that this is natural and desirable and not waste money on regional assistance schemes. As John Daley from the Grattan Institute has wisely observed:
“…governments should put development funds where people and jobs want to go.”