Corporate decentralisation and corporate investment in regional and rural Australia is as important as public investment. Through its inquiry, the Committee will examine ways to attract and retain corporate entities to non-metropolitan areas. Specifically, the Committee will examine the barriers to corporate decentralisation, and how the Commonwealth can help to overcome these.
Jane-Frances Kelly and Paul Donegan observed that the cities are still the main centres of economic activity:
Eighty per cent of the dollar value of all goods and services in Australia is produced on just 0.2 per cent of the nation’s land mass, nearly all of it in cities.
The combined central business districts of Sydney and Melbourne alone – 7.1 square kilometres – generate nearly 10 per cent of the value of goods and services produced in all of Australia, three times that produced by the agricultural sector.
Entities that operate on a profit based business model are likely to establish and retain a presence in those areas where its operations and profits can be maximised. For most private sector companies, this is in the populated metropolitan cities. For example, a company whose business exports large amounts of product will need direct access to an international shipping port or perhaps an airport. Transport and logistical costs will most likely multiply significantly if that business were to relocate to an inland location where such facilities are not directly available.
The market realities that apply to the large cities, such as the relative ease of communications, logistics and the advantage of a large customer base, are likely to remain the main attraction for businesses.
Any discussion of corporate decentralisation in support of regional development must be based on a shared understanding of what this means. As with public sector decentralisation, it may be difficult to measure the outcomes of any relocation or determine if it has contributed to the improved growth and prosperity of a region.
For example, the expansion plans of a large hardware chain may, or may not, contribute to regional development. Although a new store opening or building in a regional centre may involve a large new financial investment, it may be the case that the company is simply purchasing existing stores from a competitor. There may be no net growth or gain, but rather, filling a gap in the market. For example, in March 2017, it was announced that Bunnings would purchase eleven former Masters Home Improvement stores across Australia and open nine new stores across NSW, Victoria and Queensland.
The other issue for consideration is the profit destination of corporations. More specifically, how much of it is likely to stay or be invested back into regional communities. For example, should a national or international company purchase a locally owned enterprise, its profits may be sent to its head office in a major city, or to its parent company which may be a multinational in another country rather than remaining in the local community. In this case, there may be little return on the presence of these companies in non-metropolitan areas.
Some examples of corporate decentralisation in Australia include:
Hoffman Engineering is a specialist engineering company that was started in Perth, Western Australia, in 1969 and now operates in five cities (including overseas), employing over 500 people. In 2010, the company established its eastern operations in Bendigo, Victoria. In doing so, it created approximately 65 local jobs in heavy engineering.
Keech Australia, has been designing and manufacturing steel products for mining, excavation, construction, agriculture, rail transport and defence, for over 80 years. In 1995, Keech moved from its Mascot foundry in NSW, to expanded premises on 11 acres in Bendigo, Victoria, where its foundry and head office are now located.
Macquarie Bank’s Paraway Pastoral fund moved to Orange, NSW, in 2015 taking staff from Sydney and across NSW, as well as employing people from Orange.
It is also worth noting that there are also examples of corporate entities leaving regional areas and re-locating to the state capitals.
In April 2016, Target - a large retailer with shops in each state and territory of Australia - announced that it was re-locating its headquarters from Geelong to Melbourne with the transfer of approximately 900 jobs.
In 2011, Telstra closed down its regional call centre in Moe, eastern Victoria. A new Telstra call centre in Melbourne's Docklands, with more than 1,100 operators, was expected to take most of the Telstra customer calls that had been handled in Moe, with overflow now handled in call centres in the Philippines.
The Committee hopes to learn more about the experiences of those corporations that established a base in regional areas, only to withdraw down the track.
The role of the Commonwealth in encouraging greater decentralisation may largely rest in incentivising private sector companies. For example, by offering:
early stage equity or access to affordable finance;
public private partnerships;
targeted funding or grants for industry; and
subsidies or exemptions from levies or taxes.
In her address to the National Press Club on 19 April 2017, the Minister for Regional Development, the Hon Senator Fiona Nash, made reference to the idea of a regional database. This idea arose during discussions with business groups regarding corporate decentralisation. The database would list ‘the strengths and natural advantages of Australia’s regions, as they related to business’. Specifically, Senator Nash said the database would include:
…local workforce skills and intellectual capacity, local infrastructure including transport links, natural advantages like climate for a wine region or access to reliable irrigation water, and established local industries and businesses which an arriving business could work with or service.
Any business interested in establishing a presence in a regional or rural area could use the database to help determine which area might be best suited to their business needs.
The Committee is keen to hear of other examples or ideas to attract and retain corporate Australia to the regions.