Governments can be important catalysts for regional transitions to occur in an appropriate timeframe. On this point, the Monash Sustainable Development Institute (MSDI) noted that 'Governments do not have to spend vast sums of money driving the transition, but they do have to understand the drivers of investment and regional economic transformation'.
Professor Karen Hussey from the Centre for Policy Futures argued that it is important to transition fairly and equitably with stability, stating that 'It's not just about jobs. It's about society, it's about community, it's about people, and it's about political and social cohesion and stability. I think that's profoundly important'.
The Monash Sustainable Development Institute (MSDI) argued that the precursors for regional transitions into renewable and circular economy industries are not being adequately supported:
The technology for transitions exists and is proven; the finance for the projects is ready; but, commonly, the regional investment settings mean that the technology and its financing can't find a home.
Investment in new innovations and industries is largely contingent upon the regulatory, policy, planning and infrastructure environments into which the investment is made. Successful transitions are built on the rigorous assessment of regulations, policy and planning frameworks, infrastructure services and material flows to determine suitability for renewable/bio-circular innovation investment. This also enables regional stakeholders to forecast the changes required to facilitate future capital investment.
So that change can be steered from a local level, governments at all levels must work together and with businesses, unions and regional communities.
Government procurement policies
Government procurement policies can also play a role in supporting the development of new industries in regional areas and associated employment opportunities. For example, Dr Dirk Visser from the Monash Sustainable Development Institute explained that governments can create markets for products and services:
We create markets all the time, and those enablers of creating markets for new products and new services are something which is better done at a centralised level than with every region trying to do that. So that's a way in which regional governance and national governance can really complement each other…some of these bigger trends—the renewable industry, the hydrogen or the bio industry, and moving away from landfill—those kinds of markets can be created at a national level.
Councillor Sarah Stanley of the Shire of Collie outlined how government procurement had the potential to support local businesses more:
Government investment in clean manufacturing, including procurement targets for recycled materials in government contracts, would create opportunities for meaningful, sustainable work in regional areas while helping to address climate targets…Governments—local, state and federal—are all significant procurers, and including incentives in your procurement processes would help create a market for these industries, which would lead the way for private industry that will also take on those products, creating jobs and dealing with the waste issues at the same time.
The Centre for Policy Futures provided the following example:
Recently, in some regions the desire and need to shift to renewable energy sources has in itself provided a focus on community-owned infrastructure such as solar farms, which have both attracted investment and secured new jobs (see, for example, the Cities Power Partnership). Clever use of local government procurement principles is a particular feature in some of these communities.
Similarly in the clean energy space, the AMWU outlined how government policies could promote industry and jobs:
I think the other kind of policy on which we've seen work to some degree in this space has been how governments have looked at leveraging local procurement around domestic battery use. In South Australia, they had a rebate scheme for domestic solar batteries. Early access to the rebate was given to consumers who were willing to purchase an Australian manufactured battery system, and this kind of early window was opened up for, I think, approximately six months. Within that time, three battery manufacturers opened in South Australia, including one which took up part of the Holden plant in Elizabeth, doing battery manufacturing assembly. So I think policies like these, which promote manufacturing in Australia and expand the supply chain, are critical in making sure that we get the most out of the opportunities that lithium offers.
In Collie, the committee heard, government funding for initiatives to diversify and grow the local economy seeks to increase local content and recent changes to that state government's procurement processes should enhance local industry participation in the supply of goods and services.
However, the AMWU-WA Branch was not convinced that this policy had necessarily increased employment in the regional areas, arguing that many of the jobs were taken by Fly-In Fly-Out (FIFI) workers:
The irony of it is that we've got blokes coming off those jobs there who have got the skill set, and they could be working at Kemerton now. What we've been saying and what the state government has been saying quite clearly is, 'We want to try and employ local people to try and steady the economy here.' The reality of Kemerton is that it's getting built by people from Perth who are living down here. The only local benefit they're getting is the caravan parks are full and the motels are full of guys who are doing drive-in drive-out work…
Rail rolling stock
The AMWU argued that the federal government should utilise procurement opportunities in rail, defence and renewable energy manufacturing and maintenance to better support regional communities. Mr Adam Wieladak from the AMWU explained that:
In our submission we show that for industries like that [defence and rail], where government plays such an important role in the procurement process, they can really anchor manufacturing hubs in regions…
On the topic of rolling stock procurement, the AMWU noted that decisions by state governments to source from international manufacturers had not delivered the stated cost or efficiency benefits for a variety of reasons. In New South Wales, there are issues with the length of the platform, size of tunnels and whether the trains are able to run on the tracks. Similarly in Queensland, domestic manufacturers are fixing issues with the disability toilets on rolling stock.
In the case of ethanol production, Bioenergy Australia outlined that, despite ethanol production being cheaper in Australia than refined petroleum, Australian producers were not operating at full capacity:
…biofuels in Australia have no direct access to market. So for ethanol, or biodiesel or renewable diesel to make their way to a consumer they need to go through an oil distributor. Now, if I were an oil distributor, I would be seeking to push my own proprietary product. I think that's quite a normal thing to do. But really, it makes the security of offtake very difficult.
When you don’t have that security of offtake you're not going to have investment in new facilities and you're not going to have facilities operating at their full capacity.
Bioenergy Australia went on to explain how changes to fuels standards could improve the offtake market for ethanol, similar to what has occurred in the United States where there is a 15 per cent ethanol mandate:
It's about getting to a place where there is an intervention which requires there to be a percentage of that fuel in every fuel that we run. For ethanol to become the octane enhancer in all our fuels across Australia would have a significant impact. It effectively would then become the refiner's responsibility to be ensuring that ethanol is running through the system.
Mayor Greg Williamson from the Mackay Regional Council argued for a government mandate for ethanol in domestic fuel:
We want to see some leadership in, for instance, the mandate for the use of ethanol for use as a domestic fuel. At the current rate, no business can make a profit and there's no further investment in those businesses to create the future jobs. If there was a mere five per cent increase in the ethanol mandate, we wouldn't be able to grow enough sugarcane to meet the demand.
Bioenergy Australia noted that progress was being made to reduce the level of aromatics in fuel, potentially opening up the offtake market for ethanol:
The aromatics pool has been agreed to be reduced. We are now working with the department on what could be the potential other aromatics replacements to enhance octane. We are hoping that ethanol will be seen as the cleanest, lowest-emission job-creating opportunity…
Bioenergy Australia highlighted that the Swedish Government has implemented a mandate for biojet fuel which has provided the offtake security for producers:
One of the things that Sweden decided to do in order to support the facility for it to be financially viable was they looked at their own government travel through aviation and decided that they were going to be willing to pay a certain amount extra for all of their government travel expenses. They calculated how much fuel that would equate to and they were then able to justify through that to create an offtake for a tender for the production of that fuel within a facility.
On 13 November 2019, the Australian Renewable Energy Agency (ARENA) announced that it had agreed to a request from the Minister for Energy and Emissions Reduction, the Hon Angus Taylor, for ARENA to develop a roadmap for bioenergy to be used in the decarbonisation of Australia's industrial sector. Issues that the roadmap will cover include:
The potential for biofuels to decarbonise the industrial and transport sectors, particularly ‘hard-to-abate’ sectors such as aviation and marine;
The potential for biofuels to contribute to Australia’s liquid fuel security;
Opportunities to decarbonise the gas network;
Bioenergy opportunities for heat, steam and power;
Quantifying the economic opportunities for Australia, including a focus on regional Australia.
The National Waste Recycling Industry Council advocated for governments at all levels to support recyclers through market creation. Local councils, they suggested, could reuse materials within their own activities, such as road construction or servicing sports fields.
Further, policy that establishes and maintains zones for recycling can make the difference for recycled materials to be cost competitive. The NWRIC provided an example of a facility in south-east Melbourne:
It's an important facility to collect and recover construction and demolition materials and glass and reprocess them and put them into roads. It's part of an area that's been targeted as a green zone, in the sense of bushland. They want to extend the lease, but there is a contradiction. It's a question of whether they can stay there, which would have a significant impact, because trying to find an alternative place nearby—it's very important that they're located close to the source of the waste material but also can go back into construction material. That means they can compete with virgin sand, because they're trucking virgin sand from out of the city, whereas here you've got something within the city that can be aggregated, crunched up and re-used and put back out without having to travel 150 kilometres in traffic in trucks. That's an example where local and state planning is saying in one part: 'Yes, we want to have dedicated zones,' if you look at the infrastructure plan for Victoria, but then you've got a local planning decision or a state planning decision that's working against it.
The NWRIC consistently highlighted the importance of product stewardship legislation in creating and supporting certain recycling industries.
And the role of community education in making sure that the inputs into the recycling process do not derail it at the start was also noted. The National Waste Recycling Industry Council provided evidence that government support and education programs in Western Australia reduced contamination in kerbside recycling collection drop from 30 per cent to 8 per cent once a certain level of investment in community education was achieved, arguing that 'We all need to be reminded regularly. We need to have a lot more investment in education, and we need consistency nationally, rolling down to local council level'.
A number of stakeholders cited an increased role for government in developing the ecological services sector. For example, Ms Diane Lanyon from Ecosure contended that:
Investment by the government in Australia's natural areas as if they were infrastructure could and should be considered. This is, after all, the infrastructure of our future. Connecting landscapes on a local and national scale is essential for building resilience in our ecosystems and communities in the face of a changing climate.
Regen Australia noted that the expansion of ecological restoration into other regions would require:
national standards for the practice of ecological restoration that are accepted and implemented by governments and industry
government laws and policies to support best practice restoration
access to funding and workers with appropriate skills.
Professor David Lindenmayer outlined the enormous opportunities for native forests in Victoria to sequester carbon and create jobs:
…our environmental and economic accounting analysis suggests that the carbon market is up to four or five times more lucrative to the state of Victoria than the timber and woodchip market is at the moment.
The estimate for a carbon farming initiative, including feral animal control, revegetation, seasonal fire crews, carbon measurement and the like, could be up to 1,000 regional jobs in eastern Victoria.
However, Professor Lindenmayer noted that an important factor constraining private investment in natural forests was the lack of a carbon accounting framework:
What we are missing is the carbon methodology, and we're missing the vision from state and federal government to allow that exciting and important opportunity to take place.
The Centre for Policy Futures argued that successfully and fully exploiting an expanded terrestrial and marine based carbon market would require:
robust policy and legislative frameworks that set the rules for carbon markets in Australia
landholders being aware of the opportunities available through a carbon market and being skilled at taking on diverse revenue streams and managing multiple 'uses' of their private property.
federal, state and local governments committing to coordinate policy around the voluntary carbon market to remove unnecessary barriers to engaging in that market.
Stakeholders outlined the importance of reducing regulatory barriers for existing industries and in the development of new industries.
Councillor Sarah Stanley from the Shire of Collie outlined a number of regulatory issues that, if overcome, could catalyse new industries:
Western Australia's planning framework is unnecessarily constrained, costly and time consuming. Plans for new industries are often abandoned due to costs and processes required for land rezoning, scheme amendments and other land planning processes. Any new industries that are looking to set up—we caught many of them along our transition process—come across all of the various bureaucratic processes they'd need to undergo, which are often very costly. Those things that could be extremely good in creating new employment opportunities in regional areas are just left to go somewhere else where it's easier to set up business.
A complete overhaul of dated and rigid state agreements would allow strategic land to be repurposed for diverse job-creating industries. For example, here in Collie there's been an opportunity identified to create protected cropping located near power station infrastructure to allow that latent heat to be used to heat greenhouses to grow products for export. This industry alone has the potential to create thousands of direct employees, as well as many indirect jobs in transport, storage, processing and marketing, but it requires access to land, water and all of those other issues as well. Land is the biggest hold-up for that one at the moment, and it's probably something that could be easily changed.
Such regulatory impediments to investment were echoed by Mayors of other regions in the South West of Western Australia.
In the case of organic waste, Dr Michael Askew from the Monash Sustainable Development Institute noted that in the case of waste material processing:
It can be very difficult, for example, to move organic waste across local government boundaries—local government to local government. We haven't quite got our planning systems right and ready in a lot of places.
But these barriers can be overcome, as the committee heard from the councils in Newcastle when discussing the benefits of the joint organisation network which has been established by the NSW Government.
Policy settings can also encourage the development and/or expansion of new industries. The committee heard of various examples of where policy certainty could assist regions to transition.
Ms Liz Ritchie from the Regional Australia Institute contended that:
Policy uncertainty, as everybody knows, doesn't help any transition. The first step is ensuring there is a secure landscape—and what that is—and then, once that is known, being able to move forward from there and undertake that longer term planning…
Stable energy policy will give certainty for investment
Several stakeholders outlined the importance of a stable and long-term energy policy at a national level to provide the certainty for businesses to deploy the capital and invest in the workforce to sustain regional economies.
The AMWU submitted that 'Increasingly we are seeing instances of capital flight from Australia due to the significant uncertainty regarding energy policies'.
The Clean Energy Council noted that past policy changes in the energy industry had given rise to the 'solar-coaster' of booms and busts:
…without that policy certainty what we're likely to see is some real volatility in the pace of project deployment. I think one of the biggest challenges for our industry, and therefore the extent to which the industry has not only employed people but invested in the workforce, has been the stopping and starting, the booms and busts.
And future investment may not be forthcoming without stability in energy policy:
What we're talking about here is private investors that have been putting up, and would be expected to put up, many hundreds of millions of dollars into these projects, and they expect revenue and a return on those projects over a 15-, 20- or 30-year life. And so the extent to which they have some level of policy certainty over that period of time is obviously a critical factor.
The Clean Energy Council advocated for a long-term energy policy:
For the benefit of regional communities, the environment and generations to come, we urge the Australian Parliament to support a strong, long-term energy and climate change policy that can underpin continued investment in Australia's ageing electricity sector.
The Next Economy also advocated for 'policy certainty in the energy space that's going to incentivise investment'.
And without policy certainty, it is likely that volatility may again beset the renewable energy generation industry and threaten those next-round industries that require cheap energy to power their businesses.
The Clean Energy Council outlined the impact that renewable energy policy settings have had on wind turbine manufacturing:
Australia is a relatively high labour cost jurisdiction, so manufacturing this equipment for export is challenging. Without strong local demand for wind turbines, local manufacturing does not make economic sense.
In response to the welcome, but short-term, certainty of the Victorian Renewable Energy Target (VRET) Auction round one, Vestas [a global wind turbine manufacture and operator] was able to undertake contract manufacturing of key wind turbine components for its VRET projects…Following the completion of the VRET components, these workers will be re-absorbed…where possible, but local manufacturing will wind-up.
Ongoing auction rounds (or a strong national policy) with clear local content requirements, would enable these roles to be made permanent and potentially increase the levels of local manufacture.
The need for certainty in energy policy for renewables manufacturing was echoed by the AMWU.
The Nature Conservation Council of NSW considered that:
…government has a role to play to ensure that the infrastructure and the grid are up to scratch to be able to facilitate the transition when that inevitably takes place…We are not looking for a complete command-and-control economy here; we're looking for a broad acknowledgement by government that it's got a facilitation role to play.
In terms of creating the economy of the future, the Nature Conservation Council of NSW argued that it needs to be complemented with infrastructure of the future:
I'd like to see, for example, the significant infrastructure that we've got in the Hunter Valley repurposed for storage, for control of the grid and opportunities like that. But that requires government intervention; that requires government policy settings.
Establishment of new public services jobs in regional areas
The Community and Public Sector Union (CPSU) advocated for government policies to reduce the reliance on contractors and establish new public services agencies in regional areas:
As the public sector has become over-reliant on external contractors, particularly in ICT (information and communication technologies), it hollows out the capacity, the price goes up et cetera. But one of the other things that is not commented on or discussed enough is that that reduces the capacity for government to direct its resources into regional areas.
Indeed, the CPSU cited research from Associate Professor John Spoehr that 'every public sector job created has a multiplier effect that creates 1.45 additional jobs in the wider community'.
Cr Sarah Stanley also advocated for the decentralisation of government agencies to regional areas:
A common issue in regional areas such as Collie is a lack of diversity of work, particularly in professional and creative industries. This is one of the reasons we've identified that many people choose to work in Collie but not live in Collie—a lack of diversity of work. We've got lots of work for blue-collar workers and not so much in the creative and professional fields. That means that many families choose to live in another place. Efforts by government departments to locate offices in regional areas will provide jobs in these areas as well as providing opportunities to service these departments by local businesses, helping shore up sustainability in regional areas.
Facilitating capital investment
The importance of access to capital cannot be underestimated in ensuring that regional areas can transform their economic base.
The ANU Energy Change Institute noted that 'Natural resources alone do not create zero-carbon energy in forms useful to modern economies. Complementary capital investments will be required'.
Similarly, the AMWU outlined issues faced by manufacturers:
Manufacturers across Australia have also been faced with difficulties obtaining sufficient capital to expand their businesses. The government has gone some way to addressing this through its Manufacturing Modernisation Fund, but there is still so much more that needs to be done. The union believes that models such as the one adopted by the Clean Energy Finance Corporation could be developed to spur on increasing investment in manufacturing and prioritise the creation of regional jobs.
Professor Ray Wills from Future Smart Strategies agreed that capital investment for value adding manufacturing in Australia is constrained:
At the end of the day, while Australia is the 14th-largest nation by GDP, we still have some difficulty attracting capital, and especially in Western Australia. We don't have any problem attracting capital for the resource sector, but for anything further downstream it's more challenging. So there is a logical role for government to facilitate, and some of that facilitation will be to do with tax regimes, land access and approvals processes.
While capital investment should primarily be undertaken by the businesses that are set to benefit from that investment, the committee heard that there may be a case for financial support to be provided where the market is not willing to provide such capital.
Mayor Ramon Jayo from the Hinchinbrook Shire Council argued that smaller communities often do not have projects of sufficient scale to access government financing facilities like the Northern Australia Infrastructure Fund. Mayor Jayo outlined that agricultural diversification in the Hinchinbrook Shire could be facilitated through establishment of drying facilities and silos for around $500 000:
That would enable the grower to bring his two tonne to the silos. If every grower brings his two tonne, all of a sudden you've got a 20-tonne payload in a B-double, which just changes the economics straightaway, so it makes it viable. However, the farmers themselves don't have the capital, because of the tightness of the sugar industry and that—it's been pretty tight for a while. They don't have the capital to set up the silos.
Similar agricultural regions with established infrastructure are able to adapt:
If you look at us compared to Burdekin, Burdekin is pretty adaptable to change…if Burdekin cane is terrible, for instance, they're cashing in on $900 a tonne for chickpeas, because they already have existing infrastructure that was developed a long time ago, whereas in our district that infrastructure was never developed.
Conversely, governments may choose to finance investments directly where there are spill over benefits that would accrue to the broader community from such investment (such as in the case for electricity grid stabilisation).
In this regard, the Australian Renewable Energy Agency (ARENA) plays an important role in providing access to capital for renewable energy projects. However, as of 30 September 2019, ARENA only had $216.3 million in funds available to commit to new projects. According to the ARENA website:
ARENA’s pipeline of projects currently exceeds this amount and whilst not all of the projects in the pipeline will be successful in seeking funding, it is expected that ARENA’s funds will be fully committed in the next 12–18 months.
Governments may also choose to back key industries in particular locations where it is likely that the predominant employer in a region requires such investment to remain viable. However, in doing so, any such finance should be contingent on that business demonstrating that it will be competitive and sustainable as a result of such investment.
The committee also notes that some global investors have changed their investment principles to incorporate sustainability and climate objectives. In line with this change, there would appear to be significant opportunities for businesses and industries aligned with such principles to access these capital markets. However, stable policy settings are an important factor for these investors in deciding where to allocate capital and, given Australia's recent history of changing energy policies, other countries may be relatively more attractive in the absence of stability in Australia.
Local governments need to be proactive and responsive
The committee heard governments must lead public investment in the regions to 'de-risk' later investments by the private sector and signal to the market that it will support such investments. The committee was impressed by the number of local governments across Australia that are actively engaged in and working towards making their communities more diversified and resilient.
RDA Townsville and North Queensland expanded on the 'de-risk' concept:
One of the challenges in the north, and our region is included, is that our infrastructure is lagging in many areas. If we can invest into the critical economic and social infrastructure, we have a much better opportunity to attract private industry. For example, for someone working in a traditional industry like agriculture or mining, but even a freight logistics company, their costs to operate in a region like ours are much higher when it comes to transporting goods and services. Our road quality is poor in most of the regional areas and that means people have high maintenance costs, they have higher fuel costs, they have higher labour costs because of the slower speeds, and it goes on. They also have higher wastage because of the rough surfaces. That's one simple example of roads. If you don't invest in the infrastructure, you're actually crippling industry to be competitive, grow in that region and attract new industry.
Mr Rhys Williams from the City of Mandurah also discussed the importance of government in de-risking private investment:
…we are talking about laying economic foundations, putting in infrastructure that might de-risk the opportunities for industries that perhaps have relevance to relocate to us, and about fostering ecosystems so our local workforce can benefit from the future growth of those industries we're attracting.
Local councils also need to increase the relative attractiveness of living in a regional area by ensuring that public infrastructure and services enable communities to transition and attract people to move to, and stay in, the regions. The Regional Australia Institute noted on this point that:
Building 'liveable' communities will be increasingly important for addressing the future of work in regional Australia. With skills and professional workers growing in demand across the country, places will be increasingly in competition with each other for this workforce.
Mayor Robert Pynsent from Cessnock City Council argued that:
Positive economic development initiatives must promote growth and investment, secure economic diversity and aim for sustainability whilst targeting resilience and community liveability. A national commitment to an approach based on best practice would be welcomed in the regions. Investment is at the core of it. Continued investment in regional infrastructure and community development will unlock liveability, enhanced lifestyle attributes to support population growth and ensure the viability of jobs in our regions.
The Centre for Policy Futures highlighted that:
For regional areas to thrive, they must meet economic, social and environmental indicators that also sustain a high standard of living…
Community infrastructure, such as leisure activities and national parks, is also necessary to meet the social needs of regional areas. Affordable housing is equally important in attracting people to live in a region and encourages people to settle in an area…
The Regional Australia Institute offered its insight into what drives people to move to regional Australia for employment:
It's the other elements which support that job within regional Australia that will be the deciding factor for whether an individual or family chooses to move to the region, stay in the region and remain there…
… We know that a job will potentially be the deciding factor for somebody to move, but livability, community connection and amenity will often be the reasons that they stay—that community cohesion factor.
Even in regions where jobs currently exist, affordable accommodation was cited as a barrier to people moving to fill these positions.
The Regional Australia Institute called for a national education campaign to educate people about the opportunities that exist in regional Australia:
There are enormous opportunities to reconfigure what our population settlement patterns look like, but we understand that you can't push people. You need to change hearts and minds, and we believe that a national campaign would be the first step to ensuring that societal shift.