Leveraging sustainability and prosperity from resources

Urbecon Volume 3 2012

Australia's resources sector is driving national prosperity. Perhaps surprisingly, as evident in Queensland, most of that wealth is captured by our major cities where the business services which support the mining industry are located. But in the remote resource regions where the mineral wealth is extracted, local communities are not necessarily benefiting from the boom.

From an economic development policy perspective, this requires innovative thinking, to consider how best to leverage economic growth from the mining boom in our cities, and also how to help those remote mining towns that are facing a raft of sustainability issues. Recognising that cities and mining regions need each other to prosper in the knowledge economy is central to finding policy solutions.

Mining is Queensland's biggest single industry in terms of output, generating $24.1 billion of Gross Value Added in 2010/11, according to the Australian Bureau of Statistics' State Accounts. However, compared to its immense capital wealth, it could be argued that mining contributes a relatively small amount of direct employment across the state. For example, according to the ABS Census, using the Australian and New Zealand Standard Industrial Classification (ANZSIC), the resources sector (mining) accounts for just 1 per cent of metropolitan Brisbane's industry employment - far smaller than the services industries (see Figure 1). But the basic employment data can be misleading and in order to appreciate the true value of mining as an employer, one must delve deeper into the data and understand the supply chain linkages throughout the Queensland economy.

The detail is in the value chain

When the supply chain flows between industries in the economy are examined, it is apparent that the resources sector (mining) is in fact a major contributor to metropolitan Brisbane's job stock.

A report commissioned by the Queensland Resources Council in 2011 shows that Queensland's mining sector employment is heavily concentrated in the Brisbane metropolitan region - which hosts 124,000 full time equivalent resources sector jobs, or 42% of Queensland's resources sector employment (Figure 2).

The resources sector is an important component of Brisbane's economy, providing 12% of its employment and 21% of its share of Queensland's Gross State Product (Figure 3).

Breaking down the mining sector's value chain into the dollar shares of component industries helps explain why such a large part of mining sector jobs and production value is generated in the Brisbane metro region. As can be seen from Figure 4, almost 34% of the inputs consumed by the state's resources sector are drawn from ‘Scientific, Technical & Professional Services to Mining'. A further 14% are drawn from ‘Other Basic Business Services'. These industries are an important part of Queensland's growing knowledge economy.

The knowledge economy

Economic development thinking has long recognised that in a ‘knowledge economy', knowledge is not a separate sector of the economy but rather, is embedded in all industries. As a 2005 Queensland government report pointed out, [1]

"A knowledge economy does not rely solely on a few high technology industries for growth and wealth production but rather, all industries in the economy are knowledge intensive to some extent. This includes the so-called ‘old economy' industries like mining and agriculture."

So in the mining production chain, resource extraction in the source regions is inextricably tied to knowledge-intensive scientific and technical services and business services which are typically located in the cities.

Knowledge cities

In the 21st century, interaction between knowledge industries and urban regions has become vital to economic development. Skilled, adaptable knowledge workers are attracted to cities with high quality, engaging environments and cultures, as places to live. But the cities also act as enablers of ‘knowledge work'. Specialised services and business services rely heavily on personal interaction and can be made more productive by a well-structured urban environment.

Knowledge cities enable knowledge work in several key ways: through ‘smart' infrastructure and technology, a strong education and research presence, appropriately located, serviced and administered land and the presence of export-focused industry clusters and networks.

The effect can be envisaged as a dynamic cycle of innovation, creativity, liveability and prosperity. The diverse, creative city attracts knowledge workers and knowledge based industries (KBIs); in turn, productivity increases; economic growth speeds up; there is investment in services and facilities and more social and cultural diversity; feeding back into a more prosperous, knowledge-based ‘creative city'.

All these factors tell us that the cities and regions are interdependent and need each other to prosper.

Utilising the resource wealth dividend

Investment in the Brisbane metropolitan region will strengthen the Queensland economy, because further infrastructure investment in the city and suburbs helps to drive the dynamic cycle of innovation, creativity, liveability and prosperity.

Brisbane has the South East Queensland Regional Plan, a strategic policy document with an emphasis on reducing the region's ecological footprint while enhancing the economy and quality of life. Melbourne has put forward a similar plan, characterised by ‘transit-oriented communities' where people would enjoy much shorter journeys to work. Economic modelling by SGS Economics and Planning shows that this is expected to deliver a three per cent boost to the city's gross regional product (GRP). Arguably, South East Queensland could deliver similar if not superior outcomes.

According to research and analysis by SGS Economics and Planning, a three per cent GRP boost in current terms translates to an estimated $3.5 billion annual injection to the South East Queensland economy. This would raise across-the-board government tax receipts by up to $1 billion per annum.

The Commonwealth would receive around two-thirds of that tax revenue which could be re-invested in a raft of national capacity-building measures - in the city and in the regions - to help further boost national productivity and long-term wealth.

What about the mining communities?

‘Economic Development' is the process of expanding the size of the economy (increasing an area's level of income and capital / wealth) and distributing that wealth (through local expenditure and employment) to the community. It is typically measured in terms of jobs and income, but also includes improvements in education, health, lifestyle and ‘liveability', environmental sustainability and community well-being.

Mining towns and regions are unique: they require different economic development approaches from other regional communities. Even where mining is the economic driver, much of the wealth is often not retained locally and investment in community is sometimes lacking.

This is because resource regions face a raft of sustainability issues, including: an ‘unusual' population profile (e.g. high proportion of young males); high incomes alongside social disadvantage; employment mismatches between what mining companies need and what the local labour force can offer; fly-in/fly-out and drive-in/drive-out work and shift work; family dislocation and lack of social cohesion; social issues such as alcohol abuse and domestic violence; health issues and insufficient health infrastructure and services; housing shortages; acute infrastructure shortages; a lack of opportunity for local enterprise (input supply); and complex governance arrangements (e.g. Native Title).

Hence, efforts to tackle issues of economic dislocation as well as opportunities for growth in Australia's resource regions requires an understanding of: (1) local complexities and the relationships between community and economy; and (2) broader resources sector dynamics and the economic links between mining activity in the regions and wealth generation in the cities, and vice-versa.

For those working in the regions, a good start is to focus on how best the agents of change (local government, the mining companies, community groups and others) can invest in community to help build local capacity. This requires a holistic approach. And for those of us who live and work in the cities but with an interest in (or obligation to) the sustainable economic development of our mining towns, it is equally important to understand how the cities and the regions interact.

Economy and community - a holistic approach

Like any region, cities must build on their strategic comparative advantage. For Brisbane, it is the State's vibrant resources sector. Productive cities, intrinsically tied into the mining boom, can be made more efficient, well-planned and productive through national urban policy and infrastructure investment.

The regions, particularly the remote mining towns, need some help to become sustainable. Economic development is about community. With this in mind, perhaps there is scope for economic development practitioners, urban and regional planners and the community relations officers of mining companies to work more closely with one another in order to achieve sustainable outcomes for our regions as well as for our cities.

Footnotes and References

1. Queensland Government Department of State Development and Innovation (2005), Knowledge- Based Industries, Internal Working Paper, Brisbane

Australian Bureau of Statistics, National Accounts: State Accounts, 20010-11 (cat. no. 5220.0), referenced in Queensland Government, 2012, Know Your Queensland'

Lennon, S. (2010), ‘Integrating Urban Planning with Economic Development for Sustainable Growth', in Economic Development, the Quarterly Journal of Economic Development Australia, Volume 4, Number 3

Queensland Government Department of Premier and Cabinet (2005), Definition of Knowledge Intensive Exports, Internal Working Paper Trade Division, Brisbane

Queensland Government Department of Infrastructure and Planning (July 2009), South East Queensland Regional Plan 2009-2031

Queensland Resources Council (November 2011), Economic Impact of Resources Sector on the Queensland Economy 2010/11

http://www.regions.qld.gov.au/dsdweb/v4/apps/web/c... (accessed 24th September 2012) - please note this document is no longer available

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