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Impact of the global financial crisis on regional Australia

CHAIR —Thank you for appearing before us today. I apologise that we are running a little bit behind schedule, but hopefully not too far. Although the committee is not requiring you to give evidence under oath, I need to remind you that these are formal proceedings of the parliament, and as such should be treated with the same respect as proceedings of the House. It is also customary for me to remind witnesses that giving false or misleading evidence is regarded as a serious matter and may be considered a contempt of parliament. That being said, you are most welcome and we are certainly looking forward to your evidence. I would like to thank you for the really comprehensive submission that you made. There are a number of the recommendations you have made that I have questions about, but perhaps before we start you might like to make some introductory comments.

Mrs Godfrey —I was the Vice-President of the Mid West Chamber of Commerce and Industry for seven years and its CEO for the last two years. My role with the chamber has finished and has now gone to Regional Development Australia, although it might be very short-lived. The submission that was put in from the RDA was done by our previous EO, but I will try to answer all of your questions to the best of my ability.

I will give a bit of an overview of the economic situation a year ago compared with now, which might explain some of the questions that I have been listening to. This time last year we had an oversupply of work and an undersupply of workers. We were gripped with not just a skill shortage but a major labour shortage, so much so that I was sent to Sydney and Queensland for the Careers and Employment Expo to promote our region and attract workers. In a survey conducted last year by the Mid West Chamber of Commerce and Industry, representing over 600 businesses throughout the Mid West region, the businesses that responded reported that if current trends continued over 75 per cent of those businesses were looking at employing between five and 10 employees within six months. They also highlighted that labour shortage and retaining staff was their highest concern.

A year on and much has changed. Employees are not looking for pay rises to remain at their employment. They are looking for job stability. Business owners have stopped recruiting people as they analyse their business, business practices and how they can manage through difficult times without overextending themselves. We are now faced with businesses that have a direct negative impact from companies that have gone into liquidation, and these are corporate companies. One small business alone in Geraldton has over $2.4 million owing to them. The impact from these large companies going into liquidation will continue to stress our already concerned local economies.

Because we have had such an extraordinary recovery year from our rural sector, being the farming sector, that has insulated our businesses somewhat over the last year or the last six months. However, many businesses are reporting that they are still doing okay, but that they are having to market themselves better, decrease margins to get sales, and have reported that overall their profit margins have decreased as they fight to have their targets met each month.

Another major concern and by-product from this downturn is that many businesses have reported that they will not be extending any new apprentices. Whilst on the surface our economy may appear a little bit more resilient than others regions, there is a real risk that the local economy could be jeopardised if current approvals processes continue to have unnecessarily lengthy delays not just for the mining sector but also the Oakajee supported infrastructure, being the road component, the corridor and the industrial estate. The failure of the Oakajee port to develop and the failure of the Oakajee industry park to eventuate will also need significant government—local, federal and state—contributions, as will the failure of Australia to win the SKA bid. I think we still need to deliver a lot better social outcomes, such as Indigenous and regional development outcomes, to try to be on a par with South Africa.

I am not one to only focus on the negatives. You are here to also identify solutions. My recommendation to the committee, to encourage economic and social delivery, would be to encourage and strengthen the communication between the Commonwealth and regional Australia through the RDA network and for this network to work closely with business, local and state authorities to identify trigger points in their regions that will encourage and strengthen their own local economies. It is this connection with grassroots and the people that live in regional areas who can recommend solutions to their own regional economies. I congratulate you on coming here today, because that is obviously one of the outcomes that you were trying to derive.

I have one last point. A program that was enormously successful for our region, which has ceased now, enhanced economic development, employment, the development of sustainable essential services and social infrastructure—that one program that allowed ideas to become real projects with regional people driving better outcomes was Regional Partnerships. Regional Partnerships for this region had significant economic benefits. It was a $10 million investment over four years and had a return of $52 million. The investment turned around our tourism. It enhanced our attractiveness. It supported social services by increasing their capacity by developing bigger premises. Everything that you have on your mandate today was primarily through the Regional Partnerships. If there is anything that I can say I would be really supportive it would be to have local people to have their own futures by being able to identify programs or identify key target initiatives through federal funding that can deliver better outcomes. There has been no other better significant program than the Regional Partnerships and that has ceased, so that is something that we would be looking at trying to see if something could be replaced.

CHAIR —Thank you for your evidence. We have obviously chosen quite a range of regions to look at how different ones are faring and how different economies are working. It is very helpful to have your evidence as to what is actually happening in this particular economy that, as you say, a year ago was experiencing an incredibly tight labour market and labour shortages and which now has seen a fairly substantial turnaround in that.

I would like to ask you about some of the things that are contained in your submission. I apologise, I am aware that you were not the author of it, but it would be really helpful for me to flesh out some of the things that you have suggested. I just wanted to concentrate on job creation and skills. One of the recommendations was carefully monitoring 457 visa applications. Can you expand on what has been the issue with that in this region, if any?

Mrs Godfrey —I am only speaking from my own experience with 457 visas. The 457 visa was a very good solution last year when we were able to attract hardly any workers at all. There are significant problems with 457 visas, and that is the transition from their work ethics to the work ethics here. For instance, in South Africa you could get a mechanic who has very good skills that could come over here, but in South Africa he delegated responsibility, whereas in Australia it is very much hands-on. That was probably through the recruitment process. Also, the 457 visas have now been highlighted as probably being the first ones that are going in the labour shortage, not the local people. They are the only two things that I could comment on. I can find out a little bit more on why he did say that.

CHAIR —Yes. That was one of the recommendations. I was just intrigued as to what the issue is. I might focus on some of the areas that you are more familiar with. What would your sense be of what has happened in the retail sector, particularly small business within that sector, over the past year?

Mrs Godfrey —I will probably go back to all business six months ago and why there was a tightening up of everyone’s belts. In October/November the majority of businesses and the majority of information that was coming through to us said that of the mining sector that a decrease in export costs and an increase in China’s demand, although over that period that had diminished, would mean that by January, February, March they would be increasing their demand again. A lot of businesses thought that the downturn for this regional area was probably very short lived and would only be between four and six months. In a lot of regions in Australia it is now starting to seem like it will be a lot longer time before it recovers. A lot of businesses put their straps on. I think they still had a very good five to six years of their best business in probably the last 20 years. It was very much a catch-up period and that is why I said they stopped employing. Over October to about January there was a much quieter period in retail, but that has seen a very positive rebound in the last two months. I am not quite sure of the pattern and why all of a sudden in the last two months that has had such a significant growth, but that is retail alone.

CHAIR —I have been asking other witnesses this. You mentioned that one of the larger companies has gone into liquidation. Can you tell me which one that is, and what has happened with the workers from the area who have been made redundant? We have heard evidence that most of them have been fly in-fly out and have not been staying within the local area, but I am assuming that there are some who are.

Mrs Godfrey —With respect to the outcome from Windimurra and OzMinerals, Windimurra’s future is still being decided upon. There were 10 interested businesses wanting to invest in there.

CHAIR —So it is in administration at the moment?

Mrs Godfrey —It is still in administration. There is a significant debt there for local companies. How it is resolved will depend on what the local companies get, and that could be a potentially significant risk to our region.

CHAIR —In terms of the workforce of those companies, what has happened with them?

Mrs Godfrey —As I said, a year ago there were a lot of businesses really screaming for work, and over the period of the last six months there have been redundancies, but they have been absorbed into the areas where the businesses did not have enough staff. That is probably flattening out now. It was picked up very quickly because we had such a lack of labour at that stage. It has been absorbed, but from now on will be interesting to see.

CHAIR —Thank you. Mr Neville.

Mr NEVILLE —You have made a number of very challenging recommendations here. I was interested in tourism, in particular. What is your take on tourism here? We have had evidence that it is improving, possibly because people are not taking overseas holidays. We did pick that up in Launceston, but we did not pick it up elsewhere.

Mrs Godfrey —It has been twofold. There are two different reasons why tourism has increased in Geraldton. Firstly, Geraldton’s face has changed. Through a component of the Regional Partnerships, state government and local funding to do the foreshore redevelopment it has started to take on a little bit more of a tourism atmosphere here, whereas it did not before.

Mr NEVILLE —It is very impressive.

Mrs Godfrey —It is absolutely fantastic. It has started even the hinterland coming in and visiting Geraldton. Before Geraldton was not a destination, it was just a drive through to go up north. Now it is starting to change. Also the philosophy here is on tourism. They are starting to address it in a lot more concentrated way and promoting Geraldton. I think it is that, but also a lot of the people may not necessarily be able to afford to go all the way through to Broome and so they are using Geraldton as a different destination. Tourism has definitely increased.

Mr NEVILLE —You mentioned one program here. What other recommendations would you have for tourism?

Mrs Godfrey —Definitely more hotels.

Mr NEVILLE —You talk about ‘Come Walkabout’.

Mrs Godfrey —I am not familiar with that.

Mr NEVILLE —On a general level, do you think utilising the old hotels would help?

Mrs Godfrey —We need more accommodation in Geraldton. That has been something that has been an impediment over the last 12 months. There has not been enough accommodation, particularly when we have functions here. It gets booked out very quickly. And quality accommodation. I do believe there are some sites identified now, but it is still going to take a couple of years to get them up and running.

Mr NEVILLE —I was asking some questions around town yesterday. It seems that the older hotels, some of which are quite gracious, are being used for low cost accommodation and backpackers.

Mrs Godfrey —Yes.

Mr NEVILLE —Is that boosting the economy here? Has it got to that stage where it is really a backpacker destination?

Mrs Godfrey —No, I do not believe so. I think it is attractive to backpackers only because of the distance from Perth. The majority of them stop over here. We are still in our infancy for delivering the tourism market reasons to stay here. We have changed in the last year and probably in the next two years we will be delivering a lot stronger programs to try to attract people to stay, and not just stay overnight and the next day. We have not got our whole delivery properly done yet.

Mr NEVILLE —You were talking about industry as well. You suggested to us that we should recommend access to programs. Do you mean for seed funding? You said that the Regional Partnerships program was very successful here. On what basis do you make that comment and how would you see it continuing?

Mrs Godfrey —My previous experience with the Development Commission here has more or less been for feasibility studies to go into how you would make something work. I see that the Regional Partnerships has been so successful because, for instance, with the HMAS Sydney we would never have been able to get a memorial like that, or the foreshore redevelopment or the boat lifter if we had not had a significant contribution from the Commonwealth, state, local and private enterprise. If that is not all on the same page then there is no way that those sorts of projects can be realised, together with the significant size of those projects. It is not about funding a study. It is about actually getting real outcomes from the funding. I cannot see, unless you did that seed funding, that you would get a lot of these projects up and running. All those projects now are delivering fantastic economic outcomes for this region.

Mr NEVILLE —Albeit that the government does not intend to fund commercial projects from that program—it has not said it will not fund them—do you still see the RDA as being the catalyst or the honest broker of bringing Commonwealth, state and local government funding to the table?

Mrs Godfrey —It has probably gone too far down the track. It is irrelevant what I think now because in the next two weeks a decision will be made. The draft memorandum of understanding that I have seen is that they will be dissolved under the development commissions for the state.

Mr NEVILLE —The RDAs will be rolled into the Development Commission? As a separate entity or as just part of the commission?

Mrs Godfrey —The state CEOs of the development commissions will be directly reporting to the Commonwealth.

Mr NEVILLE —I see. Thank you.

CHAIR —Mr Raguse.

Mr RAGUSE —Just following on from that a little bit, you mentioned the RPP and we talk about projects in the community. I know the work that the ACCs did in my region and now the role of the RDAs. I know it is difficult because of that transition. You are suggesting that moving that process will mean that there will be a whole range of things and certainly the coordination of projects at the local level. In reading this submission, it essentially supports the changes that are occurring. The comments are that taking the port should take the politics out of these processes. I am presuming that from the way that we are managing the funding through our new RDA process, whatever that will be, and how we then fund programs on the ground, essentially not that you are in conflict with what you are saying here, but I am not quite sure that you are actually suggesting the process that we are taking as a government. In other words, the way that we are now putting the RDAs in place with their future role, whatever that might be, and the way that projects may be funded. Taking on board that there is certainly a decision made that we will not necessarily fund commercial opportunity. You talk here about devolved authority of the regional levels, local engagement, creation of partnership activities and mutual obligation. To me, that is essentially what we are doing as a government. I am not quite sure of that. Do you have some conflict with this? What you are suggesting is a model. Given that the RDAs or the ACCs, whether they do exist or do not exist, are you suggesting that they cannot exist without them?

Mrs Godfrey —No. I am not saying that the devolving of the responsibility of regional development has to lie with RDAs. It would be a shame if we all went to one central organisation for state and federal. I think sometimes an autonomous organisation delivering federal services and federal funding, irrespective of what political party it is and asking for other government agencies to step up at the same time, is a way of making sure that each party brings to their own. You devolve it into one responsibility and into one agency. I would like to see how the model works. I would not have thought that it would ensure that everyone puts up their hand and contributes. It is almost devolving it into one. The federal funding could be going to the state and the state may not necessarily have to match it.

Mr RAGUSE —What I am suggesting is that this document more or less suggests that a certain outcome is going to occur and I do not necessarily believe that we are that far advanced to know that. You are right; local engagement is what the federal government is trying to encourage. The role of the RDAs to be more strategic makes a lot of sense. From what your document is saying, my understanding is that decisions should be made at the local level. We are talking about the local government being a big part of that and being highly representative of the region. What I am suggesting is that it is not directly in conflict, but your suggestions are that it is at odds with what I believe we are doing as a government and what you are suggesting in this recommendation.

Mrs Godfrey —I will have to read that a little bit more carefully. I have skimmed over it, but I have not read it in depth.

Mr RAGUSE —Are you comfortable with the fact that regional areas, local authorities and local organisations should make the decisions about priority?

Mrs Godfrey —Absolutely, and they should all be aligned a lot closer together so that they are all working together. I do not necessarily say that they should be one.

Mr RAGUSE —Thank you.

CHAIR —Again, I am sorry that we are referring to the submission, so it does make it a bit difficult, and it may in fact be that our next witness, Mr Hosking, may be able to tell us a bit more about it. In 1.6 the submission talks about the fishing industry and the shrinkage of the industry by 30 per cent over the past two years with harder times expected, but then it has stated that ‘in contrast, a marine services precinct project, which was jointly funded by the Commonwealth and state governments, has begun to reap dividends’. I thought that looked like a really good example of an economy in transition and the way in which both Commonwealth and state investment have helped that. Are you able to tell us a bit more about that, or should I leave that for the next witness?

Mrs Godfrey —I would suggest that Mr Hosking would be the best person to explain that.

CHAIR —We are obviously interested in really good examples. We are conscious that economies do change over time. They are never going to stay set in concrete. When they do transition it is where is the best investment and how best can Commonwealth and states actually assist with that? I am interested in terms of the precinct so I may ask that question to the next witness. Have we got any further questions?

Mr NEVILLE —Yes, just one question. There has been a lot of talk today about the importance of rail, firstly, to Perth, secondly, to the grain lines and, thirdly, to potential mineral resources to the east behind Geraldton. As a chamber, and with your experience of the ACC in fostering industries, what is your view on what rail could do for Geraldton?

Mrs Godfrey —Without a doubt it would open up the whole hinterland to having an export hub. At the moment some of the mining companies, more in the east, ship out from Esperance. They send their product down the line to Esperance. Esperance is two days more shipping than from Geraldton. There would be a whole opening of that opportunity. There is a lot more out there than just what we are seeing right now. I think, in a downturn, it should be looked at as an opportunity. We have stated on record since 1969 the potential for an export hub through a deepwater port in Geraldton is quite an important achievement. We have a downturn right now. This is the time where we really should be investing into it, to expand all of the industries. By putting in that industrial site up there, it will attract even more. That could be the most significant change in the Mid West area—having the biggest industrial estate in Western Australia. It is an opportunity for businesses to come and relocate, too.

Mr NEVILLE —Are you saying that rail is the catalyst for that?

Mrs Godfrey —Rail will be the catalyst for the mining companies which will bring that seed capital for the port to be able to open up for other businesses.

Mr NEVILLE —Should we recommend that in our report? Do you think we should recommend rail as one of the priorities in our report?

Mrs Godfrey —Yes, I do.

Mr NEVILLE —I did not want to make it sound too blunt. A lot of people speculate here at the table. If I ask you what is the single most important developmental aspect to the Geraldton area, what would you say?

Mrs Godfrey —I would have to say three things, and not just one. The rail is certainly important. At the same time the industrial estate is as important, as well as the corridor of services going to Oakajee. All three would have to be federally assisted in some form.

Mr NEVILLE —Thank you.

CHAIR —Ms Parke has a question.

Ms PARKE —I have a follow-up question about the proposed port development. Is it proposed to have a container facility as well?

Mrs Godfrey —At the moment it is focusing only on iron ore exports, but there have been discussions about being containerised. With the way that the AWB is being dismantled and the way that we export our wheat, there is also opportunity through that for containerised wheat exports. We send our containerised wheat down to Fremantle. There is a lot of potential here for having a northern hub away from Perth in having containerised shipments here.

Ms PARKE —Lead shipments, too.

Mrs Godfrey —That is not through our cities. That is through a dedicated outsourced port. That is not associated with residential. That is probably one of the biggest arguments; it will be one of the only standalone ports outside of a residential area in all of Western Australia.

CHAIR —I note some of our previous witnesses were frantically nodding yes to the answer to your question.

Mrs Godfrey —I cannot see them.

CHAIR —I can. I would like you to thank you for providing evidence before the committee today. You will receive a proof transcript of the Hansard and if there is any further evidence that you wish to supply us with if you could do so in writing it would be really helpful. The secretariat may write to you if we have any further questions of you. Thank you for taking the time to present for us today, and particularly given, I am conscious, there is a significant amount of transition and anxiety occurring around the RDA issue in Western Australia.

Mrs Godfrey —Would you like me to resolve that 457 issue through that submission?

CHAIR —I would be interested in getting a little bit more information about it. It was the first time that it had come up, so I thought there might be some more information. That would certainly be helpful.

Mrs Godfrey —I will find out.

CHAIR —Thank you very much.

[1.40 pm]