Mayors Summit for Jobs Growth 7 August 2015

Mayors’ Summit for Jobs Growth 7 August 2015 Local Government Scope for Action Presented by Darryl Gobbett Visiting Fellow The South Australian Centre for Economic Studies Adelaide and Flinders Universities

The Environment for Jobs and Economic Development • Accelerating pace of change • Technology, Demographics, Social structures, Attitudes, Economies, Industries • Declining costs of information, communication and transport • Increasing importance of global value chains • Re-emergence of China and India • Impacts on Supply, Demand, Finance, Politics, Law, Attitudes, Value Chains etc • Global populations increasingly urbanised, middle class & ageing • Inflation and Interest Rates staying low for a long time • Low financing costs, business asset deflation, impacts on business decisions • Increased value of cash flow generating infrastructure • Income & Company tax rates staying high as they fall overseas • Australia and South Australia growing slower than average • Productivity, real income growth, return on investment, employment, taxes, revenue SA Centre For Economic Studies - Adelaide and Flinders Universities

South Australia’s Growth by Income SA Centre For Economic Studies - Adelaide and Flinders Universities

SA Jobs growth • SA Centre for Economic Studies Issues papers 44 and 45 • Private sector employment has declined through 2014 and 2015 • Male FT employment down to 2007 levels • 25, 000 plus jobs gone in manufacturing since 2009: Broader impact than just automotive • Growth is occurring but not offsetting losses in Manufacturing • • • Agriculture Mining (now in short term decline) Manufacturing: Food and Beverages and Specialised Machinery Professional Services Health Care and Social Assistance now 115, 200 jobs, 14. 3% of SA employment • Likely most growth in Small Business employment • SA small business has higher than national average survival rates (ABS Cat 8165 2/3/2015) • Not enough small businesses being created, so numbers are falling SA Centre For Economic Studies - Adelaide and Flinders Universities

SA Jobs growth: Change is Happening Source: ABS SA Centre For Economic Studies - Adelaide and Flinders Universities

Value Chains and Human Capital • SA will not be a comparative low cost producer, regardless of $A • Industrial Relations, Attitudes and Public sector policies and practices • Global Economies of scale largely out of our reach • Global Production increasingly large, flexible, changing value chains • Being part of the chain and specialising is a driver of value, wealth and employment • But also • Increasing demand for high quality, clean, “provenance certain” goods and services • Global and local opportunities in small scale specialisation and comparative advantage • Where will “you” fit in the Value Chain? • What Value will “you” add? • How does your Value Add be Sustained or Adapt? SA Centre For Economic Studies - Adelaide and Flinders Universities

Value Chains and Human Capital • Some different SA business “for instances” competing interstate and overseas through “created” comparative advantage • The chocolate makers: Haighs, Bracegirdles, Cocolat • Balco, Beerenburg, Bickfords, Coopers, Maggie Beer, Thomas Foods • Redarc (automotive electronics); Seeley International (air conditioning) • Rising Sun pictures (Computer graphics – X-Men Days of Future Past) • Nova Systems (engineering and management services) • Superguardian, Cavendish, SPAA (Self Managed Superannuation) • 550, 000 funds, 1 m members, $595 b of assets at March 2015 • SA businesses can compete globally and grow • Often in goods and services where SA would not have been the most obvious base • SMSF admin and industry representation, chocolate etc • Other times being based on SA and regional strengths and advantages • Acquaculture, wine, meat processing, malt, defence services, rural machinery • Aged care, Adult Education, Tourism SA Centre For Economic Studies - Adelaide and Flinders Universities

Value Chains and Human Capital • Human Capital is an important part of the success • Understanding the specific need or opportunity • Doing specific things very well • Market Position, Focus and Branding, Research and Development • Staff selection and Training • Regional growth theories now emphasise the local human capital • SACES Dec 2013 Report to the LGA • “Old approach” emphasises top down, centrally driven & funded one size fits all policies • New approach emphasises role of local “actors” acting in response to local opportunities • Digital networks and reduced transport costs have redefined “Local” • This offers bigger opportunities than threats • Local Government has considerable scope and capacity to act SA Centre For Economic Studies - Adelaide and Flinders Universities

Value Chains and Human Capital • SA businesses can compete and grow • Far more benefits regionally in helping them than competing for big firms • Less likely to move away due to head office/global corporate activity • Less likely to be playing you off against other jurisdictions • Less likely to be asking for significant ongoing support • More likely to use other local businesses and inputs • More likely to be supportive of local institutions, charities etc • More local embedding of intellectual property • Can be part of the global value chains • Public sector funding & resources more likely to be available for supporting local activities • Competing on a national and international stage • Corporate welfare is not a priority • Benefits provided to some businesses/regions have to be paid for by someone else SA Centre For Economic Studies - Adelaide and Flinders Universities

Regional Primary Economic Drivers • Skilled People and High levels of Human Capital • More benefits in raising low skill levels than lifting number of highly skilled people • Entrepreneurship • Starting at school • Innovation (technological and non-technological) • Equipment embodying technology • Quality of other inputs/intermediate goods/business environment • • Physical and Social infrastructure, incl roads, ports, education, social services, recreation, arts etc Regulation and public policy, including land use planning, environment, waste disposal etc • Local Government does/can play important roles in each • • Infrastructure, Zoning and land use Local procurement policies and buy local programs Employment and Training Local business extension, education and support activities, including across jurisdictions SA Centre For Economic Studies - Adelaide and Flinders Universities

Some Possible Paths for Action • Ask local businesses • What constrains their growth? • What threatens their survival? • What are the areas Local Government can influence, assist? • Prioritise those actions where there can be a quick local benefit • Be prepared together to ask for more responsibility • Location of State and Federal Government employment and offices • Decentralisation of policy ideas generation, decision making and policy implementation • Build better paid and more skilled employment • Spinoffs for local business, education and training, empowerment SA Centre For Economic Studies - Adelaide and Flinders Universities

Some Possible Paths for Action • Work together to make a difference on bigger issues • Programs to benefit a number of regions or all of SA • Investment in Health Care and Residential Aged Care, Export infrastructure • Education priorities • Entrepreneurship in Schools and RTOs • Aged Care, Child Care, Manufacturing, Tourism • Water, sewerage and energy costs and investment • Small business funding and banking relationships • Tax policy and Public sector funding distribution • How possible changes to the tax system would impact the regions • Revisit formal share of tax revenue for Local Government • Wages policies, eg penalty rates • Your efficiency and program and service delivery SA Centre For Economic Studies - Adelaide and Flinders Universities

Thank You SA Centre For Economic Studies - Adelaide and Flinders Universities