Directional politics

A few Prime Ministers back, Australian politics seemed to be all about Western Sydney. On the conservative side of politics, unremarkable politicians who managed to win and hold former Labor electorates were lionised, while similar wins in other parts of the country were seen as part of the normal ebb and flow of electoral politics. On the Labor side, the region was invoked by the NSW Right (many of whom preferred not to live there) as the basis for its “aspirational” politics. This was all nonsense. The two million or so people who live in Western Sydney vary far more among themselves than they differ from the Australian population as a whole. To the extent that they have any sort of collective identity it hasn’t stopped large numbers of them for voting for (or, for that matter, against) governments led by silvertails from the North Shore, Northern Beaches and Eastern Suburbs.

But since the brief return of Kevin Rudd, the focus has shifted back to an area of more traditional concern: Northern Australia and its supposed need for development. I had hoped to see the end of this when Turnbull became PM, especially given the government’s fiscal woes. But sadly, this is not to be. Not only is the $5 billion development fund still alive, but we are getting stories about Turnbull’s plans to “unlock the North“.

As it happens, I’m in North Queensland right now, and I lived in Townsville for most of the 1990s. Like everyone else in the region I received a special “zone allowance” under the tax system to compensate me for living in a pleasant (if rather warm) coastal city with all the amenities that would be expected by a resident of, say, Newcastle or Wollongong. I understand that this allowance is still available. Nothing of the sort is on offer to people in poor suburbs or declining country towns in the rest of the country.

Like every other place in Australia, the North has plenty of unmet needs for services and, though to a much lesser extent than people seem to think, physical infrastructure. But it is in no sense “locked up”. There are road, rail and air transport links that meet the needs of the region with the same adequacy or lack of it as most other places in the country. Internet access is taken for granted in all but the remotest parts of the region. Ports, and transport links to them, are well developed to carry agricultural and mineral exports wherever they need to be sent. And so on.

Moreover, as with Western Sydney, the region has much the same diversity as the rest of the country, with a corresponding diversity of needs and wants. The cities of Rockhampton, Townsville, Cairns and Darwin differ as greatly from each other and from the rural areas they serve as they do from cities and regions in the rest of Australia.

We don’t need a Northern Australia policy any more than we need a Western Sydney policy. Public infrastructure projects should be assessed on the basis of their merits, and not their location. Private investment should be left to the commercial judgement of those involved. The $5 billion development fund should be rolled back into general revenue and used wherever it is most needed.

21 thoughts on “Directional politics

  1. Doesnt this feel like a bunch of dead white males reviving the 60s on tales of mining, irrigation and electricity they learned about in Social Studies aka the Snowy and the Ord schemes, the former now a modest electricity supplier more useful for its energy storage ability, and problematic contributor to salination, the latter an even more modest scheme. And of course BHP, the ‘big Australian??!!’

    But why arent we doing this again? Well the world has changed. Doh!

    As to why specifically people arent moving out more some thoughts megaprojects aside:
    – In the old days there were also large govt subsidies in the form of government services and extension at both state and commonwealth level far greater than this 5 billion sop.
    – In the old days protectionism kept much money in the country.
    – In the old days agricultural produce paid relatively much better money and there were lot of people involved in the production.
    – In the old days land was cheap in the capital cities and rentier capitalist and similar leverage sharks were less able to exploit this non productive resource.
    – In the old days there were coops which took care of a lot of the farm subsidies and paperwork.
    – In the old days there was agrarian socialism
    – In the old days we hadnt burnt out the more nearby forests soil or mineral resources/deposits.
    – In the old days the dream job was not a cubicle in an airconditioned office.
    – In the old days casual jobs paid relatively well and universities were not monopolised by business schools but by engineering aimed at producing something more than digits in a computer.
    – In the old days we didnt have a rapidly aging population tiring of life.
    – In the old days the reef was healthy for tourism and not a bleached desert.
    – In the old days we were part of the old secure British empire system of commodity provision.
    – In the old days strong unions made sure the extracted wealth was redistributed rather than used to prop up billionaire MacMansion and MacTinny (boat) monstrosities.
    – In the old days we could rip off the environmental capital without hindrance leaving the rememdiation tasks to the present and future generations and so things were cheap and growth was 6%
    – In the old days Europe’s industry had been smashed and there was demand for reconstruction resources including migrants here while Asia still equalled made in Japan.
    – In the old days capitalism had to demonstrate it was superior to socialism in one country and struggle to maintain its hold over hearts and minds before there was no alternative.

    Whether this development dream was right wrong or at least in part flawed/unsustainable is beside the point. The trouble with ‘the Great North’ is its a dinosaur but its promoters dont realize it. Which is ironic as they are the ones who claim to understand the need for constant changes and greater efficiency. It also and interesting reflection on Turnbull – who used to look like an intellectual but increasingly appears like Rudd, a hollow man devoid of ideas or at best a captive of his ideology like Obama.

    Separately as to accessibility damn right. Once beyond the city limits I always wonder at the 6am to 8pm jam packed snail’s pace of the city, especially in Western Sydney on Saturday, to roads generally lacking in jams, and traffic lights where 80 kmph is seen as slow.

  2. I too am surprised and disappointed by the continuation of Abbott’s northern development foolishness. That the Abbott government wanted to redistribute income and wealth to the owners of farms, mines, and other property and natural resources in northern Australia was hardly a surprise, given its close ties to the agricultural and mining industries and its goodies and baddies take on economic and all other policy.

    It is of course these owners of geographically fixed factors of production who will benefit from the northern Australia policies—not non-land-owning workers whose wages and living costs will respond as workers are drawn in from elsewhere in Australia, equalising real wages[1] across the nation, no doubt at a lower level than would otherwise have been the case, given the negative effects on national productivity of the policy distortions.

    But this policy is clearly at odds with Turnbull’s policy direction (a focus on innovation and cities) and supposed economic philosophy. I was hardly expecting Turnbull to reintroduce the mining profits tax, but I still didn’t expect this level of bone-headedness on economic policy. I can only surmise that that this was another concession necessary to secure backing for the coup.

    By the way, Professor Quiggin, I’m glad that break from blogging you were going to take didn’t eventuate!

    [1] More accurately, equalising welfare levels, taking into account geographical differences in amenities and accessibility to services.

  3. Isn’t it just code for establishing special economic zone? A couple of factories in the desert would let Australia compete with China for manufacturing.

  4. Looking at a map the land use in Northern Australia is significantly different to South East Australia and South West Australia. North Australia is mostly categorised as natural grazing land, protected parkland, other protected uses, and minimal use.

    The majority is natural grazing land, if you start counting Northern Australia from about half way in the middle of Australia.

    Due to climate change this should probably be reduced in line with having a livestock sector of a size that is sustainable and doesn’t cause climate change. Better management of the livestock can probably reduce GHG somewhat, but the numbers would have to decrease quite a lot I’d guess.

    That would mean all that land would be protected parkland etc or you would have to do something else with it. I don’t know what as it is a different climate and topography from here.

  5. Maybe you could build another city, an inland city since we don’t have one of those. And then regional towns around it. Then we could commit to taking quite a lot of migrants and refugees for the city. Maybe put it near Mt Isa since its not too much rain or too little rain, and not too hot.

  6. The alternative would be to cut superfluous defence spending and see what happens with the $5 billion up north.

    Except, of course we know what happens to nations who try to run their economies rationally, from Greece last year and the Troika’s demand that defence cuts not be permitted.

  7. I lived in the Cairns region back when it was a service town for ringers, cane cutters and trawler men. Plus a few defunct mines.

    The biggest barrier was the heat, next the distance. Some people can hack the build up to the wet, most succumbed and went troppo with a proportion who never returned.

    “Locked up” is a state of mind in response to geography.

  8. The youth unemployment map is interesting.

    On the face of it, it does give the picture that in all of Australia, north and west Queensland need the most regional help along with Wide Bay and north-western NSW. However, the uniform colours for N.T. and much of W.A. call into question the lack of regional differentiation in their figures as represented by the colours on the map. Additionally, there is the question. How much do percentages matter and how much do absolute numbers matter, region by region, with a problem like this?

    For a national government looking for a key issue, our number one economic and social problem is unemployment, particularly youth unemployment. Many of our other problems flow from this one key problem. Why has everyone given up on considering unemployment? Why is it not an issue and a vote-gainer? Why does almost everyone consider 6% unemployment and often more than double that in youth unemployment, unexceptional? I am baffled. I think our youth unemployment rate is at crisis level, has been for a long time, and is damaging a whole generation’s chances. Nobody seems to care.

    There is a complex of very damaging factors here. Students for example start their working years with a large debt (often $30,000 to $40,000). They get no job or a low paying job which does not use their qualifications. They cannot afford to buy a residence, even a flat. There is a large real estate bubble. They pay exorbitant rents and cannot save. Household formation in the age twenties can scarcely occur.

    Many without qualifications end up long term unemployed with all the social problems that entails and the costs which that in turn imposes on wider society. Yet all this has become a non-debate. It’s as if it isn’t happening. We are storing up huge social and economic problems for the future by ignoring this problem.

  9. On the Zone Tax Offset, the borders for it haven’t been changed in at least 60 years. The original rationale was simply that the cost of living is said to be higher in remote areas so capacity to pay tax on a given income is lower – very dubious IMO, but YMMV. But whatever you think of that rationale the boundaries for it were set more than 60 years ago – that’s why Townsville, Cairns, etc residents can claim it.

    BTW if you’re on welfare you get Remote Area Allowance based on the same boundaries – along with the cost of housing in cities its a barrier to people moving from economically backward areas to jobs. Ikonoclast, it has always been true that the best thing you can do for young adults living in some parts of Australia is to give them a bus ticket to the big smoke – I speak from experience.

    Though the biggest aid to “Developing the North” was simply the widespread adoption of air conditioning. Otherwise few people would want to live there, and even fewer would be productive. I recall reading a paper arguing that one factor in the economic “take-off” of the Asian tigers is that they got rich enough to air-condition their sweatshops, with massive attendant productivity gains.

  10. The reasons why Australians favour northern development are the same reasons why our fathers and grandfathers did. We believe in filling in the map (in British Empire red), in forestalling Asian invasion, in pioneers and progress and the superiority of the farmer to the nomad, and in Kidman and Durack and properties the size of England. Our forefathers were able to talk about that Biggles-in-Australia stuff without embarrassment; we can’t, so we have to find new excuses, but exposing the excuses doesn’t remove the underlying reasons. And the connection between northern development and western Sydney is Cronulla rioting in support of exactly that national myth.
    “For the best spots are red and the rest is all grey,
    And that is the meaning of Empire Day.”

  11. @ChrisB

    Hmmm, I just went to look for the quoted verse. I see it’s from G.K.Chesterton., in particular his Songs of Education cycle, which is very obviously satirical. What strikes me is the stylistic similarity of this to C.J. Dennis’s “The Glugs of Gosh”. Who copied who I wonder? Or is there a broader and older tradition involved? And don’t just say humorous verse… oh okay you can say it.

  12. @derrida derider

    Failing to take into account cost-of-living and amenity differences in income taxation is spatially distortionary (though not necessarily unfair), and it would be nice if this issue were systematically addressed.

    Click to access federaltaxes.pdf

    High living costs and low amenities will both push up the nominal wages of workers with given skills, who will in turn be taxed more. Workers will be compensated through even higher nominal wages and/or lower living costs, but the spatial distribution of economic activity will be distorted.

    But nominal incomes for workers with given skills are generally lower in rural and remote areas, reflecting (on the labour supply side) the major role played by cheaper housing in reducing living costs (and reflecting low productivity on the labour demand side). Some regional areas have high nominal incomes (and attendant high living costs) thanks to the resources boom, but looking at the list of places included in the special tax zones, it’s clear that the special allowances are mostly pushing against more efficient taxation.

    For example, the Whitsunday area is included, but it is not an expensive place to live (rents significantly lower than Brisbane), and is quite categorically not a low amenity location, and both of these are reflected in low, not high, nominal incomes.

  13. @paul walter

    Yeah, we could cancel our orders for that ‘never fly in combat’ hunk of future junk, the F35.

    Think of all the money we’d save. Besides, as Obama can testify, drones are so much cheaper.

  14. @derrida derider

    “…the best thing you can do for young adults living in some parts of Australia is to give them a bus ticket to the big smoke ”

    An idea that the Chinese went for in droves. Worked a treat for them, too.

  15. Is tinkering around the edges (changing zone allowances, re-jigging the tax system) going to change what is wrong with our economic system? I think not. It is going to need more thorough-going policies that that.

  16. @Ikonoclast
    There is a case for targeted measures to compensate residents of remote communities for the higher cost of living. Before the GST was introduced (and before fresh produce was excluded), I surveyed the prices of a basket of supermarket items at stores in remote communities on Cape York Peninsula and Torres Strait and compared these with Cairns stores. Prices were 25-100% higher in remote stores. Remote residents pay more GST than city residents. I proposed that zone rebates for remote residents (Special Zones) could be adjusted to compensate, and pensions likewise. The cost of living in remote communities is one of the reasons that Cairns has the largest indigenous population in an Australian city.

  17. If unlocking the North is the best this Coalition government, its millionaire funder/advisers, its think-tank-lamprey/advisers and its media cheer squad/advisors can come up with as a legacy, as something good to come out of their otherwise disastrous term in government, then perhaps we should just hand them some more rope while chortling quietly in anticipation.

  18. @Ron E Joggles

    I agree there is a case. And those measures are good as far as they go (which is significant for minority communities). At the same time, I am suggesting we need to look at the bigger picture. Tinkering around the edges (changing zone allowances, re-jigging the tax system) is not going to change what is fundamentally wrong with our economic system. To change that we need to change the entire system. This system is wrecking the environment, greatly under-utilising human capacity and increasing inequality. It is an extremely wasteful, damaging and unjust system.

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