Towards a Globally Competitive and Resilient Region

Hunter Valley Research Foundation

Singleton Chamber of

Commerce & Industry

Dr Brent Jenkins CEO HVRF

July 2014


Agenda

• What are we aiming for as a region?

• Where are we currently heading?

• What can we do to change course? • Respond to global challenges

• Thrive within the national context

• Build new regional opportunities and capabilities

• The HVRF’s new vision and role to provide insights that move the Hunter forward

Topic: Towards a Globally Competitive and

Resilient Region


What are we aiming for?

Regional competitiveness is the capability of an economy to attract

and maintain firms with a stable or rising market share in an

activity while maintaining stable or increasing standards of living.

In order to be competitive in the globalising knowledge economy,

the OECD countries need to invest in their innovation systems at

the national and regional levels. As countries are turning their

production towards value-added segments and knowledge-

intensive products and services, there is greater dependency on

access to new technologies, knowledge and skills.

For a region to be globally competitive today and into the future

requires it to grow into a global knowledge based economy



Social resilience allows for the community to adapt and change

through difficult times without leaving core elements behind

The HVRF Wellbeing index points to

the current state of a social

community.

• Happiness with their life

• Satisfaction with what they have

achieved to date

• Satisfaction with their current

standard of living

• Satisfaction with their life as a

whole

• Feeling of being valued by those

who know them

• Optimism about their future

The ability to maintain a high state

of Wellbeing during times of change

(Resilience) is impacted by.

• Education levels that provide

employment options

• An income that can sustain an

acceptable quality of life

• Affordable and secure housing

• Strong and supportive

relationships – community and

private

• A high level of physical and

mental health



These two objectives are not mutually exclusive …

Education

Employment

Income

Health

Innovation

Investment

Collaboration

Infrastructure

Skills

Connectedness

Housing and

Neighbourhoods

Relationships

Crime and Safety

Civics and

Environment

Resilient Internationally

Competitive



… and we have the building blocks to get there !

Source: Bernard Salt, KPMG Demographics 2013

Must Haves

• Air link, or electrified rail link to

capital city

• Tertiary education campus

• Local television production, daily

newspaper

• Entrepreneurial spirit

• Geographic command over distinct

and resource-rich region

• Port facilities

• Diverse lifestyle opportunities

• Affordable housing

• Expandable infrastructure

• An economic reason for being

Nice to Haves

• Galvanised community opinion

• Military institution

• Research establishments

• Direct air link to capital cities

nationally and internationally

• Cultural diversity

• Regular state, national or

international events


We are experiencing a buoyant residential construction sector

supported by low interest rates

$0

$50

$100

$150

$200

$250

$300

SEP 10 SEP 11 SEP 12 SEP 13

Public Private

Base year = 2011/12

1,000

2,000

3,000

4,000

5,000

10,000

20,000

30,000

40,000

50,000

DEC 03 DEC 05 DEC 07 DEC 09 DEC 11 DEC 13

HUNTER

NSW

NSW

HUNTER (rhs)

Note: Minor boundary changes in the upper Hunter prior to Sept 2005 SOURCE: HVRF, ABS

Non-residential building approvals Hunter

Source: ABS, Catalogue No3 8731.1 and 6427.0

Number of residential building approvals Hunter and NSW, Annualised data series, all dwelling types

Where are we currently heading?


Where are we currently heading?

After a long period of growth underpinned by mining investment, the

Hunter Region’s economy is undergoing structural adjustment

Newcastle Port Corporation

Coal exports from the Port of Newcastle

0

20

40

60

80

100

120

140

160

DEC 03 DEC 05 DEC 07 DEC 09 DEC 11 DEC 13

Tonnes (million)

0

20

40

60

80

100

120

140

160

Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14

USD per tonne

SOURCE: Indexmundi, HVRF

Newcastle coal price

While coal exports are likely to rise, the impact on

economic activity (jobs and investment) will decline


0.00

0.04

0.08

0.12

0.16

0.20

MAR 09 MAR 10 MAR 11 MAR 12 MAR 13 MAR 14

Average for June: 2000 to 2010

SOURCE: Hunter Valley Research Foundation business surveys

Employment Intentions Capital Expenditure

We are not seeing the signs of strong business investment that will

support future growth

Where we are currently heading?


The economy is sheading jobs, particularly in mining, infrastructure

and manufacturing


-500 jobs

Camberwell and

Glennies Creek

- 160 jobs

Mt Arthur

- 30 jobs

Waratah

- 100 jobs

Carrington

- 103 jobs

Heatherbrae

- 35 jobs

Gateshead

Fox Mining and

Engineering

- 130 jobs

Ravensworth

- 500 jobs

Kurri Kurri

- 45 jobs

Hunter

- 190 jobs

Cardiff


0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

MAY 11 MAY 12 MAY 13 MAY 14

SOURCE: Australian Bureau of Statistics, Monthly Labour Force Survey

HUNTER BALANCE

NSW

2%

3%

4%

5%

6%

7%

8%

9%

10%

MAY 11 MAY 12 MAY 13 MAY 14

SOURCE: Australian Bureau of Statistics, Monthly Labour Force Survey

Newcastle

NSW

Cessnock, Dungog, Gloucester, Great Lakes,

Maitland, Muswellbrook, Port Stephens, Singleton,

Upper Hunter

Newcastle and Lake Macquarie

This trend is now becoming apparent in the official unemployment

rates, particularly for the mid- and upper- Hunter


Unemployment Rate


Other indicators show that the Upper Hunter region is being

particularly impacted

Indicator Position

Upper Hunter region business

performance index (trading,

profitability, employment)

Negative

Unemployment rates Rising

Real Value of Non-residential

building approvals

Close to 6 year lows

Upper Hunter region SME

capital expenditure intentions

10 year low

Upper Hunter region business

expectations for regional

economy

10 year low

Upper Hunter Region Economic Indicators 2014

Source: HVRF



The Hunter also ranks relatively low on some key determinants of

regional success

Competitiveness of Australian regions

is being measured by 10 indicators:

- Technological Readiness

- Human Capital

- Business Sophistication

- Quality of Institutions

- Economic Fundamentals

- Innovation

- Labour Market Efficiency

- Infrastructure

- Market Size

- Natural Resources

Source: Regional Australia Institute

Where are we currently heading

Hunter RDA Rankings

(1=best, 55=worst)

- 20/55

- 16/55

- 40/55

- 27/55

- 46/55

- 30/55

- 35/55

- 17/55

- 10/55

- 22/55


Where are we currently heading

Recent changes in the HVRF’s wellbeing index point to social issues that

will define our region

• Increased reporting of inability to pay utility bills across all income groups

• Increased requests for support from a welfare organisation

• Increasing disparity between the highest and lowest income groups

• Resurgence of views that high school completion does not improve employment

and income prospects, probably as a consequence of the strong Hunter

economy

• Continued high levels of obesity, fuelled by a decrease in physical activity and

healthy diet

• 36% of residents are negatively affected by traffic yet 70% continue to use

private transport exclusively and satisfaction with public transport has fallen

• Increased experience of threatened force or physical violence overall and

increased perception of non-sexual assaults and dangerous and noisy driving

being problems

Source: HVRF Wellbeing Index 2013


• The Asian century

• Limited Resources

• Increased Connectedness

• Environmental Challenges

• Ageing population

• Changing consumption patterns –

“mass customisation”

The Hunter Region will be impacted by a variety of global trends over

the coming years

Changing Course – Responding to Global Trends


Inter-censual change, 2006 to 2011,

population by age groups - Hunter Region

An ageing population is a demographic tsunami already visible on the

horizon, with significant fiscal and social implications

Other

Health

Age Pension

Aged Care

Education

0

20

40

60

80

0-4

10

-14

20

-24

30

-34

40

-44

50

-54

60

-64

70

-74

80

-84

90

-94

10

0+

Government spending by age cohort Australia, all governments, 000’s per person, 2011 - 12

Changing Course – Ageing Population


The emerging solutions are likely to be difficult with many potential

impacts

What economic opportunities

will this create?

What will be the impact on

Regions and LGA’s?

Changing Course – Aging Population

Possible Solutions

#1 Raise Retirement Age to 70

#2 Widening tax base (e.g. GST)

#3 Additional levy on workers

wages

#4 Targeted Population growth

#5 Increase participation rates

The Hunter is ageing faster than

other regions. LGA’s have much

of the heavy lifting:

- Services – Health and Welfare

- Infrastructure

- Housing

- Transport

No clear answers and many

are politically difficult to

implement


Consumers expectations are being shaped by their lives online

Design it yourself 3D Printing

Changing Course – Mass Customisation

Can the Hunter’s

manufacturers adapt?


The Hunter’s position within the country has, and will be, impacted

directly by Australia’s policies and relative international performance.

• Fiscal Restraint

• Low Interest Rates

• Tax Base

• High Australian $

• Health and Defence

Spending

• Investment in

Infrastructure

• Education Levels

• R&D Spend

• Innovation System

Policy Performance

Changing Course – Thriving in the domestic

context

Can the Hunter

outperform the rest of

Australia?


Opportunities: Redevelopment of the Port of Newcastle provides great

potential to support new economic growth throughout the Hunter

Options Example Comments Example

Maritime

Clusters

Logistics

Maritime Services

Shipbuilding/Repair

Grow all economic

activities associated with

arrival and departure of

goods

Singapore

New Industries Renewable Energy On-shore/Off-shore Wind

Tidal Energy

Rotterdam

Waterfront

Developments

Tourism/Recreation

Food

Events Industry

Look to balance land use

in areas such as public

space, residential,

retail/commerce

Cape Town,

San Francisco

Diversification Non-Port Sectors Media/IT focus Hamburg

Source: OCED The Competitiveness of Global Port Cities

Changing Course – Regional Opportunities

How does the region

maximise this opportunity?


Opportunities: Events such as the Children’s Games and Asian Cup

have potential to develop event based strategies to fuel economic

growth Event Based Development Strategies

Source: City of Busselton, HVRF

Type

Hallmark Major Developing Community

Features

Occurs annually

Internationally

recognised

Unique to region

Attracts

international and

interstate visitors

Opportunities for

local businesses

Actively engages

local community

Significant external

media exposure

Economic multiplier

of at least 10

May be internationally

recognised

Annual or single

event

Builds on local

participation and

community life

Opportunities for

media exposure

Attracts visitors from

> 40 min drive time

Economic multiplier

of at least 4

Showcases facilities

and attractions

Positions the City

for other events

Has potential to

become a major or

Hallmark event

Has strong

passionate local

supporters

Promotion of council

asset of strategic

importance

Positions City for

future events

Celebrates an aspect

of community life in

the City

Generally run by

volunteers

Does not attract

visitors from outside

the City

Limited likelihood of

media exposure

Limited economic

benefit

Changing Course – Regional Opportunities

Can the Hunter do an

Adelaide or a Yorkshire?


Economic diversification plays an important role in providing

resilience and flexibility for regional Australia’s economies. Without

this cushion, regional economies may suffer disproportionately

during adverse external shocks, with exacerbated negative effects on

employment security, income and living standards

Regional Australia Institute

The most commonly raised economic threat – identified by 39 regions

– was the reliance on one or few main industries and the need to

diversify the region’s economy

ABS 2013

Economic diversification in the Hunter region is becoming an

increasingly important strategic issue

Changing Course – Diversification


Local Industries (High > 80%): provide

goods and services to the local market.

They compete in only a limited way with

other regions.

Resource Dependent Industries (Low 5-10

%): Employment in these industries is

located primarily where the needed natural

resources are found, but these industries

compete with other domestic and

international locations.

Traded Industries (Low 10-15%): These

industries sell products and services

across regions and often to other

countries. They locate in a particular region

based not on resources but on broader

competitive reasons.

Source: M Porter HBS

Local Industries:

Highest share of employment

Highest Employment Growth

Grow Population

Demographic Changes (Ageing)

Traded Industries:

Higher average salaries

Higher wage growth

Higher productivity

Higher levels of innovation

Grow Clusters (Single or

Overlapping)

Build Innovative Capacity

Regional Economies typically contain three types of industries. Growth

in traded industries is fundamental for regional prosperity

Changing Course – Diversification


Changing Course - Innovation

Regions are becoming the global competitive forces with success

based on innovation

Regions are of the scale at which meaningful interaction

among firms, people and knowledge generators leads to

innovation.

These region-specific advantages – embedded in

specialised firms, skilled labour and innovation capacity –

remain a significant source of productivity gain for firms.

Regions emphasised that their main comparative

advantage was the innovativeness of their enterprise base.

Source: OCED


Innovation is about applying new knowledge to create value

Research turns money into knowledge ……

Innovation turns knowledge into money!

• Can use new knowledge generated from R&D, suppliers,

customers, competitors, other industries

• Can manifest in New Processes, Products or Services

that provide a competitive advantage and a superior

value proposition

• Meets market needs in a timely manner

• Creates economic or social value



New goods and services introduced in

previous 12 months - Hunter Region

HVRF’s data suggests that innovation in the region is declining not

rising!

37% 26%



Access to skills and funding are the major barriers for SME’s (5-199

persons) to innovation

Data source: ABS Cat. No. 8158.0, Data Cube 6, Table 1

Barriers to Innovation – Skills and Investment



Hunter NSW

SOURCE: HVRF; ABS Census of Population and Housing, 2006 and 2011

The Hunter is experiencing a “hollowing out” of its young workforce. A

young educated working population is critical to fuel economic growth

Changing Course – Human Capital

0-4

5-9

10-14

15-19

20-24

25-29

30-34

35-39

40-44

45-49

50-54

55-59

60-64

65-69

70-74

75-79

80-84

85-89

90-94

95-99

100 +

2011

2006

2.0% 4.0% 6.0% 8.0%

MALES8.0% 6.0% 4.0% 2.0%

FEMALES


The relative low education attainment levels also remains a major risk

factor for competitiveness and economic growth

Level of year 12 completion – by age group Hunter Region

Changing Course – Human Capital

0%

20%

40%

60%

80%

18-19 20-24 25-34 35-44 45-54 55-64 65-74 75-84 85+ Total

Singleton MuswellbrookUH Shire NewcastleNSW

SOURCE: HVRF; ABS Census of Population and Housing, 2011


How: Utilisation of waste heat from

power stations to support intensive

agriculture or aquaculture

1 Extensive pond aquaculture

2 Animal shelters

3 Algal ponds

4 Intensive raceway aquaculture

5 Undersoil heating

6 Greenhouses

Environmental control symposium, Washington, DC,

USA, 28 Nov 1978

Changing Course – What If …..?

What if we thought about using our region’s resources in new and

innovative ways to meet global opportunities?

Natural Resources:

Coal

Clean and consistent water supply

Fertile Land

Beautiful Landscapes

River system linked to harbour

Created Resources:

Power Stations

Electricity Distribution Network

Holes in the Ground

Road and Rail Links to Port and Airport

Engineering and Design Skills

Manufacturing Capability

World Class Research Capacity

Opportunity (1): Supplying the

Global Food Chain

Opportunity (2): Industrial Tourism


The Hunter Region will continue to be battered by global and

national forces, many of which will have potentially negative impacts

on the economy, health and wellbeing…if we are not prepared!!

Regions are the new battle grounds in the global economy.

The Hunter Region has many natural assets and world-class

capabilities but rarely applies these to innovative and value-creating

goods and services that can serve global markets.

It is critical to think and act strategically and innovatively NOW to

create a globally competitive region that will allow all of our

businesses, organisations and communities to thrive into the future.

What strategic role can we all play in supporting the development of

a more competitive region?

Summary


HVRF – Today

HVRF is a unique regional-based organisation with national reach

• Not-for-profit research organisation established in Newcastle in 1956

• Governed by a voluntary Board of Directors representing the Hunter

Region community

REGIONAL RESEARCH

• 125 Sponsors generating $300,000 per annum that is focused on

regional data and research

• Supported by all Hunter LGAs, major corporates, local businesses

and the community

• Major Themes: Regional Competitiveness and Resilience

FEE-FOR-SERVICE RESEARCH

• Conducts fee-for-service research work in areas of:

– Transport Planning

– Health

– Community Attitudes


The HVRF is re-orienting its regional research agenda

HVRF – Looking Forward

HVRF has been an important source of regional data based on our high

quality survey capabilities. We will continue to keep our finger on the

pulse of the region

Looking forward the Foundation’s regional research program will

increasingly be about addressing key strategic issues that will impact

the region. We will:

- Look at the 5-10 year horizon

- Tackle high impact issues

- Bring global best practice home

Our focus will be on providing:

Insights that move the Hunter forward towards an

Internationally Competitive and Resilient Region


Education

Employment

Income

Health

Innovation

Investment

Collaboration

Infrastructure

Skills

Connectedness

Housing and

Neighbourhoods

Relationships

Crime and Safety

Civics and

Environment

Resilient Internationally

Competitive


Our unique regional research programs will look holistically at the key

areas that will ensure the region’s future



We are implementing a new regional research program around regional

competitiveness with a first focus on manufacturing

Highlighting the key issues (Globally

and Nationally) impacting productivity,

innovation and change within the

manufacturing sector;

Improving the Region’s understanding

of the changes that need to occur to

make the Hunter’s manufacturing

sector more competitive, and

Identifying initiatives that may be

undertaken by firms and policy-makers

to improve regional competitiveness

and prioritising these.



Youth engagement and connection to education and the workforce is

strategically important if we are to build the region’s human capital and

improve wellbeing

Unemployment Rate 33/55

Young Unemployment 28/55

Participation Rate 36/55

Welfare Dependence 35/55

Early School Leavers 37/55

University Qualifications 19/55

Technical Qualifications 6/55

Hunter RDA - Selected Rankings

(1=best, 55=worst)

Source: Regional Australia Institute


HVRF values the continuing support of our local partners

sponsors and supporters .. but we always need more !

We are more than just regional data gatherers…

…we have the knowledge, skills and desire to assist all

local government, regional businesses, policy makers and

the community confront change head on, and chart a path

to a competitive and vibrant future.

Our focus will be on providing INSIGHTS THAT MOVE THE

HUNTER FORWARD to an internationally competitive and

resilient region

THANK YOU



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Data & Analytics

Towards a Globally Competitive and Resilient Region