While in the short term, stimulating economic activity will be critical to ensure that the health crisis does not cause a deep, long lasting economic crisis, targeted short-term stimulus can also set the foundations to achieve greater longer term economic and social outcomes.
I believe there are four key opportunities for Tasmania going forward, each linked to our existing, pre-COVID-19 structural challenges.
- Approach the investment in the health care and social assistance industry as an economic and social opportunity
- Use the opportunities attached to population ageing to address the challenges of ageing
- Prioritise industry policy that aims to increase diversity across industries and markets
- Aim to achieve a ‘strong middle’ educational attainment structure (EAS)
Given the current situation of the COVID-19 global pandemic, with the state and national borders effectively closed to immigration (see recent migration analysis for Tasmania), it is likely that population growth will slow considerably in the short to medium term and that the rate of population ageing will intensify. Future economic and social policy development for Tasmania will need to be positioned in the context of a population with low or no population growth and ageing rapidly.
Even when Tasmania was experiencing its strongest rate of population growth in a Century, the population was still ageing, and ageing at a faster rate than the rest of the country. Nearly half of Tasmania’s Local Government Areas had already been experiencing population decline for a prolonged period prior to the pandemic. When, and if, Tasmania returns to relatively strong population growth, it will continue to age, both in terms of the number of older people and in terms of proportion of the total population.
Prior to the pandemic, the health care and social assistance sector contributed both the highest proportion to Gross State Product (GSP) and to employment than any other industry sector, yet its contribution was not valued as such in the community. Research by the University of Tasmania’s Institute of Social Change found that Tasmanians greatest wish into the post-COVID-19 future in Tasmania is access to a quality healthcare.
First, greater understanding of the Return on Investment (RoI) in the health care and social assistance sector and the potential of the White Economy, would assist shift this negative perception and also inform greater investment in the provision of health care and social assistance in Tasmania.
Second, as the Premier considers his infrastructure and construction plan, investment in the regeneration and re-purposing of the built environment in relation to population ageing also needs to be considered.
Revitalisation of regional centres and public spaces can both stimulate economic activity in regional areas but also ensure that the new infrastructure meets the needs of that community.
As regional populations age and/or decline, their town centres and public spaces can also deteriorate, creating a fragmented and under-utilised spatial structure. The visible degradation of the built environment, for example houses, buildings and other public infrastructure can impact the perception of the place and detract people from living there. Policy initiatives that target the revitalisation of a town centre and its periphery in response to shrinkage have two main aims; to improve standards of living through urban renewal while maintaining cultural heritage and to improve social cohesion.
A number of major towns in Tasmania could benefit from urban renewal projects which focus on the regeneration of the existing built environment and the revitalisation, re-purposing and right-sizing of public and private infrastructure, services, amenities and housing to meet the needs of their changing populations. Appropriate towns to consider for fit-for-purpose urban renewal projects are those with transport corridors and access to other towns within their periphery, as well as to towns and major urban centres outside their immediate periphery which may provide larger-scale public services to their community.
Third, to safe-guard against external shocks, Tasmania needs to improve the diversity of its industry structure and markets, particularly focusing on increasing the traded-market sector of the economy.
In 2019 the The BankWestCurtin Economic Centre developed a strategy for future-proofing the Western Australian economy. The research underpinning this strategy could be quickly and easily replicated for Tasmania.
The strategy is based on the framework of economic complexity developed by the Harvard University Kennedy Business School (explained here from an Australian context), and smart specialisation. A‘smart specialisation’ approach to regional diversification ensures that new development opportunities build on existing regional capabilities and capitalise on local conditions and networks as well as boost their competitive advantage by prioritising innovation and research.
Strategic new product opportunities are further diversified according to a realistic indicator of either; ‘low-hanging fruit’, balanced portfolio or a ‘long jump’.
Tasmania needs to identify its low hanging fruit to start building the foundations of a more diversified economy from which to build a stronger economy over the longer term.
Fourth, in addition to improving the participation in, and completion of, schooling and further education for individual Tasmanians, much greater attention needs to be provided to the Educational Attainment Structure (EAS) of Tasmania’s workforce and future workforce.
The International Labour Organisation (ILO) suggests that type of EAS, rather than levels of educational attainment, is the most significant determinant of the pattern of industrial development and economic growth. The type of EAS is explained by the share of the labour force based on educational attainment according to its shape along a bell curve.
The ILO argues that capabilities to innovate and develop new products are influenced by the particular mix of educational, vocational and technical competencies embodied in the labour force.
‘Strong middle’ EAS are those with relatively higher shares of vocational and technical education and training. This EAS provides the widest range of options for developing and diversifying industry structures.
‘Missing-middle’ EAS are polarised and present with relatively lower shares of vocational and technical education but higher shares of schooling and tertiary education. Missing middle EASs provide limited options for innovation as the labour force lacks the broad supply of complementary occupations required in addition to tertiary qualified managers and professionals.
Critically absent in a missing middle EAS is a workforce with design skills; skills that enable workforces to invent their own products and solutions rather than just skills to replicate others’ designs. These skills are predominantly acquired in vocational and technical education at the diploma or advanced diploma level.
Tasmania currently has a missing middle EAS and its workforce is skewed to both high and low skill occupations.
Without a strong middle EAS workforce and a focus on diversifying the economy, combined with a low population growth situation, and an ageing population, Tasmania will struggle to recover from the economic consequences of this global pandemic crisis.