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The Regional Divide and the Future of Small Towns

Paul Collits

Manager Regional Policy, New South Wales Department of State and Regional Development
Adjunct Senior Lecturer, Faculty of the Built Environment, University of New South Wales

Presentation to the "From Strength to Strength" Regional Development Conference, Timaru, New Zealand, September 2003

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Background Paper

Some years ago, a colleague in Australia, Gordon Forth, acquired a reputation as the doctor death of small towns when he argued that many small towns under the 4 000 population barrier were destined for inevitable decline despite the best efforts of economic development practitioners.

The debate over small towns raises many of the core issues of regional development policy. It also juxtaposes two common views of regional Australia. One is the optimistic view that "all towns can make it" provided they have a vision, leadership and mobilised local resources. The other view is that rural Australia consists largely of declining towns lacking hope and lacking dynamism, racked by poverty and where people have left and services have followed too.

According to Gordon Forth, writing in 2000:

... the decline and ultimate demise of many smaller country towns is part of an inevitable historical process and should be accepted as such.

Forth made a number of points in his, at the time, controversial paper. Some of them were misinterpreted either wilfully or not, by journalists and local community leaders who resented the implication that their town might be inevitably declining. One point was that much regional decline is to be expected and cannot be readily reversed. Another is that some towns have become havens for an underclass of welfare recipients. Another was that for some people the answer might be assistance to move to larger towns. A final point was that what Forth termed "false wizards" often gave hope for revival to communities where there were simply not the resources to fulfil that hope. The final point received some support from other small town observers.

Forth stated:

Amongst the false wizards, who have intentionally or unintentionally misled Australia's regional communities regarding the realities of decline, are certain opportunistic consultants with their glossy well-rehearsed butcher's paper routines, less than honest politicians and the small town revivalists - the professional optimists with their quick-fix solutions for the complex problems of small town decline.

Forth debated Peter Kenyon on national television about these issues. Kenyon might be regarded as a natural target for Forth's comments. He is someone who ignites passion in communities and encourages them to believe that better outcomes are possible for those who believe.

Forth was not alone in deriding what might be termed the butcher's paper-led recovery. Roy Powell and Craig Mathisen, two observers for whom I have a lot of respect, have made the same point about the need for more "analytics" in community economic development.

At the end of the day, the differences between Forth and Kenyon might be seen as exaggerated. I don't believe there is anyone who believes that every small town will thrive. On balance, a number of points can be made:

• Understanding without passion is unlikely to yield great results for communities;
• The reverse of this is also true;
• Nothing, including the decline of every small town, is inevitable;
• Yet many small towns are likely to decline further, in the sense of losing population;
• Population decline need not mean decline in every sense;
• Governments now "get it" in relation to service provision, though far more could be done to provide technical support to communities;
• We are yet to see the much needed, definitive, independent, empirical study that measures the real impact of local economic development.

Are small towns worth saving and how can governments best assist in this. And what does "making it" actually mean?

One view is that small town decline is not inevitable and can be reversed by local community action. Any town can make it given the right circumstances, even against the odds.  This is the view of what might be termed the "small town optimists", often consultants and future search facilitators who are involved in community economic development and who often tell of the success stories of small towns who have "made it" despite the odds. Proponents of this view focus on the need for community action, strategic planning and leadership and assume that governments are not going to "save" small towns. As Derriman states, "enterprise and ingenuity can prevail over rural adversity".

On this view, regional communities can play an important role in economic development. It is, of course, one of the principal tenets of community economic development thinking that communities can make a difference to local economic development outcomes through their own actions. As E M Schumacher has noted:

Perhaps we cannot raise the winds. But each of us can put up the sail so that when the wind comes we can catch it (quoted in Centre for Sustainable Regional Communities).

There is considerable debate over the relative influences of internal and external drivers of local economic growth, and hence of the capacity of communities to shape their futures.

At a time when governments have moved away from top down to bottom up approaches to economic development, the role of the local community has become more important to achieving economic prosperity.

A variation of this view (that decline is not inevitable) is that some towns will die while others thrive. According to Roy Powell, success will depend on "passion and creativity", in other words, on local resources.

On this view, the proper role of government in relation to small towns and the purposes of policy are not clear. At the very least, this scenario would entail governments working with local resources and encouraging them.

There are a number of trends occurring in the space economy of New South Wales. They confirm some longstanding elements of the settlement pattern and the space economy. The following stand out:

• Persistent metropolitan primacy. Sydney's dominance has continued, though the capital city's share of the State's population has virtually plateaued since the 1970s.   Sydney has emerged as a "global city", with its "command and control functions, the strength of business services and finance as key industries, and the development of a highly paid, multi-skilled workforce with an international focus and highly developed global links.
• Australians' traditional preference for with coastal living has increased since the 1970s. While population moves to coastal areas in New South Wales appear to have slowed between 1996 and 2001, it is likely that movements out of capital cities to coastal regions will continue.
• In inland regions, especially in the wheat-sheep belt, smaller communities with an already low population base have struggled to maintain population and economic function in the face of increased farm mechanisation and corporatisation.
• At the same time, larger regional centres have generally prospered relative to smaller communities, especially in inland regions, benefiting from scale and greater economic diversity and driven by better transport, out-shopping and the regionalisation of government and other services. This is the so-called "sponge city" phenomenon described by Salt.
• The decline of traditional industries such as meat processing, timber and dairying, driven by a mix of global competitive pressures, environmental policy drivers and the demands of national competition policy.
• The flight of youth from regional areas in search of educational and career opportunities, particularly from smaller towns, has robbed many communities of talent and future community leaders and is a continued source of despair to these communities.
• The impacts of government decisions on regional communities, for example in the area of service delivery and national competition policy, has reinforced patterns of regionalisation, that is, the drift of services to larger centres.
• Globalisation has empowered some regions and communities and disempowered others through processes of what Schumpeter termed "creative destruction", and generally reduced the capacity of governments to shape regional outcomes.
• There is less dependence on agriculture to drive regional economies, as regional communities have "uncoupled" from their local farm economies.
• There has been a drive towards greater value-add in agribusiness and greater diversity.
• The advance of service industries, eg business services, community services, has continued apace.
• There has been a marked decline in manufacturing in metropolitan regions, providing fewer opportunities for traditional "smokestack chasing" strategies in regional areas.
• Changing patterns of industry ownership and the development of national supply chains with a greater focus on "command and control" functions in major cities has reinforced metropolitan primacy and given it new forms, based on agglomeration economies.

These patterns suggest increasing complexity and reinforce the arguments of Sorensen, Stimson and others that it is meaningless to talk of one "regional Australia".

The Exaggerated City-Country Divide?

Yet too often regional Australia is typecast as being in terminal decline. The media, often at the urging of regional interest groups, plays up the city-country divide theme.

The "drift to the city" is, in overall terms, a myth. More people leave Sydney each year to settle in other parts of the State than the reverse. From 1996 to 2001 (census years), Sydney's loss to the rest of the State was over 36 000 people.

While some towns and regions have experienced difficulties, many centres are growing. What make the headlines are the population losses, young people leaving small towns, the impact of the drought and businesses folding. Yet there are many business success stories, many towns are fighting successfully against difficult conditions and new industries are thriving.

Recent population figures show that around half non-metropolitan Local Government Areas (LGAs) have experienced sustained population growth over the 1997-2002 period. As well, recent employment growth has been far stronger in percentage terms in regional New South Wales than in Sydney. The employment growth for the 2002-03 year was the strongest performance since 1995-96.

The recent housing price boom, fuelled by the Commonwealth Government's enhanced First Home Owner's Scheme implemented following (and to counteract) the post Olympics slump, has sent Sydneysiders and property investors scurrying to regional locations, generally (but not only) to the coast. The "sea change" phenomenon has led to a renewed and increasing interest, for example among professionals wanting to "downshift", in regional locations with high amenity values.

Regional New South Wales is highly differentiated. Regional problems vary widely and demand region-specific responses. Regional development drivers are complex and subject to an enormous range of influences.

Public pronouncements by regional interest groups suggest regional gloom and policy failure. However, governments want to emphasise the positive - towns surviving against the trend, successful businesses, new industries appearing and jobs created or retained.

There are many signs of life and hope for a better economic future in regional areas. There is continuing metropolitan out-migration. There is a regional housing boom under way with dramatic increases in property values in many towns. Regional tourism continues to be a growth sector, with rising city incomes and compressed city lives creating great demand for short stay breaks in accessible regional locations with good amenity. There is considerable endogenous business development in communities, with new niche industries such as viticulture and aquaculture emerging as well as biotechnology. There are new industries and new industry clusters forming. There is a natural churn of population where young people go to the cities and older people leave the city, or in some cases, return to the country.

What is Occurring in Small Towns Specifically?

The Australian Bureau of Statistics (ABS) sums up the plight of small towns thus:

People living in declining towns risk losing their savings, livelihood and support systems as they confront the break-up of their community, loss of jobs, deteriorating infrastructure and declining property values. In addition, declining towns often lose services through the closure of schools, hospitals, retail establishments and banks. Such closures have a direct impact on the health and well being of remaining residents, but they can also have psychological impact, with many seeing the closure of central services as signalling the "death of a town".

Such a view is common among commentators on the plight of small town Australia. Perhaps the most intractable problem regional development is what to do to help small towns. According to Kevin O'Connor et al:

In general, it would seem that it is at the lower ends of the settlement hierarchy that the claim of 'gloom and doom' in rural and regional Australia is most apparent and most widespread.

This is backed up by Roy Powell:

I am presenting a bleak picture. It is one that underpins many of the trends affecting rural/regional Australia. Our old structures and systems are not working, we lack scale, and we are losing industries, people and services to the urban areas.

Small towns are at the end of the chain with little going for them.

There are a number of sobering accounts of the plight of small towns in Australia.

Research by Baum et al found that of the 136 towns in Australia that had in 1996 a population between 4 000 and 10 000, around three quarters were classed as vulnerable.

Moreover, the small number of "places of opportunity" among small towns are, according to Baum et al, places relying on mining or towns servicing prosperous agricultural hinterlands.

The vicious cycle of decline is all too familiar - loss of population causing and caused by loss of economic function, the decline in services fed by out-migration, the declining capacity to attract new investors, and further decline.

Yet not all small towns are in decline, whatever the overall trends. Many small towns have low unemployment rates. Places with good amenity, particularly (but not confined to) areas close to the city, offer opportunities for cheaper housing and lifestyle advantages.

Tim Fischer, Australia's quirky former Deputy Prime Minister, recently authored a book called Outback Heroes. In it he outlined some success stories to counter the widespread view that regional Australia is in decline.

Governments are interested in regional success stories. This is understandable. Often their programs contribute to the successes. And governments get blamed, generally quite wrongly, when regions are seen to be going backwards.

There are some stand-out success stories in New South Wales,

Tim Fischer has co-authored a book called Outback Heroes. In it, he tells the stories of a number of successes. For example, the small town of Nundle in the North West of the State has been revived by the dramatic intervention of an entrepreneurial married couple from Sydney who have, it seems, almost single-handedly transformed the town by buying up businesses, hiring managers for them and enthusing the community. There are still challenges ahead, and setbacks have been experienced. But the town has prospered and the quality of life has lifted enormously.

Parkes in the Central West is described in detail by Fischer and Rees. It has prospered due to its location on major transport routes and the arrival of a logistics firm that has taken advantage of Parkes' transport hub status. Parkes has benefited from new investment and also from the success of the film, The Dish, based on the town's role in having the telecommunications satellite linked to the first moon landing in the 1960s.

Coolah in the central west of New South Wales has attracted attention, as it has thwarted economic circumstances and fought back against the decline of traditional industries such as timber. There was a strong leadership group that emerged in the 1990s and successfully bid for many government programs at State and Commonwealth level. There was strong support in the town from both the Council and the community generally. The town's amenity was improved, a telecommunications centre was installed, and a number of projects succeeded in bringing new life and energy to the town. Coolah has also benefited from its rich agricultural land and the absence of competition from nearby towns.

The NSW Government's Townlife Development Program has also produced some substantial gains in the economic development of towns such as Gulargambone and the tiny town of Nymagee, which puts on an annual outback music festival, bringing thousands to the town and creating a number of spin-off industries in the cultural sector.

Australian Regional Realities

There are a number of realities that must be confronted by regions and by any government trying to achieve better economic development outcomes for regional areas.

Sydney's global city status is generally accepted by observers. Even though many of the State's regional industries, particularly the emerging areas of strength such as the wine industry and regional tourism, are globally connected, Sydney's sheer size, multiculturalism, its gateway status through Kingsford Smith Airport, and its global command and control functions make it dominant of the State's economy. Roy Powell as estimated that Sydney accounts for more than 70% of the State's economy. Globalisation has, in effect, provided a new set of reasons for Sydney's dominance.

In Australia, most people prefer to live on the coast. Young people tend to leave their region of origin for employment or education. Not all regions or communities have the resources or natural advantages to succeed economically. Globalisation is disempowering some communities and regions while others are prospering. Unemployment remains stubbornly high is some regions. Traditional industries like timber, dairying and meat processing continue to contract.

The State's regional economies are characterised by less diversity than the cities, smaller local markets, and a lesser capacity to absorb and prosper from forced structural change. New South Wales regional centres are far less multicultural than Sydney, and hence less attractive to migrants. There are relatively few regional universities around which knowledge hubs can be built, at a time when it is increasingly accepted that universities play an important role in driving regional economic growth. Smaller towns are typically associated with social conservatism and perhaps not attractive to the new "bourgeois bohemians" or the "creative class".

Lack of scale is often a constraint in a State where there are no middle sized cities other than the Central Coast, Newcastle and Wollongong. (These cities are, in effect, part of the Greater Sydney region conurbation, and typically regarded negatively by most regional residents as being part of "NSW" - Newcastle-Sydney-Wollongong).

Forces beyond the control of regions - and government - will always affect economic outcomes. Yet, equally, some regions and communities prosper while these largely negative trends place a ceiling over regional growth.

Regional economies are open and resources move from region to region, creating winners and losers. Growth and settlement is lumpy. It has always been the case, but globalization has only strengthened the hand of (mainly) larger places that are globally connected.

Myths About Regional Australia

The above picture provides a current reading of the state of play in regional Australia. Much debate swirls around the trends that are occurring, and what they mean. The debates are seldom free of politics and ideology. Among the discourse on regional Australia, however, there are a number of myths that persist, often at the service of particular arguments about what should happen in government. These myths include the following:

• Regional Australia as a whole is in decline;
• There is a single entity called "regional Australia"
• There is a drift to the cities in aggregate terms;
• It is open to governments to favour some regions over others;
• Population mobility is a bad thing;
• Cities are growing at the expense of regional areas;
• Regions are in decline because cities are growing;
• Big infrastructure projects in regional Australia will populate the inland;
• Population loss equals decline;
• Economic restructuring ("creative destruction") inevitably leads to negative outcomes;
• Youth out-migration is all one way;
• Economic rationalism /neo-liberalism has caused regional decline;
• Regional Australia can be fixed up by government policy change; and
• Declining farm populations are necessarily a bad thing for regional areas.

There is insufficient space here fully to dispense with these myths. But they are powerful tools in the wrong hands, and serve in the cause of bad policy.

Summary: the State of Play in Regional Australia

In summary, what is the state of play? Is the picture of decline more accurate than the picture of growth? Who to believe? There seem to be two ways of viewing regional Australia, two views of the processes driving regional growth, and two ways of conceiving the proper role of government.

One view sees regional Australia as differentiated and certainly not in universal decline. It sees regional development drivers as complex and subject to an enormous range of forces, many of which determine where industry and businesses locate, and few of which are subject to government fiat. On this view, government intervention should be selective and should seek to "make a difference", while not prejudicing the market. Inherent to this argument, though generally unstated, is the view that not all regions will prosper.

The other view see regional Australia as facing a "crisis", with many parts in terminal decline. This situation is said to be unacceptable, caused by government actions and inaction, and requiring substantial and direct government intervention. Such government intervention is, on this view, capable of turning around the declining fortunes of regions, even if at great cost to the taxpayer, provided the right "incentives" are in place for industry to relocate or expand. Inherent in this argument is the view that all (or at least most) regions should prosper.

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