Study fails to understand our economic diversity

GIPPSLAND South MLA Danny O’Brien has rejected the findings of a study which suggests Sale is one of the top 10 most vulnerable towns in Australia in terms of recovering from the coronavirus downturn.

Mr O’Brien said Sale’s diverse economy would rebound well, and that the economic study headed by the University of South Australia was an academic exercise which “failed to understand the diversity of the Sale and Wellington Shire economy”.

“It is unfortunate that this study has highlighted Sale as a town allegedly lacking in economic diversity. Nothing could be further from the truth,” Mr O’Brien said.

“Yes, we have a significant proportion of our economy involved in the oil and gas industry, but that is a good thing, and despite the drop in the oil price there is unlikely to be any significant impact on our oil and gas sector from the coronavirus issue.

“In addition, we have the diversity offered by the hundreds of jobs and trainees at the East Sale RAA F Base, southern Victoria’s best and most reliable irrigation district in the Macalister Irrigation District and a dryland farming sector now beginning to recover from drought.

“Sure, we will have difficult times ahead particularly for tourism and retail businesses.

“Our retail sector has been under pressure for some time, and unfortunately some shops may not make it through this crisis.

“But others are showing great innovation and resilience to continue trading in these difficult times and I’m sure we will see many of them bounce back strongly when they can.”

Mr O’Brien said there was still significant capital expenditure being undertaken in Bass Strait gas fields, while there were good prospective new industries emerging with plans for the Solis RE solar farm in the shire and the proposed Star of the South offshore wind farm off Port Albert.

He said academic studies such as this were neither helpful nor accurate when confidence was critical in our local economy.

“Studies like this remind me why economics is known as the ‘dismal science’.

“Having an economics degree myself, I know how these conclusions can be reached, but in this case they are wrong about Sale.

“Compared to most regional towns of a similar size, we have a well-diversified economy, innovative business people and a skilled and well-educated workforce.

“We are all facing difficult times ahead, but I am optimistic that Sale, Wellington Shire and Gippsland generally will bounce back quickly from this crisis.”

The study was an international collaboration between the University of South Australia Business School, the Hunter Foundation Research Centre at the University of Newcastle and George Mason University in Washington, DC, with researchers attempting to pinpoint which Australian cities were most vulnerable to economic disruptions caused directly by the impacts of the COVID -19 pandemic.

Cities on the list are regional and largely dependent on industries such as tourism, hospitality and oil and gas mining.

The most vulnerable on the list included Chinchilla, Karratha, Airlie Beach-Cannonvale, Sale, Roma, Gladstone, Byron Bay, Lakes Entrance, Tannum Sands-Boyne Isand, and Cairns.

The least vulnerable were listed as Kyabram, Biloela, Port Hedland, Naracoorte, Leeton, Griffith, Forbes, Mount Isa, Emerald and Gratton.

Executive dean of the UniSA Business School, Professor Andrew Beer said an economic vulnerability index was specifically designed to identify localities where economic output and jobs were concentrated in particular industry sectors.

“Our examination of market indicators in the earliest days of this unfolding calamity, suggested that the sectors most likely to feel the first economic effects include hospitality and leisure, transportation, employment services (agencies), travel arrangements and oil and gas mining,” Prof Beer said.

Specialist researcher in Australian regional cities at George Mason University in the US, Professor Terry Clower, says it was not just the presence of vulnerable industries in these communities, it was also a matter of overall economic diversity.

“Communities whose economy is dominated by just a couple of sectors, have little to fall back on when their key industries experience disruption,” Prof Clower says.

But Prof Beer said the economic vulnerability index was not a measure of absolute vulnerability. “We need to be clear; this pandemic will affect every city and town in Australia and those impacts may change over the period of this crisis.

“Keeping up with economic impacts under rapidly changing conditions is particularly challenging, and many of these places have also felt the impact of Australia’s summer of bush fires.

“But there are ways places that are at risk can respond to these challenging times.

“Mayors, state governments and business leaders should be looking at ways to develop new markets and new industries, closely related to their existing strengths, as part of a more diversified, but still globally competitive, industry base.

“One of our many challenges in developing an index to assess economic vulnerability to COVID-19 that is useful for policymakers and planners, is the speed at which the economic ground is shifting under our feet.

“Therefore [the] release of the economic vulnerability index is really version 1.0 and our team is already working on assessing how the index will need to be adapted as the economic effects of the pandemic continue to spread across the economy.”