Fragmentation in responsibility for regional development presents a major challenge for the practice of economic development in Australia. Fragmentation is evident in a number of ways: first, responsibilities for regional development are commonly distributed between the federal, state and local governments and it is common to see all three tiers of government engaged in regional development activities in any locality (see Beer, Maude and Pritchard 2003, p. 45). There is fragmentation also on a territorial basis with each State and Territory largely shaping the institutional architecture for regional development via their own agencies, the requirements they place on local government and through their funding policies (Beer and Maude 1997, 2002). There is, therefore, no uniformity across the States and Territories, and while there are common elements to the practice of regional development in Australia (Beer, Haughton and Maude 2003), there are also significant differences (Beer and Maude 2002).

As a number of academics and pundits have argued, the Federal Government is probably the only tier of government in Australia with the necessary resources to sustain a coherent and viable program of local or regional economic development (Logan 1978; Beer 2000). As the collector of 75% of public sector revenues it has greater financial capacity than either state or local governments. But federal governments have long shied away from an explicit involvement in formal regional development initiatives. Throughout the 1960s an Inter-Departmental Committee sat for eight years considering whether the Federal Government should act to promote decentralisation of people and economic activity. There was a brief flurry of activity in the early 1970s under the Whitlam Labor Governments, and then virtually nothing for almost 20 years. The Keating Government’s Regional Development Program was hastily jettisoned by the newly-elected Howard Coalition Government, because it considered it had no constitutional role in the area, and that federal involvement would result in overlap and duplication with state and local government efforts. In the year 2000 the Howard Government re-engaged with local and regional development issues – admittedly at an initially modest level – via the Regional Solutions Program. More recently, the Federal Government has promoted regional issues through the reformulated Bureau of Transport and Regional Economics, the establishment of the Sustainable Regions Program focussed on 10 regions across Australia, and the Regional Partnerships Program.

While the Howard Coalition Government has not formally enunciated a major regional development program, it has intervened in the functioning of regional economies in many ways. For example, drought relief is a major regional intervention, as are the arrangements for guaranteeing the quality of telecommunications infrastructure in ‘the bush’ after the full privatisation of Telstra. Other research (Beer, Haughton and Maude 2003) has shown that Federal funding – from a variety of sources – typically makes up 40 per cent of the budgets of regional development bodies. And while this contribution to regional development efforts is welcome, regional development practitioners are only too aware that funding priorities are established centrally, not locally. Area Consultative Committees (ACCs) are an important part of the Federal Government’s engagement with regions. ACCs were originally established as labour market organisations, but have been gradually transformed and refocussed on regional development issues, broadly defined. ACCs can be a source of funding for other regional development bodies and are often perceived to reflect the political interests of the government rather than genuinely reflecting the needs and interests of local community. Importantly, ACCs have not been part of a wider political project by the Australian Government – say, comparable with Cities Commission or the Department of Urban and Regional Development - and therefore their engagement with regional issues has been disjointed.

State governments are probably the most visible participants in regional economic development, and in aggregate would make the largest investment in encouraging growth locally. State governments are substantial investors in the infrastructure and services that sustain economic activity in metropolitan and non-metropolitan regions. Many state governments have a long history of involvement in formal regional development initiatives and in the immediate post-War period decentralisation programs were favoured. In line with the growth pole theory of the time, state governments used tax breaks and financial incentives in an attempt to create growth centres. Paul Collits (1995) has suggested that the period 1965 to 1975 was the high water mark for these initiatives, and this reflected the preference for dispersed development in Australia, recognition of the rising costs associated with the growth of Australia’s biggest cities, evidence that the rural population was in decline, and the strength of the Country Party. Significantly, the regional development policies of state governments have continued to reflect the decentralisation debate, despite the demise of growth pole theory within the regional economic development literature and the rise of new dynamics within national and global economy. Many states continue to promote regional development within non-metropolitan regions, with South Australia, Western Australia and NSW essentially funding regional development boards outside the capital cities only.

Most local governments have some formal role in economic development activities, though participation varies considerably by state and location. Local governments have been the primary agents for economic development in Victoria since the mid-1990s, while local governments in Queensland have always played a much broader role within their communities than elsewhere in Australia. Their participation in the provision of major infrastructure – such as water supply, roads and electricity – has given them a greater capacity to influence growth. Local government remains the smallest and poorest tier of government in Australia and its circumstances are worsening (Hawker Report 2003). Over the last two decades, the real value of financial support to local government from the Federal Government has fallen – as has state financial support in most jurisdictions – while the tasks required of local governments by the other tiers of government have grown. Despite these pressures, local governments have not shied away from promoting their region or local economy. Many provide cash incentives or infrastructure to attract firms, and the majority would employ at least one staff member with responsibilities for economic development. In some places – notably Victoria – there are large Economic Development Units within individual local governments. While there is considerable variation around Australia, it is common for them to join state governments in funding regional development agencies, Business Enterprise Centres and or initiatives. Often they host special events designed to draw in tourists and will market their region nationally and internationally. It is worth noting that the national awards in local government explicitly recognise the role of local government in working for economic development. In 2004, Burnie City Council was recognised for its role in revitalising the city’s airport and developing adjacent land as an industrial estate, while the town of Cressy in Tasmania’s central highlands was recognised in 2005 for its ‘Troutarama’ festival.

It is important to acknowledge, from the discussion above, that responsibility for regional development in Australia is divided across the three tiers of government and that each – to a greater or lesser degree – has an equivocal attitude to the development of regions. For central governments (state and federal) there is a strong imperative to be perceived to be delivering real outcomes for regions, but this does not necessarily translate into a systematic engagement with regional development. Collits (2003) has noted the ‘tyranny of the announceable’ within regional development, with governments favouring regional initiatives that have a high media profile, a short time-frame and limited impact on the budget, over those policy measures that attract less public interest but are more likely to deliver growth in the long-term. Local governments are too often an ineffective participant in regional development because their resources are limited and their responsibilities wide-ranging. Overall, the very structure of Australian federalism makes the achievement of an efficient framework for regional economic development difficult. Financial power is concentrated in the Australian Government, constitutional power is held by state and territory governments, while local government has, in large measure, been left to ‘muddle through’ as best it can.

One of the challenges for regional development in Australia is the small scale of policy interventions. Over the last 20 years, Labor and Coalition Federal Governments have transformed the Australian economy but they have relied upon policy levers that operate at the level of the whole economy to achieve their objectives. These have included: the floating of the Australian economy; lifting of control on exchange rates; a reliance on monetary policy to regulate the economy; national competition policy; micro economic reform; and de-regulation of the labour market. Australian governments have not embraced direct interventions in the economy – at either a national or regional level – via wholesale investment in infrastructure or wide-ranging business development programs. The failure to engage in these measures has had significant consequences, as reflected in the fact that, by 2006, Australia’s exports were retarded by a shortage of port infrastructure. At the same time, a skills shortage has emerged, largely as a result of inadequate programs for skills development and enhancement. Other nations faced with the challenge of reforming their economy have teamed conventional national policy measures with explicit regional development initiatives. In the Republic of Ireland, for example, economic reform through the 1990s was matched by substantial investment in transport infrastructure, environmental programs and labour market training (MacSharry et al 2000). The combination of national policy change and strategic investment in regional development catapulted development in the Republic of Ireland, such that in 1990 Ireland’s per capita income stood at less than 80% of the European Union average, but by 2006 incomes in the Republic of Ireland exceeded the EU mean.

The absence of large scale interventions in the economies of regions significantly reduces the ability of regional development agencies to achieve substantial outcomes. Other research has shown (Beer, Haughton and Maude 2003) that regional development agencies in Australia largely play a facilitative role: assisting business projects pass through the development approval process; lobbying for infrastructure; co-ordinating economic development strategies; networking with businesses and other development bodies and promoting tourism. By contrast, regional development agencies in England and the United States have, on average, much larger budgets and engage in a different range of activities (Beer, Haughton and Maude 2003). In the US, agencies are often locally funded, have a strong business orientation and report very high levels of achievement (Beer, Haughton and Maude 2003). In England, regional development bodies are much more likely to engage in state-of-the-art economic development practices – such as business incubators, supply chain associations, technology diffusion strategies etc. – and in large part this reflects their more generous funding.

It is important to acknowledge that governments across Australia often offer up small-scale policy solutions to the large-scale problems confronting regions. In part this is justified by the ‘self help’ philosophy embedded within neo-liberalism (Gray and Lawrence 2000), but it also reflects a new, and cynical, set of tendencies within government to be spatially selective (Jones 1997) and to reinforce the success of prosperous regions while ignoring the demise of the less fortunate. As will be discussed in the case study below, governments increasingly have a tendency to offer up politically expedient, short-term, responses to regional economic crises, while ignoring the long term implications and the strategies needed to provide solutions into the future.

In Australia, regional development is usually equated with non-metropolitan or rural development. It is as if regions start at the metropolitan boundary – or to view this phenomenon in another way, it is as if regions exist up to the edges of the capital cities and then disappear. Evidence of this trend can be seen in the Australian Government’s most recent regional policy statement, by the former Deputy Prime Minister and Minister for Transport and Regional Services, John Sharpe. In his foreword to this policy statement, the Deputy Prime Minister noted that:

A number of assumptions and values are embedded in this pronouncement. First, there is a clear link in the Deputy Prime Minister’s statement between ‘regional Australia’ and country Australia. Second, there is an overt political dimension to the policy document, with the ‘Liberal-National Government’ explicitly canvassed rather than more inclusive language around the role of the Australian Government. Third, and relevant to the discussion in the section above, the Deputy Prime Minister’s foreword establishes the rhetoric of regional development – including recognition of the symbolic importance of ‘regional Australia’, the need to support communities ideas and build leadership, but offers few substantive programs of assistance.

Similar spatial biases are evident in the formal regional policies of state governments, with an emphasis on non-metropolitan regions and, in large measure, an absence of discussion about the development of metropolitan regions. The exclusion of cities from the discussion of regions in Australia has profound implications, and, perhaps counter-intuitively, in the long term, it disadvantages the communities that might be seen to benefit from this assistance. The focus on non-metropolitan regions ensures there is no political consensus around the need for a spatial development strategy or a comprehensive regional development framework. At a political level, both sides of politics perceive regional development policy as serving the interests of National Party or Liberal Party electorates, while the metropolitan corollary – urban policy – is viewed as serving the immediate electoral interests of the Labor Party. In both cases, the perception that locationally-focussed policy interventions equate to ‘pork barrelling’ (McFarlane 2002) weakens the case for their continuation in the long term and contributes to disruption when governments change. At a policy level, the alignment of political interests with regional policy weakens the case for large scale programs in debates with Treasury or other central government agencies. It makes it more difficult to justify larger programs and creates an apparently insurmountable hurdle to arguments that systematic policy interventions are required.

At a more immediate level, it is often the case that regions – such as large peri-urban local governments – are eligible for funding for half their jurisdiction on the grounds that they are defined as rural, while the other half is seen as metropolitan and is therefore excluded from financial support.