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Moving beyond mining

News story

Economics research delivers an innovative road map to diversifying Western Australia’s regional industries.

Mining truck at a mine site.

Mining has been Western Australia’s jewel in the crown for well over a century, but Curtin research shows that if the state diversifies its regional industries, it could support sustained and inclusive growth throughout WA and promote a more resilient economy.

The 2019 Bankwest Curtin Economics Centre (BCEC) report Future-Proofing the WA Economy reveals that by capitalising on regions’ existing industry strengths and identifying areas for future development, the state could create 165,000 new jobs by 2025 and contribute more than A$19 billion to its economy, on top of current growth predictions.

“WA has been dominated by mining, but when the boom ended, this strong reliance on resources exposed the economy to a lot of flow-on effects. If we were more diversified, we’d have been more resilient to those changes,” says Dr Steven Bond-Smith, lead author of the report.

The report proposes that diversification can be achieved through ‘smart specialisation’, a policy approach that identifies expansion opportunities or new ventures which build the capabilities of industries already performing well. These industries include defence technologies, rare-earth minerals, big data and tourism.

“Smart specialisation focuses on the unique strengths of our regions and how their existing capabilities can be repurposed into new activities,” says Dr Bond-Smith.

This ‘smart’ approach can ultimately enable government, business and industry to fortify WA’s economic future and ensure wealth and prosperity are more evenly distributed across the state.

Diluting WA

Western Australia’s bounty of natural resources has long been the envy of our eastern counterparts and has underpinned our strong economic and social development. Indeed, record minerals sales valued at A$172 billion in 2019–20 meant WA was the only Australian state or territory to avoid a deficit during the COVID-19 pandemic.

But mining now accounts for 34% of the state’s economy, making it more concentrated than at any time during the past 25 years.

“The economy’s concentration in primary production exposes the state to extreme volatility, especially given the pronounced fluctuations that typify commodity price cycles,” explains Dr Bond-Smith.

By strengthening its other industries, WA can better counter-balance mining’s peaks and troughs, and ensure the state isn’t left behind as the world moves towards new technologies and a knowledge-based economy.

Dr Bond-Smith is quick to stress that mining will remain important to the state’s economic future.

“Diversification is not about stopping what we’re already good at. We’re absolutely going to keep mining, and there is a lot of wealth that WA can enjoy from mining,” he says.

“But it is saying let’s not do that to the detriment of everything else – let’s not let mining crowd out alternative things that we could do.”

Play to our strengths

Given Western Australia’s geographical, social, cultural and economic diversity, its 10 regions each offer unique areas of specialisation. To identify these areas, the BCEC team compared hundreds of industry portfolios across Australia.

WA regions having at least twice the average level of employment in a particular industry compared with the rest of the nation were considered ‘experts’ in that industry.

“You can have very small industries but there happens to be one region that’s particularly good at that industry. It means there are local capabilities and knowledge, and therefore these are the top industries by their comparative advantage,” says Dr Bond-Smith.

For example, the Kimberley’s strengths include accommodation, hospitals, education, local government administration, non-iron ore mining and quarrying, and specialised beef cattle farming.

The report also identifies the potential for new or expanded areas of diversification that build on existing related industries.

“Let’s say transport logistics are constantly seen alongside ports – you know those two are related,” explains Dr Bond-Smith. “But say a place had a port without a logistics hub. That would be a good candidate for a new industry in that region, as it’s a related industry and therefore likely to be successful.”

For the Kimberley, diversification opportunities exist in defence, offshore caged aquaculture, non-iron ore mining, oil and gas extraction and hydro-electricity generation. According to the report, these industries could generate 2,700 jobs and A$1.2 billion for the region.

At the opposite end of the state, the Great Southern could create 2,300 jobs and generate A$200 million by exploiting its strengths in aquaculture, agriculture and horticulture, sawmilling, timber dressing and accommodation.

Two Peoples Bay in the Great Southern

WA regions like the Great Southern need to find their unique areas of specialisation.

The road from here

While regional development policies do exist, they lack a rigorous and consistent methodology for determining regional priorities and a clear framework for government on how to foster, support and monitor policies.

The BCEC report fills these gaps by providing comprehensive, objective data on specific regional strengths and emphasising an ‘entrepreneurial discovery process’. With this process, the private sector, industry and research entities collaborate to identify and transform activities into marketable goods and services.

Dr Bond-Smith says that with the state’s current policy landscape, “you often get initiatives that end up being about the political ‘flavour of the month’, with no overarching, long-term vision.

“This report can support flagship policies with better governance to identify regional priorities as part of an ongoing process of regional development.”

He says the key to implementing smart specialisation is to keep things local.

“If assumptions are being imposed top-down from governments in Perth or Canberra about what’s good for a region, you’re not going to get that local buy-in or momentum.

“It’s important that regions are given resources to implement these initiatives, but in a way that respects their local knowledge, expertise and ambition.”

The approach can also be used to target broader regional goals, such as the economic transition away from carbon. In 2020, the BCEC updated the report’s analysis to explore the benefits to Western Australia from adopting an environmentally sustainable strategy for economic growth.

This research has led to a collaboration with the City of Bunbury, extending the application of smart specialisation to explore the potential economic value of investing in specific capabilities.

Read the report

 

Researcher profile

Dr Steven Bond-Smith is a senior research fellow at the Bankwest Curtin Economics Centre. He contributes to original research and BCEC’s marquee reports. His research has been presented at conferences and seminars in Europe, the UK, Asia, Australia and the US on international trade, macroeconomics, regional science and economic geography. Prior to joining BCEC, Dr Bond-Smith has provided economic advice to government departments, regulators and stakeholders.

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