Towards a Globally Competitive and Resilient Region

Hunter Valley Research Foundation
Singleton Chamber of
Commerce & Industry
Dr Brent Jenkins CEO HVRF
July 2014

Agenda
• What are we aiming for as a region?
• Where are we currently heading?
• What can we do to change course?
• Respond to global challenges
• Thrive within the national context
• Build new regional opportunities and capabilities
• The HVRF’s new vision and role to provide
insights that move the Hunter forward
Topic: Towards a Globally Competitive and
Resilient Region

What are we aiming for?
Regional competitiveness is the capability of an economy to attract
and maintain firms with a stable or rising market share in an
activity while maintaining stable or increasing standards of living.
In order to be competitive in the globalising knowledge economy,
the OECD countries need to invest in their innovation systems at
the national and regional levels. As countries are turning their
production towards value-added segments and knowledge-
intensive products and services, there is greater dependency on
access to new technologies, knowledge and skills.
For a region to be globally competitive today and into the future
requires it to grow into a global knowledge based economy

Social resilience allows for the community to adapt and change
through difficult times without leaving core elements behind
The HVRF Wellbeing index points to
the current state of a social
community.
• Happiness with their life
• Satisfaction with what they have
achieved to date
• Satisfaction with their current
standard of living
• Satisfaction with their life as a
whole
• Feeling of being valued by those
who know them
• Optimism about their future
The ability to maintain a high state
of Wellbeing during times of change
(Resilience) is impacted by.
• Education levels that provide
employment options
• An income that can sustain an
acceptable quality of life
• Affordable and secure housing
• Strong and supportive
relationships – community and
private
• A high level of physical and
mental health

These two objectives are not mutually exclusive …
Education
Employment
Income
Health
Innovation
Investment
Collaboration
Infrastructure
Skills
Connectedness
Housing and
Neighbourhoods
Relationships
Crime and Safety
Civics and
Environment
Resilient
Internationally
Competitive

… and we have the building blocks to get there !
Source: Bernard Salt, KPMG Demographics 2013
Must Haves
• Air link, or electrified rail link to
capital city
• Tertiary education campus
• Local television production, daily
newspaper
• Entrepreneurial spirit
• Geographic command over distinct
and resource-rich region
• Port facilities
• Diverse lifestyle opportunities
• Affordable housing
• Expandable infrastructure
• An economic reason for being
Nice to Haves
• Galvanised community opinion
• Military institution
• Research establishments
• Direct air link to capital cities
nationally and internationally
• Cultural diversity
• Regular state, national or
international events

We are experiencing a buoyant residential construction sector
supported by low interest rates
$0
$50
$100
$150
$200
$250
$300
SEP 10 SEP 11 SEP 12 SEP 13
Public Private
Base year = 2011/12
1,000
2,000
3,000
4,000
5,000
10,000
20,000
30,000
40,000
50,000
DEC 03 DEC 05 DEC 07 DEC 09 DEC 11 DEC 13
HUNTER
NSW
NSW
HUNTER (rhs)
Note: Minor boundary changes in the upper Hunter prior to Sept 2005
SOURCE: HVRF, ABS
Non-residential building approvals
Hunter
Source: ABS, Catalogue No3 8731.1 and 6427.0
Number of residential building approvals
Hunter and NSW, Annualised data series, all dwelling types
Where are we currently heading?

Where are we currently heading?
After a long period of growth underpinned by mining investment, the
Hunter Region’s economy is undergoing structural adjustment
Newcastle Port Corporation
Coal exports from the Port of Newcastle
0
20
40
60
80
100
120
140
160
DEC 03 DEC 05 DEC 07 DEC 09 DEC 11 DEC 13
Tonnes (million)
0
20
40
60
80
100
120
140
160
Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14
USD per
tonne
SOURCE: Indexmundi, HVRF
Newcastle coal price
While coal exports are likely to rise, the impact on
economic activity (jobs and investment) will decline

0.00
0.04
0.08
0.12
0.16
0.20
MAR 09 MAR 10 MAR 11 MAR 12 MAR 13 MAR 14
Average for June: 2000 to 2010
SOURCE: Hunter Valley Research Foundation business surveys
Employment Intentions Capital Expenditure
We are not seeing the signs of strong business investment that will
support future growth
Where we are currently heading?

The economy is sheading jobs, particularly in mining, infrastructure
and manufacturing
-500 jobs
Camberwell and
Glennies Creek
- 160 jobs
Mt Arthur
- 30 jobs
Waratah
- 100 jobs
Carrington
- 103 jobs
Heatherbrae
- 35 jobs
Gateshead
Fox Mining and
Engineering
- 130 jobs
Ravensworth
- 500 jobs
Kurri Kurri
- 45 jobs
Hunter
- 190 jobs
Cardiff

0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
MAY 11 MAY 12 MAY 13 MAY 14
SOURCE: Australian Bureau of Statistics, Monthly Labour Force Survey
HUNTER
BALANCE
NSW
2%
3%
4%
5%
6%
7%
8%
9%
10%
MAY 11 MAY 12 MAY 13 MAY 14
SOURCE: Australian Bureau of Statistics, Monthly Labour Force Survey
Newcastle
NSW
Cessnock, Dungog, Gloucester, Great Lakes,
Maitland, Muswellbrook, Port Stephens, Singleton,
Upper Hunter
Newcastle and Lake Macquarie
This trend is now becoming apparent in the official unemployment
rates, particularly for the mid- and upper- Hunter
Unemployment Rate

Other indicators show that the Upper Hunter region is being
particularly impacted
Indicator Position
Upper Hunter region business
performance index (trading,
profitability, employment)
Negative
Unemployment rates Rising
Real Value of Non-residential
building approvals
Close to 6 year lows
Upper Hunter region SME
capital expenditure intentions
10 year low
Upper Hunter region business
expectations for regional
economy
10 year low
Upper Hunter Region Economic Indicators 2014
Source: HVRF

The Hunter also ranks relatively low on some key determinants of
regional success
Competitiveness of Australian regions
is being measured by 10 indicators:
- Technological Readiness
- Human Capital
- Business Sophistication
- Quality of Institutions
- Economic Fundamentals
- Innovation
- Labour Market Efficiency
- Infrastructure
- Market Size
- Natural Resources
Source: Regional Australia Institute
Where are we currently heading
Hunter RDA Rankings
(1=best, 55=worst)
- 20/55
- 16/55
- 40/55
- 27/55
- 46/55
- 30/55
- 35/55
- 17/55
- 10/55
- 22/55

Where are we currently heading
Recent changes in the HVRF’s wellbeing index point to social issues that
will define our region
• Increased reporting of inability to pay utility bills across all income groups
• Increased requests for support from a welfare organisation
• Increasing disparity between the highest and lowest income groups
• Resurgence of views that high school completion does not improve employment
and income prospects, probably as a consequence of the strong Hunter
economy
• Continued high levels of obesity, fuelled by a decrease in physical activity and
healthy diet
• 36% of residents are negatively affected by traffic yet 70% continue to use
private transport exclusively and satisfaction with public transport has fallen
• Increased experience of threatened force or physical violence overall and
increased perception of non-sexual assaults and dangerous and noisy driving
being problems
Source: HVRF Wellbeing Index 2013

• The Asian century
• Limited Resources
• Increased Connectedness
• Environmental Challenges
• Ageing population
• Changing consumption patterns –
“mass customisation”
The Hunter Region will be impacted by a variety of global trends over
the coming years
Changing Course – Responding to Global Trends

Inter-censual change, 2006 to 2011,
population by age groups - Hunter Region
An ageing population is a demographic tsunami already visible on the
horizon, with significant fiscal and social implications
Other
Health
Age Pension
Aged Care
Education
0
20
40
60
80
0-4
10-14
20-24
30-34
40-44
50-54
60-64
70-74
80-84
90-94
100+
Government spending by age cohort
Australia, all governments, 000’s per person,
2011 - 12
Changing Course – Ageing Population

The emerging solutions are likely to be difficult with many potential
impacts
What economic opportunities
will this create?
What will be the impact on
Regions and LGA’s?
Changing Course – Aging Population
Possible Solutions
#1 Raise Retirement Age to 70
#2 Widening tax base (e.g. GST)
#3 Additional levy on workers
wages
#4 Targeted Population growth
#5 Increase participation rates
The Hunter is ageing faster than
other regions. LGA’s have much
of the heavy lifting:
- Services – Health and Welfare
- Infrastructure
- Housing
- Transport
No clear answers and many
are politically difficult to
implement

Consumers expectations are being shaped by their lives online
Design it yourself 3D Printing
Changing Course – Mass Customisation
Can the Hunter’s
manufacturers adapt?

The Hunter’s position within the country has, and will be, impacted
directly by Australia’s policies and relative international performance.
• Fiscal Restraint
• Low Interest Rates
• Tax Base
• High Australian $
• Health and Defence
Spending
• Investment in
Infrastructure
• Education Levels
• R&D Spend
• Innovation System
Policy Performance
Changing Course – Thriving in the domestic
context
Can the Hunter
outperform the rest of
Australia?

Opportunities: Redevelopment of the Port of Newcastle provides great
potential to support new economic growth throughout the Hunter
Options Example Comments Example
Maritime
Clusters
Logistics
Maritime Services
Shipbuilding/Repair
Grow all economic
activities associated with
arrival and departure of
goods
Singapore
New Industries Renewable Energy On-shore/Off-shore Wind
Tidal Energy
Rotterdam
Waterfront
Developments
Tourism/Recreation
Food
Events Industry
Look to balance land use
in areas such as public
space, residential,
retail/commerce
Cape Town,
San Francisco
Diversification Non-Port Sectors Media/IT focus Hamburg
Source: OCED The Competitiveness of Global Port Cities
Changing Course – Regional Opportunities
How does the region
maximise this opportunity?

Opportunities: Events such as the Children’s Games and Asian Cup
have potential to develop event based strategies to fuel economic
growth Event Based Development Strategies
Source: City of Busselton, HVRF
Type Hallmark Major Developing Community
Features
 Occurs annually
 Internationally
recognised
 Unique to region
 Attracts
international and
interstate visitors
 Opportunities for
local businesses
 Actively engages
local community
 Significant external
media exposure
 Economic multiplier
of at least 10
 May be internationally
recognised
 Annual or single
event
 Builds on local
participation and
community life
 Opportunities for
media exposure
 Attracts visitors from
> 40 min drive time
 Economic multiplier
of at least 4
 Showcases facilities
and attractions
 Positions the City
for other events
 Has potential to
become a major or
Hallmark event
 Has strong
passionate local
supporters
 Promotion of council
asset of strategic
importance
 Positions City for
future events
 Celebrates an aspect
of community life in
the City
 Generally run by
volunteers
 Does not attract
visitors from outside
the City
 Limited likelihood of
media exposure
 Limited economic
benefit
Changing Course – Regional Opportunities
Can the Hunter do an
Adelaide or a Yorkshire?

Economic diversification plays an important role in providing
resilience and flexibility for regional Australia’s economies. Without
this cushion, regional economies may suffer disproportionately
during adverse external shocks, with exacerbated negative effects on
employment security, income and living standards
Regional Australia Institute
The most commonly raised economic threat – identified by 39 regions
– was the reliance on one or few main industries and the need to
diversify the region’s economy
ABS 2013
Economic diversification in the Hunter region is becoming an
increasingly important strategic issue
Changing Course – Diversification

Local Industries (High > 80%): provide
goods and services to the local market.
They compete in only a limited way with
other regions.
Resource Dependent Industries (Low 5-10
%): Employment in these industries is
located primarily where the needed natural
resources are found, but these industries
compete with other domestic and
international locations.
Traded Industries (Low 10-15%): These
industries sell products and services
across regions and often to other
countries. They locate in a particular region
based not on resources but on broader
competitive reasons.
Source: M Porter HBS
Local Industries:
Highest share of employment
Highest Employment Growth
 Grow Population
 Demographic Changes (Ageing)
Traded Industries:
Higher average salaries
Higher wage growth
Higher productivity
Higher levels of innovation
Grow Clusters (Single or
Overlapping)
Build Innovative Capacity
Regional Economies typically contain three types of industries. Growth
in traded industries is fundamental for regional prosperity
Changing Course – Diversification

Changing Course - Innovation
Regions are becoming the global competitive forces with success
based on innovation
Regions are of the scale at which meaningful interaction
among firms, people and knowledge generators leads to
innovation.
These region-specific advantages – embedded in
specialised firms, skilled labour and innovation capacity –
remain a significant source of productivity gain for firms.
Regions emphasised that their main comparative
advantage was the innovativeness of their enterprise base.
Source: OCED

Innovation is about applying new knowledge to create value
Research turns money into knowledge ……
Innovation turns knowledge into money!
• Can use new knowledge generated from R&D, suppliers,
customers, competitors, other industries
• Can manifest in New Processes, Products or Services
that provide a competitive advantage and a superior
value proposition
• Meets market needs in a timely manner
• Creates economic or social value

New goods and services introduced in
previous 12 months - Hunter Region
HVRF’s data suggests that innovation in the region is declining not
rising!
37%
26%

Access to skills and funding are the major barriers for SME’s (5-199
persons) to innovation
Data source: ABS Cat. No. 8158.0, Data Cube 6, Table 1
Barriers to Innovation – Skills and Investment

Hunter NSW
SOURCE: HVRF; ABS Census of Population and Housing, 2006 and 2011
The Hunter is experiencing a “hollowing out” of its young workforce. A
young educated working population is critical to fuel economic growth
Changing Course – Human Capital
0-4
5-9
10-14
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65-69
70-74
75-79
80-84
85-89
90-94
95-99
100 +
2011
2006
2.0% 4.0% 6.0% 8.0%
MALES
8.0% 6.0% 4.0% 2.0%
FEMALES

The relative low education attainment levels also remains a major risk
factor for competitiveness and economic growth
Level of year 12 completion – by age group
Hunter Region
Changing Course – Human Capital
0%
20%
40%
60%
80%
18-19 20-24 25-34 35-44 45-54 55-64 65-74 75-84 85+ Total
Singleton Muswellbrook
UH Shire Newcastle
NSW
SOURCE: HVRF; ABS Census of Population and Housing, 2011

How: Utilisation of waste heat from
power stations to support intensive
agriculture or aquaculture
1 Extensive pond aquaculture
2 Animal shelters
3 Algal ponds
4 Intensive raceway aquaculture
5 Undersoil heating
6 Greenhouses
Environmental control symposium, Washington, DC,
USA, 28 Nov 1978
Changing Course – What If …..?
What if we thought about using our region’s resources in new and
innovative ways to meet global opportunities?
Natural Resources:
Coal
Clean and consistent water supply
Fertile Land
Beautiful Landscapes
River system linked to harbour
Created Resources:
Power Stations
Electricity Distribution Network
Holes in the Ground
Road and Rail Links to Port and Airport
Engineering and Design Skills
Manufacturing Capability
World Class Research Capacity
Opportunity (1): Supplying the
Global Food Chain
Opportunity (2): Industrial Tourism

The Hunter Region will continue to be battered by global and
national forces, many of which will have potentially negative impacts
on the economy, health and wellbeing…if we are not prepared!!
Regions are the new battle grounds in the global economy.
The Hunter Region has many natural assets and world-class
capabilities but rarely applies these to innovative and value-creating
goods and services that can serve global markets.
It is critical to think and act strategically and innovatively NOW to
create a globally competitive region that will allow all of our
businesses, organisations and communities to thrive into the future.
What strategic role can we all play in supporting the development of
a more competitive region?
Summary

HVRF – Today
HVRF is a unique regional-based organisation with national reach
• Not-for-profit research organisation established in Newcastle in 1956
• Governed by a voluntary Board of Directors representing the Hunter
Region community
REGIONAL RESEARCH
• 125 Sponsors generating $300,000 per annum that is focused on
regional data and research
• Supported by all Hunter LGAs, major corporates, local businesses
and the community
• Major Themes: Regional Competitiveness and Resilience
FEE-FOR-SERVICE RESEARCH
• Conducts fee-for-service research work in areas of:
– Transport Planning
– Health
– Community Attitudes

The HVRF is re-orienting its regional research agenda
HVRF – Looking Forward
HVRF has been an important source of regional data based on our high
quality survey capabilities. We will continue to keep our finger on the
pulse of the region
Looking forward the Foundation’s regional research program will
increasingly be about addressing key strategic issues that will impact
the region. We will:
- Look at the 5-10 year horizon
- Tackle high impact issues
- Bring global best practice home
Our focus will be on providing:
Insights that move the Hunter forward towards an
Internationally Competitive and Resilient Region

Education
Employment
Income
Health
Innovation
Investment
Collaboration
Infrastructure
Skills
Connectedness
Housing and
Neighbourhoods
Relationships
Crime and Safety
Civics and
Environment
Resilient
Internationally
Competitive
Our unique regional research programs will look holistically at the key
areas that will ensure the region’s future

We are implementing a new regional research program around regional
competitiveness with a first focus on manufacturing
Highlighting the key issues (Globally
and Nationally) impacting productivity,
innovation and change within the
manufacturing sector;
Improving the Region’s understanding
of the changes that need to occur to
make the Hunter’s manufacturing
sector more competitive, and
Identifying initiatives that may be
undertaken by firms and policy-makers
to improve regional competitiveness
and prioritising these.

Youth engagement and connection to education and the workforce is
strategically important if we are to build the region’s human capital and
improve wellbeing
Unemployment Rate 33/55
Young Unemployment 28/55
Participation Rate 36/55
Welfare Dependence 35/55
Early School Leavers 37/55
University Qualifications 19/55
Technical Qualifications 6/55
Hunter RDA - Selected Rankings
(1=best, 55=worst)
Source: Regional Australia Institute

HVRF values the continuing support of our local partners
sponsors and supporters .. but we always need more !
We are more than just regional data gatherers…
…we have the knowledge, skills and desire to assist all
local government, regional businesses, policy makers and
the community confront change head on, and chart a path
to a competitive and vibrant future.
Our focus will be on providing INSIGHTS THAT MOVE THE
HUNTER FORWARD to an internationally competitive and
resilient region
THANK YOU

HVRF – Follow us
Join in our conversation on
Twitter - use #HVRFinsights
For the latest HVRF news
follow us on Facebook -
search HVRF
Connect via Linkedin
Or go to our website www.hvrf.com.au

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