Moving public servants to the regions can harm the decentralised agencies and deprive them of technical skills, the Productivity Commission has warned.
The commission sounds the alarm on the government’s decentralisation agenda in its Transitioning Regional Economies report, released on Friday, in which it notes a study finding that such moves had negligible employment benefit.
The report also warns against providing subsidies to regional businesses in failing industries, warning they give workers “false hope” when assistance should be focused on transitioning to new jobs.
The PC notes an Ernst and Young report that found moving the Australian Pesticides and Veterinary Medicines Authority to Armidale would have an economic cost of $23m and carried “significant risks”.
In recent days the Nationals have said they will expand their decentralisation push by asking all departments to justify why they should remain located in Canberra.
However, on Thursday the deputy prime minister, Barnaby Joyce, said that whole departments such as Treasury would not be moved, but rather individual agencies or parts of portfolios like agriculture would be considered.
The PC notes a Grattan Institute report finding that initiatives to decentralise public service jobs “are typically too small in scale to have any discernible effect on an individual town, as the jobs relocated have tended to amount to less than 0.1% of the relevant regional centre’s labour force”.
The PC says that relocation “can operate effectively” and had to be decided on a case-by-case basis to avoid “unintended consequences”.
“Where the skill requirements are highly technical and specific, relocation to a region might diminish the organisation’s effectiveness,” it says, warning it could be “problematic” finding qualified scientists for the APVMA in Armidale.
Decentralisation also loses the benefit of public servants being located in the same place to concentrate knowledge and expertise.
“There is an increased risk that the move to Armidale will weaken the APVMA, increasing the costs borne by the Australian government and taxpayers, and hampering the organisation’s work,” the PC says.
The PC report says that governments has at times “given false hope to people and businesses by signalling the long-term health and prosperity of particular industries through various subsidy schemes or protection from competition”.
It argues such measures are counterproductive, discouraging workers from acquiring new skills and reducing their future employment prospects.
“Business owners also have less incentive to become more innovative and productive and to plan for the future.
“This type of program is inherently risky and does not promote transition or sustainable development.”
The PC recommends that rescue packages for regions be “reserved for unexpected circumstances and highly vulnerable groups of people, and should be aimed at helping individuals make a successful transition to employment”.
It also calls for a “clear performance measurement framework” for the Turnbull government’s City Deal program which aims to support the development of selected regional centres through coordinated public and private investment.
City Deals could be useful where they “genuinely develop strategic, coordinated partnerships between all levels of government, communities and the private sector”, but it was “too early to assess” their effectiveness.
The PC warns that regional development initiatives like Victoria’s $570m regional growth fund and Western Australia’s $6.9bn royalties for regions program lack proper evaluations to show whether taxpayers were getting value for money.
The PC report finds that employment in Australia’s regions grew 80% in the last five years as declines in agriculture and manufacturing were offset by increases in mining and service sectors.
Despite the downturn in the mining boom, employment in that sector “remains significantly higher now than it was prior to the boom”.
The report concludes that Australia had benefited substantially from the mining boom.
“A highly flexible work force and a substantial use of fly-in, fly-out workers helped to spread the benefits of the boom and reduced adjustment pressures both during the boom and after it was over,” the Productivity commissioner, Paul Lindwall, writes.
However, non-mining regions, Indigenous communities and some locations in metropolitan areas demonstrated “a much lower capacity to adapt to change”, he says.
“Technological innovation and efficiencies in agriculture have led to growth in production, but using fewer workers,” the report says. “At the same time, regional populations have continued to become more centralised in larger towns and centres.”
