Our Goulburn Valley, Our Future – National Australia Bank economics report

I wrote this report that was published in the Greater Shepparton City Council December Minutes…

Wednesday 23rd November 2016

This morning Greater Shepparton City Councillors were invited to attend a forum lead by the National Australia Bank (NAB) at Eastbank. It offered an overarching snapshot of our current economic structure, key economic drivers and new opportunities for the Goulburn Valley.

If you compare the economic pie graph from four years ago, to the one presented at today’s forum, it paints a remarkably different picture. When SPC was in trouble, it became apparent how reliant we were on a single processor and that economic diversification was crucial in moving forward. Now it’s claimed our biggest job sector is health care, at 13%. According to statistics, we are no longer wholly reliant on agriculture or manufacturing.

However, all speakers concurred irrigated agriculture remains vital. The economic flow on effect of agriculture is the back bone of retail, transport, hospitality and basically all other sectors. Shepparton has an economic output of $2b in farming, before value adding. Despite this, an audience member claimed farmers remain the “poor cousin” in terms of perception, policy and market forces.

Although significant, the key to Shepparton’s diversification wasn’t as broad as introducing new industry. Much macro work has been done in the agricultural sector to buffer against volatile pricing and global warming. Our largest agricultural contributor is milk at 37%, fruit at 20%, followed by broad-acre products and cattle. Fruit alone contributes $400m to our economy, 70% being apples and pears. Tomatoes hold the largest portion of our vegetable production, at 54%, which indicates an opportunity to diversify further. In the wake of global warming, ‘climate mapping’ locates optimal, long term patches of land for new farming opportunities.

The forum suggested our need to diversify agriculture is due to 3 external forces that cause volatility in the market: water availability, international markets and disproportion between the number of small suppliers and large buyers.

Currently, there is a senate dispute over environmental ‘vs’ irrigated water allocations. Greater Shepparton City Council CEO Peter Harriott put this down to “politics” and I’m sure many would agree. A question from an audience member asked “At what point does water scarcity stop growth?”, to which Committee for Greater Shepparton representative Sam Birrell replied, “We are already there”. Mr Birrell explained the GMID Leadership Forum, which is currently informing the senate enquiry, indicates “No more water can leave this consumptive pool in our region without detrimental socioeconomic impact … we are at the tipping point” (Sam Birrell #C4GS). 

There was also the question of whether increased government intervention was required to regulate the free market of water trading – should survival of some agriculture sectors come down to their capacity to pay for water? Less water equals higher prices and although dairy and fruit comprise 70% of current irrigated output, water flows to those who can most afford it. Almond and cotton farms require 14L per hectare, compared to 5L per hectare, which could squeeze out dairy and wine grape farms altogether.

Unfortunately the response from the panel was less than optimistic, with NAB Economist Tom Taylor saying we are “swimming against the tide” in terms of interfering with the free market. He went on to state “there are thousands of Greenies in Metropolitan cities” who could inform and cement environmental flows, such as the 450GL water grab for South Australia.

International markets are another major factor impeding agriculture. Returns are often low and fluctuate significantly. Ongoing family agri-business are not being passed down to future generations due to this high level of risk. Some businesses have found the secret to great success by implementing systems to help combat extreme market volatility, but many are suffering. We’ve recently seen the impact of global market forces, with Fonterra and Murray Goulburn announcing low farm gate prices and financial claw-backs; due partly to competitive foreign export prices and a milk glut caused by China over-bulking in powdered dairy products. Both companies are being investigated over the seriousness of these decisions and will potentially inform changes to the Corporation Act.

The forum also explored the imbalance of bargaining power between small growers and large retailers/processors. In 2014, Coles admitted to misconduct in buying power and the AECC made a statement in July stating “Woolworths are yet to have their moment of awakening in their treatment of suppliers”. Basically, large buyers and manufacturers can squeeze prices so low it’s virtually impossible to compete with lower quality imports. The answer provided was to export ourselves, yet that doesn’t combat the issue of high overheads, such as the burden of GM Water infrastructure contributions, high minimum wage and logistics, to name a few. 

Mr Harriott said the recent Greater Shepparton City Council delegation to China sought to combat these issues by building connections between the GV and our Chinese sister city. Government can facilitate export relations by sourcing product, linking trade opportunities between countries, streamlining export processes and cutting red tape.

Connectivity is vitally important for Greater Shepparton’s economy. It was suggested that as Melbourne grows, freight will become more problematic due to road congestion. Melbourne’s population is projected to grow from 4.5m in 2015 to 8m in 2051. Therefore, train infrastructure is absolutely imperative, including the Melbourne to Brisbane inland rail freight and High Speed Rail connecting Shepparton to Melbourne. Comparisons were made with Bendigo, where residents have the luxury of catching a train every hour so they can reside in Bendigo and work in the city. NAB Senior Analyst and Agribusiness Economist Phin Ziebel stated Shepparton is the “forgotten region in terms of public transport” and described our tracks as “rubbish”.

Overall liveability was addressed broadly. Shepparton has ample affordable housing for average wage earners, housing approvals are on the incline and our population is increasing within urban Shepparton. 

According to speakers, jobs are up and unemployment is down; going from 10% unemployment, to 8%. However, this does not factor in the continuing unemployment disparity that sits within Indigenous groups, which continues to stand at around 20%. Mr Harriott flagged a significant effort to reduce this number via tourism and the employment agreements. We have the largest Indigenous population outside Melbourne and have a remarkable story to tell in terms of our history. No doubt this will appeal to the Chinese tourism market.

Mr Harriott described Chinese tourism as “Sovereign Hill on steroids”. The Chinese middle class population will reach 450m in 2045 and it’s imperative we position Greater Shepparton as an Australian/Victorian destination, akin to Port Phillip Penguins, MONA and the 12 Apostles. Tourism generates $200m for our region – $550m with Campaspe, Moira and Shepparton combined. Tapping into regional cross border opportunities, metro Melbourne tourism and passive income streams from retirees, will unlock even more potential.

As in most areas, we are an ageing population, therefore health and aged care are critical economic drivers. Described by Mr Taylor as “the pillar of our regional economy”. GV Health currently employ 2000 staff and there are 4000 jobs in health care overall. Considering population projections and our regional catchment of over 200,000 people, the hospital upgrade is well overdue and this will undoubtably lead to more growth and employment in this sector. Despite this, migration away from Shepparton by young people between 15-24yo is high. 

A question from the audience asked how can we retain more youth in the area. Answers included our burgeoning University precinct, professional development opportunities such as ‘Young Professionals’, entrepreneurial start ups and more urban living choices. Regular public transport and strong social networks are lacking and need improvement. 

We must get the message out that Greater Shepparton is a preferred lifestyle choice by many, for a variety of reasons. We are a major events & sporting destination, encourage arts & culture, food & wine, harbour many convenient services, employment opportunities and affordable housing. Mr Harriot summed it up by saying “If you’ve got the ‘vibe’ of the place right, the feel of the place right, whether by greening or any other measure, then you’re on the right track”.

I’d like to think Our Goulburn Valley, Our Future, is most certainly on the right track!

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