hrf upper hunter future trends

FUTURE PROOFING THE REGION

Future trends and opportunities in the Upper Hunter

Dr Alan Rai – Principal Economist16 September 2014


Agenda

• Five longer‐run trends– Global and national forces, which could negatively impact our economy and wellbeing…if ignored!

• Opportunities and threats to the Upper Hunter – diversification, innovation– diversification makes us more resilient to the ‘megatrends’

• HRF’s role in providing insights that move the Region forward

Topic: Adapting to key longer‐run trends


• China’s ‘rebalancing’ (the “Asian century”)

• Demographic changes at home

• Increasingly service‐oriented economy

• Re‐defining energy provision

• Globalisation and greater competition

Longer‐run forces impacting the Region


• Trends affect all of Australia, not just the Hunter

• Now is the time to start planning

• Choice between:

OR

Key messages


Megatrend A: Rebalancing the dragon

20

30

40

50

60

70

20

30

40

50

60

70

1995 2000 2005 2010 2015 2020 2025 2030

China's consumption as a share of its GDP

Sources: China Development Research Center of the State Council; China Global Trade; The Economist;


• More services– Pharma & medical equipment

– Agriculture– Tourism

• value‐add throughout the supply chain

• moderate future demand for our coal

Implications for our exports


A fun ride….

0

40

80

120

160

200

0

750

1500

2250

3000

3750

2001 2006 2011 2016 2021 2026 2001 2006 2011 2016 2021 2026

Impact of the mining boom on the Hunter Balance

Jobs created Extra household income ($/wk)

Sources: ABS Census of Population and Housing; Downes et al. (2014); NSW Dept of Planning and Investment; RBA

Estimatedhistorical

impact

Forecastfuture impact


…while it lasted

• Potential threats:– Increase in unemployment, lower growth in incomes

• Also opportunities:– energy efficiency

– value‐add potential in rest of supply chain (success of EU)– integration into global supply chains (e.g. outsourcing) – technology adoption


Megatrend B: Growing and greying at home

0

10

20

30

40

50

0

10

20

30

40

50

1996 2006 2016 2026 1996 2006 2016 2026

Population share by age group

Sources: ABS Census of Population and Housing; NSW Dept of Planning and Investment

Hunter Balance Newcastle & Lake Macquarie

0-24

25-54

55-64

65+


Demographic shifts (cont.)

• Potential threats:– insufficient ‘young’ workers to replace retirees– decline in income growth in the Region if trend is ignored

• Opportunities:– growing role for aged care services & manufacturing– exporting to rest of Australia (ageing is a national trend)


Megatrend C: More service‐oriented…..

Shift to services boosted by ‘population greying’

0

20

40

60

80

100

0

20

40

60

80

100

1996 2006 2016 2026 2001 2011 2021

Industry share of regional employment

Hunter Balance Newcastle and Lake Macquarie

Agriculture,forestry & fishing

Services

Manufacturing*

* Includes miningSources: ABS Census of Population and Housing; Department of Employment; HRF


…doesn’t mean manufacturing is doomed

We’re as expensive as the Swiss and French!

-20 -10 0 10 20 30 40

AustraliaSwitzerland

FranceBrazil

ItalyGermany

JapanUK

SpainChina

MexicoThailand

IndiaIndonesia

% difference from U.S. cost

Manufacturing costs compared to the U.S.

Source: Boston Consulting Group (2014)

Cheaper than the U.S.

More expensive than the U.S.


Megatrend D: Energy provision re‐defined

• Change in utility’s role: two‐way energy solutions provider• Threats and opportunities for the Region


Why is this change needed?

‘Most likely’: no new plants needed (only replacement)

45

55

65

75

85

45

55

65

75

85

2005-06 2009-10 2013-14 2017-18 2021-22 2025-26 2029-30 2033-34

NSW annual electricity demand (in TWh)

Historical

'Low'

'High'

'Medium'

'Most likely'

Source: Australian Energy Market Operator


Megatrend E: Globalisation and competition• Opportunities:

– new consumer markets (e.g. tourism)

– learn global best‐practices

• Threats:– competition: not just manufacturing

– computerisation and robotics

• One of HRF’s key themes


Globalisation affects services too

• Increasingly, competition is occurring in services– more commoditised and marketable

• Recent examples:– Financial services (financial planning, wealth management)– Legal and professional services (compliance paperwork)– Media (e.g. Newcastle Herald sub‐editors and journalists)

KurunjaWorldwide Services: an example of foreign competition


Impact of globalisation: multiculturalism

Opportunities for Hunter businesses

0

2

4

6

8

10

12

14

0

2

4

6

8

10

12

14

1996 2001 2006 2011 2016 2021 2026 2031

Proportion of foreign-born people in the Hunter

Newcastle & Lake Macquarie

Hunter Balance

* Based on historical growth ratesSources: ABS Census of Population and Housing; HRF

Forecast*


Economic diversification – what, why?• Diversification – multiple industries not directly linked to each other

• Can provide resilience and flexibility to our Region– living standards are not tied to the fate of a few industries

– without it, we may suffer greatly during bad events (e.g. end of the mining boom)


Economic diversification: how?

• Key determinants of diversification/resilience:– skilled and mobile workforce able to adapt to change– risk‐taking entrepreneurs

• Yet we score poorly on:– productivity – business sophistication

• Opportunities:– Increase youth tertiary training– strengthen intra‐industry clusters/links (e.g. HunterNet)– diversify funding sources for capex and R&D


EducationEmployment

IncomeHealth

InnovationInvestment

CollaborationInfrastructure

Skills

ConnectednessHousing and NeighbourhoodsRelationshipsCrime and SafetyCivics and Environment

ResilientInternationally

Competitive

HRF – Looking Forward

Our research programs look holistically at the key areas that will ensure the region’s future

HRF values the continuing support of our local sponsors and partners


We look forward to working together to creating a thriving Hunter Region for current

and future generations. Thank you


Q&A PANELISTSDr ALAN BROADFOOT,

NIERDr ALAN RAI, HRF

JENNY WILLIAMS, HRF

Join in the conversation

…#HRFinsights

Follow us for news

updates…Search HRF

hrf upper hunter future trends

Documents

future proofing

region chinas

future trends

longerrun trends global

abs census of population

potential threats

key longerrun trends

population greyingfuture