Good Gardening for a Perennial Economy: What's the Optimal Growth Path for a Regional Economy?

Abstract

A key public policy issue in regional economic development is whether governments should act pro-actively with strategies to achieve local economic growth. Using an Australian region, this article presents projections that test a number of such scenarios to establish whether pro-active strategies of investment provide the greatest growth. When developing pro-active strategies for a given region, economic and community development planners typically target specific industries. Key industries can be identified on the basis of high relative employment growth rates and connectivity with other industries. The case region in this analysis, not unlike other regions in Australia and across the globe, has undergone significant restructuring in recent years with a shift in its economic base from agriculture to mining. In light of the shifting nature of the regional and national economies, this article provides a foundation for building planning perspectives for the future of a regional economy using economic and population projections and scenario analyses. These analyses help highlight industrial sectors that should be targeted in the region's plans. Broader implications for regional economic development and planning generally are also drawn from the case experience. Developing projections for the growth of regional economies is no easy task. The complexities of inter-industry subsector interactions and the distinction between driving and adapting subsectors make formal modelling at the local level challenging and potentially prohibitive in terms of cost. These factors corroborate to make such bottom-up modelling beyond the capacity of most local organizations. By contrast, the approach used in this article is simple but requires care and intuition to bring these various factors together into a coherent set of projections. For the case region, optimal growth is possible provided that employment policy builds job specialization. This means directing strategies away from mining into agriculture and the trade and tourism related sectors, such as wine tourism. The economic base theory and scenario testing techniques used in this article demonstrate and deliver a useful contribution to the literature by exploring which industries contribute most to more diversified and sustainable growth. Through pre-emptive strategies, perennial growth of a regional economy can be achieved.