The Department of Infrastructure, Transport, Regional Development and Local Government is committed to the prosperity of Australia's regions. In order to promote economic and social development it is important that we understand the environment in which regional economies operate. This study provides an analytical investigation of the challenges facing regional Australia. BITRE's study takes a multifaceted and holistic approach. The underlying principle is that economies do not work in isolation and a complex mix of interacting drivers affects a region's economic performance. Tasmania's economic performance has experienced changing fortunes over the past two decades. This development provided a unique opportunity to investigate the drivers of this change and to find out if there are lessons for regional policy.