The city, the country, the rich bush and the poor bush

19 Oct 2010

THE INCREASING FOCUS on remote and regional Australia since the federal election raises a series of interesting questions. How have these areas fared over the past few years? How much did they suffer through the GFC? What has happened to salary and expenditure levels?

In recent research for the Commonwealth Bank, published in the bank's Viewpoint report, the National Centre for Social and Economic Modelling (NATSEM) analysed salaries growth, expenditure and Newstart recipients for three areas in Australia – city areas, regional areas and remote areas – which were created using the ABS's remoteness classification.

Looking at salary levels in June 2010 for these areas, we found that city and remote areas had very similar average salaries, wheras salaries in regional areas were about 10 per cent lower. The highest salaries were in remote mining areas, including Fortescue and De Grey in WA, and in South Canberra.

Looking at the growth in salaries for the three areas, we found that city and remote salaries increased at a very similar rate from mid 2008 to mid 2010. Again, regional salaries were consistently about 10 per cent lower than remote and city salaries over this period. In remote areas, this growth in salaries could be attributed to the mining boom – in fact, many of the high salary growth areas were in remote West Australia. Some city areas also had high salaries growth, including South Canberra and Inner Brisbane.

One of the strongest stories to come out of the report was that while remote areas had some of the highest salaries and highest salaries growth, they also included localities with the lowest salaries growth. While Carnegie in WA, for instance, had the second highest salaries growth, Johnston in WA had the lowest salaries growth – in fact, a decline in average salaries of 2 per cent between 2008 and 2010. Of the ten areas with the lowest salaries growth, five areas were in remote Australia, four were in regional areas, and only one was in the city.

Another measure of the level of disadvantage in an area is the proportion of Newstart recipients. This was highest in remote areas in June 2010, at 9.6 per cent, compared to 7.5 per cent in regional areas and 5.5 per cent in city areas.

The final measure we looked at was expenditure, and we found that while city areas had the highest expenditure, remote areas spent more on average than regional areas. This may be due to greater opportunities to spend in city areas (who can resist spending when the shops are easy to get to, compared to driving two hours to get to the local shop?), and the higher salaries in city and remote areas. Once we looked at particular items, we found specific remote areas like Fortescue in WA spent much more than the national average on food and groceries and petrol, due to the higher prices for these particular items in these areas. So while people in remote areas spent less than people in cities, the items they did spend their money on were much more expensive.

The overall picture that emerged from this analysis showed two types of remote areas: those where mining has pushed salaries growth over the past two years, and those where salaries are low, salary growth is low and there is a high proportion of Newstart recipients. So the mining boom appears to have benefited specific areas – not all areas – in remote Australia.

The other problem associated with the high salaries in mining areas is the fact that those household that don’t benefit from high salaries will be struggling even more due to the much higher prices of essentials like housing, food and petrol. The average advertised weekly residential rent for a two-bedroom unit in Fortescue was more than $1000. For those on lower salaries, or even those on Newstart allowance, rent and the higher prices paid for groceries and petrol can take up an entire salary, with not much left out of a pay cheque. •

Robert Tanton is Principal Research Fellow at the National Centre for Social and Economic Modelling (NATSEM)

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