Global forces shaping our regional economies
Since 2000, the global environment in which NSW competes has radically changed. With the pace of change likely to increase in coming years, we need to consider the implications of trends.
‘Megatrends’ represent major shifts in environmental, social and economic conditions that change the way people live. While megatrends are often big-picture changes occurring overseas, they influence us too. For example, ageing populations will affect our population’s lifestyles, the services they demand, and the structure of the labour force.
There are four key megatrends affecting regional NSW1.
The rise of Asia
By 2030, four of the five largest economies will be in Asia: China, India, Japan and Indonesia. Economic power is shifting towards Asia, with China and India's share of world GDP expected to increase to 20 per cent and 15 per cent by 2050, respectively.
A considerable economic shift is taking place, transitioning away from the traditional ‘West’ and towards Asia. By 2030, four of the five largest economies will be in Asia, with China already the largest economy in the world. Australia is strategically positioned to service these growing economies and their burgeoning middle class.
As incomes in Asia rise, the spending power of younger generations is rapidly increasing, creating a growing market for premium products and quality goods and services. NSW cannot feed all of Asia, but is well-positioned to be its delicatessen, producing and marketing value-added food products. The evolution of the social and consumption patterns of the new middle class will shape the export profile of regional NSW. This is also increasing spending on tourism and higher education, both of which could be significant for regional NSW, particularly with the deregulation of Chinese tourism and consequent growth in the number of independent travellers. Additionally, the advent of longer-distance non-stop international flights will open up more timely market access for regional businesses.
1.5 million people are moving into the world’s cities every week. NSW is also undergoing rapid urbanisation, but unlike before, people are increasingly moving to urban centres other than Sydney.
For the first time in 2015, more than half the world’s population lived in cities. Urban centres are drivers of productivity and growth (due to ‘agglomeration’), generating 85 per cent of global GDP. Mirroring global trends, regional NSW is also experiencing a movement away from its rural areas towards regional cities and towns. This is not to suggest everyone is moving to Sydney, as people choose where to live based on a wide variety of career, family, affordability and lifestyle considerations. Regional NSW offers a diversity of choice in terms of lifestyles, and the increasing importance of regional centres is reflected in the hub-and-spoke model underpinning the NSW Future Transport Strategy 2056.
The geographic constraints of Greater Sydney have seen nearby areas of NSW grow. These ‘Metro Satellites’ are a key destination for people moving out of the dense environment of Sydney. These regional areas have the potential to unlock and capitalise on urban productivity and innovation, but this must be balanced by providing infrastructure and developing cities that are smart and sustainable.
Demographic and social change
Australia’s population is ageing, with the over-65s soon to be the fastest growing segment of the population.
Developed countries are all experiencing ageing populations, and Australia is no different. This is driven by two factors: Australian families are, on average, having fewer children; and people are living longer. The result is that the fastest growing segment of the population will be the over-65s.
This has implications for regional NSW, as the younger generations move to cities and regional centres looking for education and employment opportunities. However, regional NSW has the potential and opportunity to provide the workforce to serve the older population. The rise in demand for aged care and health services and the changing economic and social patterns provide new opportunities for careers in health care and social assistance, with over 34,000 additional jobs forecast by 2022 in regional NSW.2
Digital technology has been progressing exponentially. The increasingly disruptive potential of data, connectivity and mobility will continue to drive and accelerate big change in the economy.
Digital technology is driving big changes in the global economy. Increasingly, we are seeing the power and potential of data connectivity and mobility, enabled by technological progress. Australia is on a digital evolution to leverage the potential of technology in accelerating economic change, productivity and growth.
Advances in digital technologies and connectivity have also facilitated an ideal environment for entrepreneurship. Ranked fifth in the world for our favourable entrepreneurship environment3, Australia is a great place for entrepreneurs, start-ups and innovators. NSW has the greatest opportunity of all states and territories to increase small business income over the next decade, with the potential to unlock up to $16 billion of additional economic output if those businesses can fully leverage mobile and internet technologies.4
For regional NSW, state-wide digital connectivity and disruptive technology have the potential to transform the future of farming, education, healthcare, local business and standards of living. This potential is described in more detail in the NSW State Infrastructure Strategy.
Whether they choose to work for established businesses or start their own, people will have choices about where to live and how this affects their work, as the need to live close to an office in a metropolitan city reduces. This may manifest in different ways, from people balancing part-week commuting with part-week working from home, to ‘digital nomads’ working from anywhere with an internet connection.
Regional NSW is well positioned to take advantage of the opportunities presented by these megatrends. It has the quality goods and services demanded by the Asian middle class, and an advanced agriculture and manufacturing base supported by some of the best research and development organisations in the world. Moreover, it has a favourable climate for agriculture with access to global markets; the beaches, parks and bush coveted by tourists and retirees; and the know-how to take advantage of new technologies in freight and logistics, and agricultural technology.
Capitalising on these megatrends will not be possible from a standing start. NSW needs to plan for the long term and give people and businesses the tools and environment they need to seize those opportunities when they arise.
1. PwC analysis of open-source data, including megatrends considered by Transport for NSW, NSW Department of Planning and Environment, and CSIRO in their paper Our Future World
2. Australian Department of Jobs and Small Business Industry Employment Projections. Note, this report includes Wollongong and Newcastle in regional NSW, though this vision excludes them
3. Global Entrepreneurship and Development Institute, 2018 Global Entrepreneurship Index.