What drives economic growth? How do we create more jobs, lower unemployment and higher wages?
I’m guessing few readers would answer those questions by saying “build a really flash and very different art gallery”, but that’s what has done it for Tasmania.
CommSec’s latest State of the States report scores Tasmania in first place over eight key indicators – economic growth, retail spending, equipment investment, unemployment, construction work done, population growth, housing finance and dwelling commencements.
This is the sixth quarter in a row that Tasmania has taken the top spot. By now, it clearly isn’t a fluke.
But Tasmania outperforming, shedding its previous decades-long title as Australia’s backwater basket case, goes back considerably further.
CommSec chief economist Craig James gives all the current reasons for Tasmania being No.1, with population growth being key.
I’d suggest housing arbitrage is playing a major role in that – Melbournians in particular buying more cheaply in Tasmania, just as Sydneysiders do in south-east Queensland.
And Tasmania avoiding the disruption of strict COVID lockdowns that other states have suffered also has to help.
(My favourite headline of this pandemic remains the Hobart Mercury’s early “We have a moat and we’re not afraid to use it”.)
But to understand how to build a winner, it’s a big mistake to concentrate purely on the present and not to dig deeper to find out what lit the economic fire.
Half a dozen years ago, Tasmania started to regularly outperform in the monthly NAB business conditions survey.
As I wrote at the time, Tasmania was the island down the bottom that’s sometimes left off the map, the one we joke about giving to New Zealand but the Kiwis don’t want it because they play odd football.
The one that you reach by time travel going back half a century, Australia’s perennial basket case, the place that shouldn’t really be a state at all with its 12 often-troublesome senators for a population smaller than the Gold Coast’s.
Yet there it was, offering the highest wage rises in the nation and topping the business conditions league.
Having been a fairly regular visitor, I had a suspicion about what had changed in what was once called the Apple Isle, but thought I should check with Tasmania’s economist in residence, Saul Eslake.
He stressed that Tasmania had done well out of the Australian dollar weakening, but also that the state was enjoying a MONA-led recovery as David Walsh’s private art museum had become the island’s biggest tourist attraction.
“MONA certainly has made a difference, not only in terms of the number of visitors it attracts but it has also prompted a significant improvement in the quality of restaurants and coffee shops catering to the requirements of the more ‘upmarket’ visitors who come to Tasmania for an arts and cultural experience as opposed to the more traditional type of tourists,” Saul told me.
“It has prompted Qantas to put on more flights to Hobart from both Melbourne and Sydney, reversing what had been a trend towards completely Jetstar-ising Tasmania. There is now also something of a hotel-building boom beginning to get under way.”
That was five years ago. Initially, the MONA effect was very Hobart-centric with the depressed north-east remaining the depressed north-east, but the fire lit then has continued to spread.
Tasmania now vies for the lowest unemployment rate in the country – 4.5 per cent last month. The latest wage price index for the year to March had Tasmania the clear leader with 2 per cent, compared with the Australian average of 1.5 per cent.
The role MONA played in changing the state is a lesson in looking for growth beyond “what we’ve always done around here”. It is extraordinary and inspiring.
It’s particularly important given the appalling hand dealt to the arts sector by the federal government during the pandemic, underestimating its importance.
It’s also important as a counterpoint to the usual mantra of both sides of politics that it’s manufacturing that really matters for Australia’s growth prospects. Well, only up to a point.
The thinking that only “things you can drop on your foot” really count for the economy is sadly outdated yet it’s what the politicians keep preaching.
The “soft” economy, service-oriented, is increasingly what counts for a rich country. Nostalgia for factories is no substitute for hard-headed and broader economic thinking.
Both sides of politics would do well to read a Sara O’Connor column in the Financial Times, Nostalgia for manufacturing won’t bring better jobs for UK workers.
She makes a convincing case for the revitalisation of the economy being based on making service jobs better, rather than thinking subsidising/buying factories results in better jobs.
And politicians with an eye for more than the next election might rethink their appreciation of the arts sector and what it can achieve. Ask Tasmania.