Tag Archives: Rural

Saying Sorry

Events have overtaken this previously schedule post, stay tuned for the upcoming one about the Forgotten Australians.


John Howard said SorryKevin Rudd said SorryThe States said Sorry.

Two federal governments and every State have said Sorry to the alleged Stolen Generations of Aboriginal and Torres Strait Islander children.

The major difference between John Howard’s speech and Kevin Rudd’s speech is that John Howard did not actually utter the word ‘sorry’.

There is little doubt that some Indigenous children were removed from their families.  For the most part the reasons will be unknown to us.  However, some of us may remember a time when non-Indigenous Australians feared the government welfare man.

If you could not adequately feed your child or provide a bed for your children and take good care of them, mothers would warn their children to do what they were told or “the government man would come around and take them away.”

No one denies that some children and not just Aboriginal children were removed from their families for reasons that were not good enough over the period of time that the “Stolen Generations” was supposed to occur.

Many young, unmarried non-Aboriginal mothers have also been systematically bullied, coerced and in some cases physically assaulted to enable representatives of the State and the Church to remove their babies.

Just as Rudd’s speech outlined Nanna Fejo’s story, The Age outlines the story of Elizabeth Edwards, a young caucasian woman.

These stories have a moral equivalence.  What should be done?

At the very least, more consultation with the wider public is needed.

Are these Tax Zones Constitutional?

Courtesy of paid subscribing of Crikey Mid-2005

14. Is Barnaby’s tax plan unconstitutional?

Charles Richardson writes:

Senator Barnaby Joyce, possibly suffering withdrawal symptoms after two days out of the headlines, popped up again yesterday calling for lower tax rates for “the most needy and depressed regions” of Australia – being
coincidentally the ones that vote National Party.

This produced an odd response from his party leader, Mark Vaile, as reported by The Australian: “Mr Vaile said such a plan was unconstitutional and would require a referendum.” This was said to have “effectively killed
off” the idea.

Perhaps politicians should be required to do their own tax returns rather than send them to accountants. If Mr Vaile did his tax, he would find, on pages 44-50 of this year’s Tax Pack Supplement, the rules for a complicated
system of zonal rebates currently available to people in remote and regional Australia. (Read more about it at the ATO website here.)

A single taxpayer with no dependants in Zone A, for example (which includes places like Broome, Port Hedland, Darwin, Mt Isa and Alice Springs), gets $338 off their tax. For a taxpayer in a “special area” – defined as being
more than 250km from a population centre of 2,500 or more people – this rises to $1,173. Taxpayers with dependants get significantly more.

In principle, this is not a bad way of compensating people for the disadvantage of living in remote areas. It is certainly fairer than, for example, discounted utility bills, which subsidise country people in
proportion to how much electricity they use (not a good measure of disadvantage). If we could replace the existing plethora of rural subsidies with a simple distance-based formula administered through the tax system it
would be a real gain. Somehow I doubt that is what Senator Joyce had in mind.

On the other hand, the legal basis for the zone system looks a bit shaky.

Section 51(ii) of the Constitution (evidently what Mark Vaile was thinking of), gives the Commonwealth power over “Taxation; but not so as to discriminate between States or parts of States.” Perhaps a tax lawyer among
Crikey’s readers could tell us whether the constitutionality of present arrangements has ever been seriously tested.

Read the answer over the fold.

Continue reading

Enterprise Zones Pt 2

Enterprise Zone issues Concluded

But you are still asking Government to pick winners -picking areas to become EZs and picking businesses?

No, not in any way is government involved in picking winners.

The Federal Government is being asked to set in place legislation which will allow for Enterprise Zones to be designated if areas meet certain criteria -being economically distressed, being prepared to commit to a planning process and having prospects and commitment for the future. This means that local government areas or groups of areas can assess their situation and apply for designation as an Enterprise Zone. Far from Government picking winners – local government areas choose to nominate themselves. The next step is likely to be that any individual business can then apply to register as an EZ business. If they invest and expand and if they create net job growth they will receive concessions on the extra taxation liability created as a result of their expanded business.

The individual business chooses to activate the EZ mechanism -not government.

Are you picking losers then?

Some have referred to the EZ concept as ‘picking losers’. EZs seek to create the possibilities of equity amongst areas which have experienced an economic downturn. It does not serve Australia’s interests to have a large part of our country performing at a standard which most Australians would find unacceptable. There are many government policies and interventions which are seen as necessary in our daily lives to ensure that all Australians have access to a range services necessary for the common good. We seek an extension of this philosophy by Government to the economic circumstances of its citizens.

But isn’t Australia’s economy doing well enough without this proposed intervention?

Australia’s overall economy is performing reasonably well by international benchmarks but it is an ‘average’ in the sense that high and low results are combined to produce the result. There are times when commodity prices such as wool, wheat and pork may be high in rural areas, but most of Australia’s lower incomes are in regional areas and because they have lower population the overall effect for the nation as a whole, looks satisfactory. Regional areas are performing poorly in many key indicators because the economic structure combined with market forces has kept these areas as basically commodity producers. The challenge is to build a system that promotes private sector investment to encourage value adding of these commodities and move towards participation in higher technology areas.

We hear lots about present government initiatives to help regional Australia-why aren’t they working?

I briefly addressed this earlier.

It is because the tools are not the right tools for the problem.

Governments have for many decades relied on grants to deal with regional economic development issues and these are valuable in highlighting natural strengths and business opportunities. Regional communities however are faced with lack of business confidence and in most cases the good ideas generated by consultants go no further! No one doubts that every one wants to assist regional and rural areas to do better, but many are questioning whether small amounts of competitive grants will really make a difference to a large scale problem. Private enterprise generally finds regional and rural areas too risky and they have chosen to locate elsewhere. The tried and tested Enterprise Zone system attacks this very problem by creating a climate of less risk and more certainty for business.

So what are the guiding principles for Enterprise Zones for Australia?

The system must be designed for Australian conditions by the three spheres of government and business groups.

  • It is a tool to assist poorly performing regions not to benefit prosperous ones!
  • The system must be simple, transparent and substantial so it is easily understood, there are no secret deals and the benefits must be real and sufficient to be attractive to business to positively influence their investment decision
  • EZs should have a minimum size of a local government area with an expectation that areas will join together.
  • To be designated, an area must show it has prospects and commitment to development of an economic development strategy.

Isn’t it just more Corporate Welfare?

EZ’s arose in the United Kingdom from an idea developed by an academic at Reading University and were subsequently adopted by well recognised conservatives Prime Minister Thatcher and President Regan.

EZs were originally designed as an urban economic development tool to reduce dependency on welfare but looked towards business to assist in this process. The idea was then transferred to a regional context. It is an approach to development that improves low-income communities and replaces ‘do for and do to’ with a ‘do with’ model.

Enterprise Zones can’t be that simple …can they?

The basic idea is very simple. To a great extent, regional areas produce commodities that over the long term typically produce a roller coaster ride of incomes, but on average these are low incomes. EZ’s help to counter this situation by attracting businesses and encouraging expansions, especially for those industries which add value to regional commodities, thereby increasing employment and wealth. It is a system used throughout the USA in many different formats. Each state designs its EZ system to meet its objectives, but principally it is used for job generation and to improve the economies of regional areas and ultimately that of the state. It is a popular mechanism for poorer performing regions, which under the present ‘economic rules’ are unable to achieve substantial benefits from growing economies.

Why can’t we have EZ’s in Australia?

It is a matter of highest priority that Australia ensures its regions have the ways and means to share in national prosperity. Our present system does not allow this to happen. Our principal problem is the Federal Government’s current approach to regional economic development and its blanket opposition to perceived interventionist methods, but there are signs this stance is being modified. While there are many types of government grants for feasibility studies, there is little emphasis on making regions more attractive to the businesses that have potential to add value to the products emanating from the regions. The EZ concept found in the USA on the other hand, has proven benefits to regions in a number of significant ways.

We need to understand that a commitment to economic rationalism has given the regions what they have today – low performing economies.

Contrasting the USA’s and Europe’s pursuit of the Knowledge/Industry Model of economic development with Australia’s fascination with the cost efficiency model. We became good at driving down costs and the producing low value products. By doing this we sentenced Australia to low levels of innovation and low returns. The USA and Europe fostered a climate of innovation and high returns.
Government can make a significant difference by committing itself to regional economic development by examining successful overseas concepts such as Enterprise Zones. While blighted communities in Australia no doubt appreciate the Federal Government’s funding of Rural Transaction Centres, what they really need are mechanisms that will get them back to work. EZ’s in conjunction with other programs can help the regions achieve their goals in the same way as the citizens of the USA and Europe have been able to achieve theirs.

The USA model differs from Australia in that the American Federal Government has backed its political rhetoric with real and substantial tools which regional communities can use. Our government risks increased regional disaffection by not making the necessary changes to an economic system that maintains the polarisation of regional and city economies. World experience has shown that Government intervention in partnership with responsible community action can become an extremely powerful economic development tool.

Is there a prescriptive model for Enterprise Zones we can follow?

We could simply pick up a model from the USA and use it, but there are differences in State and Federal Taxation, investment allowances etc that do not translate to the Australian context. EZs have a similar philosophical approach around the world but they are adapted and modified for local conditions. We need government to adopt the philosophy first, commit to the creation of the taskforce and then the stakeholders can work through the details and fully design the system.

Australia has an opportunity to draw upon 25 years of EZs and design a world’s best practice model.

Won’t politicians try and promote their areas as EZs when they do not really need it?

Politicians have an obvious interest in representing the interests of their electorates but it must be recognised that Enterprise Zones are a tool to help distressed regions perform to a better standard. If an area is already performing well it should not be designated as an EZ. If EZs became a ‘pork barrelling’ exercise, it would jeopardise the whole system and its ultimate demise would be guaranteed. All parties need to commit to a genuine approach to ensure its legitimacy and long term effectiveness. EZs should be above politics and for that reason all decisions about EZ rules and administration should be carried out through an independent body (the independent taskforce).

How can EZ’s work in Australia with our different system of taxation?

It is important to examine principles before we look at specific examples. In the USA companies pay State and Federal taxes. The important first step for the EZ model for Australia is to have all parties accept the general philosophical basis of special treatment for distressed areas and then translate that agreement to a mechanism appropriate to meet Australia’s needs. Businesses in Australia pay Federal Company tax and, in some states, Payroll Tax. A tremendous opportunity presents itself for the three levels of Government to work with business groups and design the EZ concept to meet Australia’s national objectives – and it will be local government’s job to ensure that it is committed to the local aspects of EZ administration.

Doesn’t the Australian Constitution forbid the mechanism you propose – differential taxation?

Independent advice from solicitors Phillips Fox, Constitutional Special Counsel, finds no impediment to the EZ concept of taxation measures for Enterprise Zones. I’ll attach a transcript if necessary. Also there are other precedences. Or you could just look at this post here that covers it.

What is likely to be the biggest hurdle in having Enterprise Zones introduced into Australia?

In spite of the 20-year success record seen overseas, there is likely to be resistance due to it being a ‘new ‘ idea. Australia has traditionally approached regional economic development through grant programs which means that only a few areas receive funding. This approach does not address the issue of making regional areas attractive for business. Saying “tried it before and it did not work” is unsatisfactory because the EZ concept has not been tried. Saying that “Australia is different and it will not work” is a denial of the fundamental truth that other countries have ade it work to their advantage. We all need to keep an open-minded pproach when examining Enterprise Zones. What we have now is not orking satisfactorily but EZs offer an opportunity for government and usiness to create a climate that will encourage private enterprise to take fresh look at regional Australia.

How can Local Government and economic development groups help to promote the idea of Enterprise Zones?

Principally by being united about the need for new economic development ools which address the issue of market failure in regional economies. econdly we have to call upon the Federal Government to exercise its rue leadership role in respect of regional restructuring mechanisms ather than insisting that communities find their own solutions! The Commonwealth is the principal taxing power in Australia a system of Enterprise Zones must be a Commonwealth initiative. It will be the Australian Government that will provide the ways and means for this to happen through legislation and regulation. State and Local governments must also review their roles in making regional areas more business friendly. It is important in any discussions on the subject of EZ’s to remember that EZ’s should be designed to meet local, state and national objectives that best serve the needs of regional Australia. Individual Councils should be required to develop an Economic Development Management plan as a pre-requisite for declaration as an EZ and should also be prepared to provide administrative support for the administration of the EZ credits system in the same way that it occurs in the USA.

Summarise the situation for me please!

In spite of talented and energetic people, Australia’s regions are facing challenges unable to be solved by local action alone. It is not fiction and not a media beat up – all the economic and social indicators show a looming problem and we have already seen the results in national and state elections! Many people in regional areas recognise the macro-economic nature of their problems and know that the battle cannot be won if we are simply told to try harder with the old tools! Enterprise Zones are not a cure-all, however they offer real hope for Regional Australia especially in partnership with the three spheres of government working together with business.

EZs address the real issue – getting private enterprise interested in the regional areas. They are used successfully overseas and deserve close scrutiny here in Australia.

That pretty much summarizes the situation and should quash most arguments.

What continues below are possible arguments that have not been addressed and their appropriate responses.

ARGUMENT AGAINST EZs 1

A recent survey of unemployment rates across LGAs suggests both that many regions have experienced recent declines in unemployment, and that many non-metropolitan (particularly inland) regions have very low unemployment levels (Department of Employment, Workplace Relations and Small Business 2001).

COUNTER ARGUMENT FOR EZs 1

Electrolux job losses account for 0.56% of employment in the Central West compared to 1000 job losses at Mitsubishi accounting for just 0.29% of South Australian employment. That is nearly twice the loss in Central West Employment compared to Adelaide and Adelaide is getting a $50 million assistance package. (2004/05)

Employment in Telstra declined from more than 86000 in 1987-88 to around 67000 in 1997-98. The decline in Telstra employment between 1992 and 1999 was larger in non-metropolitan than in metropolitan areas. The reduction in employment and incomes from the closure or reduced size of a Telstra depot is likely to represent a larger share of total employment and income in a country town that in a metropolitan centre or larger town. For example, the loss of 70 Telstra jobs in the town of Narrandera represented nearly 3 percent of the shire’s total workforce.

ARGUMENT AGAINST EZs 2

The NFF rejected the EZ proposal in its discussion paper. According to the paper (NFF 2001, p. 24):
– for reasons of sound economic principles, transparency and good governance, use of the Commonwealth’s tax powers should be confined to setting the broad parameters of business rather than seeking to determine what activities are worthwhile, or precise recipes of how they should be organised.

COUNTER ARGUMENT FOR EZs 2

This can more or less be answered by echoing earlier comments

The NFF and its constituents have long been the beneficiaries of non-market based economics and should be the last organisation to put this argument forward. If Australia was to rely entirely on the effects of market based economics we should ask why governments (State and Commonwealth) then ‘interferes ‘by making rules about the numbers of Doctors, medicare provision numbers, Pharmaceutical benefits, numbers of media outlets, university places etc. Surely ‘the market’ would sort these issues out. There are many areas in which government plays with market forces to achieve desirable social outcomes. The notion of adhering to ‘sound economic principles’ is often trotted out by an organisation so long as they benefit from those principles.

Since Federation, Australian Governments have adhered to the principle of Horizontal Fiscal Equalisation whereby government finances are distributed in such a way that no matter where any Australian lives they have, more or less, equal access to government services. This exemplifies a strong equity based philosophy by government. The argument which follows is that Australians no matter where they live should also have the ability to share in the overall wealth produced by the nation. Market forces will in any society gravitate wealth to cities but it is the extreme divergence between city and country that should concern the law makers. In other countries where this disparity has been identified, governments have made decisions to create a more level playing field through mechanisms like EZs.

The fundamental error in the extract from the NFF however is that EZs somehow are a policy tool that determines what specific activities will happen. In broad terms EZ can be designated areas able to grant participating business a menu of performance based incentives. Because an area is designated an EZ does not mean the area receives uncontrolled largesse. What it does mean is that if any particular business wishes to expand and in so doing create additional jobs then it can be rewarded for doing so if it achieves its goals. Moving people from long term unemployment to work offers government some significant savings. If the business does not achieve pre-agreed goals then it receives no tax rebates etc. There are no budgetary outlays only future taxation revenues foregone. In that way EZs are a very low risk tool.

ARGUMENT AGAINST

Tax concessions have actually been tried in Australia before at State level. In most States in the 1980s, governments offered complete payroll tax rebates to firms locating in regional areas. What is the evidence for their success?

All State Governments across Australia, however, did away with open-ended tax breaks (payroll tax concessions) for regional areas, largely because they did not work. They were not successful in attracting new firms to regional areas in sufficient numbers to warrant the cost to taxpayers. They were simply rewarding firms already there. Only a handful of firms had actually relocated in the late 1980s, according to analysis by the NSW Treasury and the Department of Business and Consumer Affairs (1989, 1990).

Previous attempts to influence location and investment decisions through tax concessions, including in New South Wales, have not generally achieved their objectives. While it has been argued that tax concessions in the 1980s helped retain existing jobs in regional areas, analyses undertaken at the time suggested strongly that the old payroll tax concessions were not a sufficient incentive to create new employment.

The targeted approach has been found to be more effective, though limited tax breaks do have a place within the context of this approach. Current government thinking correctly stresses the need for a business case to be made out before regional development assistance is forthcoming.

It might be argued that the payroll tax concessions were simply insufficient as incentives for industry relocation to regional areas. However, the concessions on offer were generous, and cost the NSW govt 18 million per year in 1990 dollars

COUNTER ARGUMENT FOR EZs 3

The EZ idea with its performance based requirements has not been tried in Australia in the way that EZs have been operated around the world. EZs need to draw on the level of govt which levies company tax. They have worked as a State based mechanism in the USA because many of those states levy state company tax. The Commonwealth simply has almost no economic development Policy plan or vision for regional Australia other than the aforementioned drip feed of grants. Those who do not get the grants still face the problem of job and population loss.) State Governments in Australia however have little power to greatly affect positive outcomes for businesses as per the EZ concept practiced overseas. Payroll tax is a disincentive and is viewed as an anti-development tax (the more I employ the more tax I pay).

ARGUMENT AGAINST EZs 4

An enduring concern about enterprise zones has been the fear that, if successful in attracting new investment to regions, it may be that the investment would simply be drawn from neighbouring (or other) regions.

COUNTER ARGUMENT FOR EZs 4

Targeted programs means that Canberra chooses. Inspite of Regional Area Consultative Committees it is Canberra which signs off on programs. In grants based programs there are more losers than winners. What do these areas do to fix their problems when they are unsuccessful?
Our alternative with the EZ mechanism is to use similar methods to the USA where EZ designation may only be considered if an area/s develops a proper Economic Development plan and commits its own resources. So rather than approving a grant for this area and not approving a grant for another area, the designation of an EZ depends on each area getting its act together. Designation means that a business that wants to register under the EZ program does so in the knowledge that if it meets certain criteria ie certain levels of jobs etc it may receive taxation and other incentives. A guiding principle for EZ in the USA is that ultimately the government receives more back through increased taxation because people are now tax payers rather than tax takers.

The Sustainable Regions Program does not clearly identify the real problem. Take Wide Bay Burnett (known as the black hole of Government funding). It has received many millions of grant monies over many years. 36% of all income in the area is social security. The real problem is not in Wide Bay Burnett but in other places such as Roma which on the surface has very low unemployment-reason the young people have left to go to Wide Bay. So economic policy should look further than just where there might be a statistic. The solution to Wide Bay Burnett is to be found in job creation in other areas.

If you have any more arguments against EZs, I’m happy to hear them and to put them to rest

Enterprise Zones Pt 1

The concept is for Enterprise Zones to lower the disparity between regions. The idea of Enterprise Zones is for economically and otherwise disadvantaged areas is to get a time limited tax incentive to improve the regions economics, reduce unemployment etc. It depends on the area of disadvantage what criteria any particular Enterprise Zone is based on.

Before I get too involved with this, I must note, the majority of my views are quoted directly from a multitude of resources on the Internet. It is important to note however that not all are.

By now – if you are still reading – you will be wondering what an Enterprise Zone is.

Enterprise Zones would be geographic areas comprising a local government area (LGA), or group of areas, which are performing below defined standards. These areas would nominate themselves on a co-operative basis and would not be ‘chosen’ by government, but would be assessed against objective criteria. Once approved and designated, a zone would offer a range of attractive benefits to businesses. Any business locating to the zone, or an existing business expanding in the zone, would be eligibele for a range of benefits subject to that business creating new net employment for Australia and meeting set conditions.

Enterprise Zones was originally proposed as an idea by Professor Hall in the UK. The idea was embraced by Prime Minister Thatcher and then by President Reagan. Enterprise Zones were developed originally to counter urban poverty by developing a partnership between business and government to develop the conditions for job creation. In the USA the system was particularly popular but in the early years was primarily used in urban areas. It was later used to assist in job creation in declining rural locations and in the opinion of many observers is more suited to such areas. Over its twenty year history its single and most successful achievement is long-term job creation.

Why is a system of Enterprise Zones needed?

Many regions of Australia are hurting to the extent that is has become a significant matter on the national agenda, with ramifications for community and social stability. The current methods and tools for regional economic development have generated some success at the micro (small picture) level, however at the macro (big picture)level they are not reflecting national growth patterns and the general picture is one of decline.

If a single observation were to be made it would be that the government policy has not been able to create a climate which makes regional areas attractive for private enterprise

Long-term government policy has been based on limited numbers of competitive grants for communities to develop economic strategies. The problem arises in trying to get the private sector interested in the opportunity! If we accept that the “market” decides where business will establish, we have to ask why has regional Australia been so unsuccessful in developing its private sector. The answer lies largely in the comparative level of addition risk associated with a decision to invest at the regional level. Local economic development strategies can be extremely useful in identifying opportunities but they do not change the risk climate. Enterprise Zones on the other hand can have a signifcant effect in this area.

Enterprise Zones should be used in conjunction with grants ( Those who do not get the grants still face the problem of job and population loss) but will be more effective than just the current drip feed of grants being offered.

Why should rural and regional Australia be treated differently?

Those who live in regional Australia are Australians too. They have grown up in these areas or have moved there as a lifestyle choice. Regional Australia produces the raw materials for Australia’s wealth but the wealth imbalance between city and region has become increasingly apparent. Since Federation governments have been committed to providing government services at an equal level across Australia in areas such as health, education, policing and transport. We believe that government should have the same committment to economic equity by looking at mechanisms such as EZ’s to serve the needs of all Australians.

Isn’t there already a Zonal Tax System in place?

Yes, but only for personal income tax. It was introduced in 1945 as an incentive for people to work in remote areas. It continues to serve its purpose but it is not a mechanism to help create jobs and by simply extending the present system to businesses there will be no encouragement to develop value adding industries in regional Australia.

How can a LGA, or a group of LGAs, become ‘designated’ as an EZ and what does this mean?

The area needs to compare its peformance against a set of standard socio-economic benchmarks which would be determined by an independent taskforce. If it is found to be eligible, due to performance below these standards, it can apply to become designated, subject to satisfying the independent taskforce requirements including:

  • Attempts to group with adjacent areas if they are similarly affected.
  • A demonstration that the area has prospects for development.
  • The development of an an Enterprise Zone Economic Development Plan by the group (government funding may be available to assist).
  • A commitment by LG to be responsible for the monitoring of approved businesses.
  • The degree to which LGs are prepared to financially commit to the process.

You talk about distressed areas and benchmarks … how do you propose to measure the factors that will determine designation as a Zone?

Factors which might be considered are ultimately expressed in a region’s ability to generate jobs. Governments and communities are mainly interested in jobs. Whatever indicators are used, must be agreed upon by all three spheres of government, however the principals of transparency and simplicity must be followed. This means that all benefits that are avilable to participating businesses are able to be seen and understood by the average person.

Suggested factors are:

  • income
  • poverty
  • gross regional product (GRP)
  • property values
  • etc

How does a business sign up for Enterprise Zone Benefits?

A business intending to operate within a designated Enterprise Zone would need to apply to become an EZ qualified business. Information would be supplied to the business by the local council including indicative benefits. The business would factor relevant EZ concessions and rate of return calculations in their business planning when assessing the viability of the investment in the region. The process of designation would have prudential checks but should not be overly bureaucratic. It should be as simple and transparent as possible so that anyone could read the eligibility criteria and know whether they would be accepted. It is not expected that the number of businesses would in anyway be limited once a zone is designated, as ultimately these businesses would only be receiving rebates on the additional taxes they paid. For example, a business which has 20 employees and then employs an extra 10 employees after being designated as an EZ participating business, will receive credits based on the 10 extra jobs and not the 20 original jobs. EZ’s operate for a limited time span of approximately 10 to 20 years and businesses usually receive credits in any 5 year period in this time span. The business can choose in which year it wishes to use the credits.

What are the benefits to eligible businesses?

The components of the benefits’ system have yet to be finalised but they must be significant enough to encourage business expansion. Benefits should generally fall into the categories of tax incentives at both the State and Federal level (for example rebates back to the business of part of their increased tax liability), investment allowances, accelerated depreciation and wage subsidies. A significant design feature is that tax incentives are limited to and linked to the excess tax associated with investment in the EZ. Tax incentives are therefore conditional upon successful outcomes regarding production and employment within the zone. Business activity and job creation generates the benefits to the business.

If you are still reading I thank you

Are Enterprise Zone benefits proposed to be the same across Australia’s zones or can they vary?

Zone benefits should be the same across Australia wherever zones are designated. In special circumstances however, it may be desirable to write into the legislation that certain industry types could receive an additional benefit if they were to locate into specific areas to process raw products from that area, ie timber mills into areas which have plantation forests, vegetable processing where vegetables are grown etc. This level of detail however, should be left to the relevant stakeholders when they meet to design the EZ system for Australia.

Who pays for this system?

As the system uses tax incentives as the principal component of the benefits provided, together with investment allowances, accelerated depreciation etc, it is principally within the domain of the Commonwealth Government. However other tax concessions may come from State governments, for example payroll tax concessions and Local Government through land rating tax. There will be some initial administrative costs in establishing Enterprise Zones, but in the medium to long term, the EZ system is expected to be self funding because it is rebating only the part of the increased tax liability resulting from the new investment into the regional area. Government will benefit from new and expanding businesses through increases in personal income tax, savings on those people moving from welfare to work, increased company tax and additional GST on consumption generated from new employment.

The USA and Europe have enormous taxation bases -surely Australia can’t afford a scheme like this?

Enterprise Zone benefits are not based on population scale but on the performance of individual businesses. Enterprise Zones are designed to stimulate new growth in the economy. Businesses in EZs do not receive money as a government expediture but a concession on their new tax liability when their business expands. In the medium to long term EZs would be self-funding. One thing is certain; our regional areas cannot afford to keep going the way they are, using the same old economic development tools so we urgently need to explore viable alternatives.

What about Local Government – what is its interest?

Local Government has a vital and continuing interest in the social, cultural and economic welfare of its communities. Local Government exists to serve its community but if the community is poor, the Council is unable to deliver the increasing number of services required by its residents. Thus councils want to see their communities prospering and to share in this growth. It has been suggested that councils could receive a percentage of the total tax credits generated in their area, in return for their administration of the system at the local level.

What about an existing company which tries to relocate to the zone just to get the credits?

Firstly it is unlikely that the level of credits could ever offset the substantial costs of relocating a factory or large business. Secondly there will be checks and balances in place to ensure those businesses only receive a benefit that is linked to their new investment into an Enterprise Zone. A credit is generally available only where there is net employment generation and new investment in a region.

What about an established business in a newly designated
EZ – can it get credits?

Existing and new companies operate under the same rules and receive the same types of benefits if they expand and employ additional people. In reality most new jobs are likely to be created by existing businesses. In some areas in the USA, financial institutions that lend to EZ businesses also receive credits to encourage their support of regional enterprises.

How does an Enterprise Zone benefit a regional area?

Principally through the creation of new jobs. EZs provide the ways and means for businesses to operate within a regional area in an improved climate of certainty and reduced risk. Businesses must still plan their futures with their financiers and business planners, but they will be able to factor EZ benefits as part of the planning process. Businesses have a ‘mutual obligation’ to create new jobs and invest new capital and will be rewarded for doing so. The ultimate aim of EZs is to improve the depth of regional economies and the quality of regional life in Australia.

You talk a lot about regions. Is this ‘the bush’, towns, regional centres, the coast, outer parts of cities – what is regional Australia?

The use of the word “region” is problematic in that it appears to mean all things to all people. Politicians, government agencies, consultants, academics, the media and the general public all apply different definitions. This causes a great deal of confusion and can be a significant problem in communicating ideas. To some, “regional” is synonymous with “country” or “rural”, for others it also includes all or part of major urban areas. Regional may include the Hunter or Western Sydney and may also include mining areas such as the Pilbara.

The concept of EZs does not exclusively relate to “country” regions however, as determining the economic boundaries of regions within urban conurbations is extremely difficult, the concept more readily applies to country areas. This does not preclude the applications to urban/semiurban areas, as the UK, USA and Europe have demonstrated.

What about governments – don’t they object to giving subsidies and aren’t they reluctant to intervene in market mechanisms?

That just it – EZ’s do not operate on a subsidy principal. They simply rebate back to the business part of the extra taxes paid because of the increased profits or wages paid within the designated region. Rebates and concessions occur after the investment has taken place so in effect there is nil risk to government. In fact government will receive a net increase in revenues over time as a result of an EZ because it saves on welfare payments and generates additional personal income tax from the new jobs created and GST from additional consumption – it is a win/win for everyone.

In the USA, Europe and the UK, governments are pro-actively establishing these mechanisms where they are needed to help these regions get back on their feet. Some areas in Ireland will have their preferred status removed shortly because these EZ mechanisms have substantially improved their economic situation. The EZ concept works to complement and supplement other schemes to promote business
development and exports.

The Australian government may argue that it should not interfere with market mechanisms but the reality is that these very market mechanisms are causing the decline of regional areas NOT their growth. It is arguable that in such circumstances we should use the tools that have been successfully used by our competitors for over 20 years.

There are many examples where government already intervenes and regulates. The number of media outlets is regulated, as is the number of doctors, banks and taxicabs. Regional areas are arguing for a change to the economic regulations and mechanisms for the short/medium term to ensure success in the long term. The EZ system is another interventionist mechanism for the common good, which allows businesses and people to share in the overall wealth of the nation.

It may not be a subsidy, but aren’t Enterprise Zones simply propping up inefficient industries and giving them a handout?

All businesses look at ways to achieve better profitability but many have difficulty justifying a regional location due to perceived higher costs and risk. This often means that the regions miss out on the types of industries that can add value to the products typically found in their areas.

Enterprise Zones are not designed to provide windfall benefits for businesses – they are designed to provide a measure of equity for the regions to allow businesses to operate on a level playing field.

The EZ system can address many of the shortcomings of regional areas by matching private enterprise’s needs to make a profit and manage risk, with the regions’ needs to improve employment outcomes. This matching principle is well recognised in Europe where it is stated that economic disparity for the regions does not bode well for Europe as a whole. Under the present ‘free market’ system in Australia, these joint benefits occur in only a limited way. There are many mechanisms, which differentiate government policy and taxation in Australia due to special circumstances, and it is government’s right and duty to intervene where necessary to serve the common good.

Isn’t a system of picking winners again like the old Growth Centres of the 1970’s?

It is certainly not about picking winners – it is about enhancing regional Australia’s natural advantages and developing a positive climate to foster job creation.

The old Growth Centres policy was a reaction to the scattergun economic development processes of the 60s and 70s. The policy attempted to concentrate resources via State and Commonwealth programs and was a reaction to the high growth rates in Sydney and Melbourne. They concentrated on land acquisition for industry and residential purposes, rather than creating a business climate and developing value adding on top of natural resource bases. As criticism mounted and city growth slowed the political will to continue with the program waned. Unlike Enterprise Zones, growth centres did not work on the basis of a mutual obligation on business to create jobs and increase investment.

Suicide

Starting with some of my own work, written early to mid 2005.

The death of celebrity stockbroker Rene Rivkin has highlighted how important it is that depression be treated. Depression can lead to suicide. I would like to take that one step further and discuss youth suicide.

Youth suicide is higher in rural Australia than the cities. One of the key factors in our youth committing suicide is isolation.

Isolation comes in many forms.

  • Physical isolation – being a remote location.
  • Social isolation – being ostracised from a community.
  • Emotional isolation – feeling ostracised from your family and friends.

The isolation trigger to suicide can be one of these forms of isolation or it can be a combination of them.

Isolation may pre-date the suicide or attempt of suicide but usually it does not.

I have/had a friend that committed suicide when he was 22. He hung himself. I was not with him the previous night but by all accounts he was fine the night before after a night out with friends. They had planned a trip away the next day.

Personally I think it was a combination of factors but the most pertinent to my mind being the long-term use of marijuana – it was certainly a contributing factor.

There are those that suicide is the ultimate form of selfishness and they’re right. Suicide is all about you. However most suicide is the result of depression and depression is a form of mental illness. Those that commit suicide are usually not rational and indeed if they are they have not considered their externalities – their friends and family.

Suicide as stated is related to depression and depression in turn is related to another illness – Stress. Now I don’t know if WHO classes stress as an illness but I do. Stress can also come from a variety of sources – work related1, family related, emotional fatigue.

Stress is the feeling we get when we bottle things up inside. Noted stress-relievers are physical activities such as sex, sport and a good stoush2.

However, sex is not easy when you are having relationship troubles leading to emotional stress, sport is not easy when you are under pressure to perform putting yourself further under stress and as with sport there is the risk of injury in a blue3 that you may wish to avoid.

Build these things up inside yourself and you may find you are talking to yourself, verbalising those that are giving you trouble so you do not lash out and hurt them but nothing is ever said to them personally. Why? Because you don’t wish to hurt them. Is this selfless? Yes. Is this healthy? No.

This may pass but then because you did not react originally, you’ll sink into the same stress-related depression cycle when a similar situation occurs.

There is another reason that you may not react, you may guess what others reactions will be and you know that will either physically or emotionally hurt you and that’s not a risk you can take. So again you sink further into your stress-related depression cycle.

This can lead to any combination of the forms of isolation. Eventually you are in a vicious cycle of emotional torment and can no longer take the pain. You don’t lash out for fear of hurting someone. You don’t tell anyone how you feel as you don’t think they’ll understand and you think you’ll lose status in whatever circle you move in thus increasing your isolation, so you suck it all in which leads you to the only way you know how to end your pain — taking your own life.

It is the only way you know how to assert control.

Why don’t the suicidal seek a counsellor or counselling then? The answer to that one is easy. Would you tell a stranger all your woes? Would you tell a stranger all your ills? Where is the rapport?

That said, a suicidal person is more likely to trust a stranger for that exact reason. The fact they’re a stranger and they don’t know you.

Why won’t they tell a professional then? For the same reason they trust a stranger. The stranger may move on and you may never see them again thus there is a burden lifted from them. Telling a professional however, could lead to the information becoming public at a later date which brings the whole status scenario into play again.

So what is the solution? The honest answer is I don’t know.

My best guess is to somehow ensure everyone you know gets a dose of endorphins every now and then. Endorphins are a natural high usually through vigorous activities and the known stress relievers I mentioned earlier.

1I include unemployment in work related
2Stoush is old Australian slang for a fight
3Blue has many connotations in Australian slang but in this context it also means fight