Valley should build on coal strengths: Weller

THE author of a key report into the impact of carbon pricing on the Latrobe Valley believes attempts to ‘diversify’ the region’s economic base are likely to fall flat.

Monash University economic geographer Dr Sally Weller co-authored ‘The Regional Effects of Pricing Carbon Emissions: An Adjustment Strategy for the Latrobe Valley’ submitted to Regional Development Victoria in 2011.

After it was revealed the Federal Government had all but abandoned its ‘structural adjustment’ fund for regions expected to be hardest hit by the carbon tax, The Express asked Dr Weller what levels of government assistance would be required for the Valley to effectively transition to a ‘low-carbon’ economy.

Dr Weller said the question implied “the solution to the problem is diversifying the economy”.

“The experiences of previous restructuring in the Valley shows that incentives for ‘diversification’ often fall flat,” Dr Weller said.

“The three current suggestions – food processing, agriculture and tourism – won’t be viable until the Australian exchange rate falls significantly,” she said, adding even if the exchange rate dropped, Gippsland’s isolation and distance from export markets would still “constitute a significant competitive disadvantage”.

“For example, high value food producers near San Francisco and Vancouver have much lower costs accessing the Chinese market, and their proximity means they have better firm network connections.”

Instead, Dr Weller said she believed the Valley’s best hope for a solution to its economic challenges lay in building on its “existing strengths”, namely “developing energy and coal-related specialisations”, such as batteries and transmissions, that built on the “advantage of the Valley’s skilled labour force”.

This was best achieved through supporting research, funding innovation and setting up demonstration projects, Dr Weller said, but she warned those strategies would collapse when government’s preferred private sector initiatives and the private sector was not investing enough.

“The design of the (Federal Government’s) clean energy package, in conjunction with the carbon price, was expected to stimulate private investment – it hasn’t happened and that implies the need for policy redesign at the national scale to stimulate investment,” Dr Weller said.

“On the other hand, a lot of taxpayer’s money has been given to private firms for very little observable return,” she said, suggesting it could be preferable to “fund bodies like the CSIRO and universities to do the research and develop the commercial applications, which could be sold to private firms to run once they were profitable”.

The best way to reduce the impact of structural change, however, was to “slow down the process,” Dr Weller said.

“In the Valley’s case, that means closing down brown coal generation one generator at a time spread over 10 years or more.”

When asked what sort of model the Valley should adopt to best move forward, Dr Weller said importing a model from elsewhere “won’t necessarily work in the Valley”.

“We know that the key problems are in infrastructure linking the Valley with other places and markets, and education – which needs a 20 year plan starting with early childhood,” she said.

To overcome the region’s “physical isolation”, Dr Weller said better links from the Valley up to Albury were required, to “open up domestic markets, promote agricultural exchanges into Murray Darling Basin and create a second route that doesn’t require travelling via Melbourne”.