Latrobe — A turning point or a dead cat bouncing?
There are some positive signs in Latrobe City’s economy. That makes it a good time to make some transformative changes.
Source: Geografia, 2019
Changes to Australia’s economy makes places Like Latrobe vulnerable
Latrobe City (150km east of Melbourne) is often in the news for the wrong reason. The stories are about an economy in a parlous state, waiting for the expected closure of more power stations that have underpinned the region’s economy and provided many of its jobs for decades.
And it’s true that, for maybe 20–30 years, Latrobe’s economy, while not shrinking in absolute terms, has shrunk relative to the rest of Gippsland and Victoria, from one-third of the population of Gippsland in 1966 down to one-quarter today. Two industries that have become less job intensive — mining and utilities — are still important to its economy and that puts Latrobe in a potentially vulnerable position when it comes to jobs and population.
This is because job growth is no longer in these sectors and a growing share of GDP is in industries that serve people.
As many places in rural Australia understand, major construction projects in mining and utilities are usually short-lived sugar hits to the economy and unlike sugar, it’s very difficult to convert this activity to permanent and significant growth. That is, of course, unless you are building a fast, cheap and efficient transport link to a larger employment hub, or creating your own service economy employment hub like a university. On top of that, just as the energy sector has become less job intensive, these jobs are also becoming more distributed. Rather than all the jobs being at the site (like they would at a large power station), they could be in a service company which is managing the buying and selling of power between numerous providers, including domestic rooftop solar.
But despite these clouds on the horizon, Latrobe’s consumer economy looks remarkably healthy
Yet despite all these challenges, the fact is the consumer economy in Latrobe looks pretty healthy. When putting together some data for a talk for Latrobe City, we found the latest 12 months of spending data shows:
· A 7% increase in Total Local Spending (far more than we’d expect from population growth and inflation combined);
· A 7% increase in Resident Escape Spend (the spending of residents and local businesses outside of the Latrobe City local government area — not good for local merchants, but a sign that some residents and local businesses are feeling bullish enough to spend more money); and
· A 12% increase in Resident Online Spend (also not ideal for local merchants, but, again, it is a spending increase) (Figure 1).
Source: spendmapp.com.au
And perhaps most interestingly of all, local spending on Specialised & Luxury Goods grew as well; up by 9% on the year before. This is usually a very good leading indicator of a confident consumer market. In most places around Australia, over the last two years, we have seen a decline, or, at best a flat-lining trajectory in Specialised & Luxury Goods spending. In Latrobe City, it’s been up (Figure 2).
Source: spendmapp.com.au
And if that solid, quantitative evidence wasn’t enough, we only need look at the streetscape. Sure it’s only a visual impression, but unlike some other commercial precincts around the country, Latrobe’s main commercial strips are not a sea of for lease signs (sorry, I forgot to take a photo when I was there).
Why is this? Is it the lipstick economy effect, the impact of substantial State Government investment, a dead cat bouncing, or something else entirely?
It’s not clear why Latrobe is doing better than most of us probably think. Maybe the efforts of the Latrobe Valley Authority to secure new investment are already having a positive impact; maybe redundancy packages from Hazelwood’s closure are flowing through the local economy. Maybe it’s the lipstick effect: people are just buying lots of discretionary consumer goods and services to make up for the stress and uncertainty they feel about the future. Maybe (or more likely) it’s a mix of things.
Whatever the cause, there are healthy signs in Latrobe’s economy and this makes it a good time to renew
Whatever the cause, it’s clear, that in this case, the reality is currently better than the rhetoric.
So, how do we make sure this is not a short-term fix?
We know the knowledge economy thrives on agglomeration, so Latrobe has to tap into this
As an economic geographer, I see everything within the frame of reference of the spatial dimensions to the economy. And, for me, the answer is in a phenomenon that has created its own sea of thought bubbles over the last decade or so: the agglomeration of jobs into central city areas. This has been happening as the knowledge economy has grown to become the bulk of Australia’s economy. And, assuming our economy continues along this path for at least a little longer, then we shouldn’t expect this agglomeration of jobs, investment and people to slow (there are more than enough push and pull factors to keep it going).
In my view, then, the priority for places like Latrobe is to keep improving the connections to places like central Melbourne. It will mean urban amenity and large job markets are not that far away. And while doing that, it’s important Latrobe can continue to offer things to residents, workers and businesses that they can’t get in built-up areas: cheaper housing, cheaper land, cleaner air (eventually), and some rural amenity.
Given the enormous opportunity (and urgent need) in Australia to transform fundamental parts of its infrastructure and networks (the efficiency and sustainability of our cities and transport networks, our energy system, and our agricultural practices), this is an important time for Latrobe. And whether it’s a temporary period of relative prosperity or signs of some positive change, right now Latrobe appears to be in a good economic position to take advantage of what is on offer.
And let’s start with faster, more reliable trains, please.
