Ivan Colhoun, Chief Economist, Markets for National Australia Bank is set to provide a keynote address at the 5th Local Government Financial Sustainability Summit in Cairns March 29-30.
We sat down with him to discuss local government finance in the FEB-MARCH edition of Council Leader magazine.
To what extent do global economic trends and events filter down to a local, community level? Where are we seeing evidence of this in local Queensland communities?
Global economic trends have always had a very big influence on the Australian economy and inevitably filter down to local communities. The close but broad relationship between the cycles in the Australian and US economies across many decades is testament to this, as is the importance in recent years for example of the rise of China and its influence on commodity prices and the resources and farm sectors in Australia and many parts of Queensland.
The increased inter-connectedness of economies via technology and financial market linkages means that global trends and events are transmitted very broadly. That’s not to say that specific local issues won’t be important influences that need to be taken account of also.
What are the key emerging and future industries that you think will have a transformative impact on Queensland communities in a post-mining boom economy?
It is always important to consider the comparative advantages that your economy or local region may have. Broadly for Queensland these of course include its vast natural and mineral resources, which benefit the agriculture, mining, tourism and housing industries.
Emerging trends would include the ageing population, the analysis and use of big data, relatively cheaper housing affordability as well as continuing growth in China. The continuing strong growth of Australia’s population is also an important feature that benefits many industries.
How does a sector like local government – with 3% of the national tax pie – continue to keep up with evolving community expectations around infrastructure and services?
This is indeed a challenge for all levels of government in Australia, given strong population growth is pressuring existing services and infrastructure.
Detailed medium-term plans and budgets and prioritisation of projects are important common-sense requirements. Frequent meetings with those controlling the State and Federal budgets for infrastructure projects will also be important. That said, studying the innovations of local governments in other regions and countries should also be encouraged.
Potential options involve sharing technology services, recycling, repurposing of innovating with existing assets (eg developing car parks for mixed use).
What lessons can local councils learn from the private sector about financial sustainability?
I think the recent mining boom provides a very good lesson for private organisations, governments and local councils alike on the topic of financial sustainability. The lesson was that budgets should have had more conservative expenditure settings, even though tax receipts ran strongly for an extended period.
It was assumed that the exceptional level of receipts would extend more or less indefinitely. It’s always wise to be conservative on your assumptions and manage so that regular but unanticipated downside surprises don’t require very significant adjustments to the budget.
What news sources should mayors, councillors and council ceos be keeping their eye on to keep abreast of economic trends impacting Australia and Queensland – any insider tips?
Well of course, I would recommend subscribing to National Australia Bank’s research publications (email ivan.colhoun@nab.com.au if you would like to be added).
I have always liked to look at trends in the US economy, the NAB business survey, job advertising (SEEK has the best data in this area) and the trend for the unemployment rate.
These indicators rarely provide a false signal for the overall trend for the world, Australian, state or local economies. Population trends – and predictions – are also very important for local, regional and state governments to be aware of.
Register here for the 2017 Local Government Financial Sustainability Summit in Cairns March 29-30 to hear Ivan speak.