4.1 Enhance regional market access and economic growth
Regional and rural Victoria play a vital role in the Victorian economy. Collectively the regions contribute almost 20% of the state’s overall economy and produce a third of Victoria’s exports.1 Victoria is Australia’s largest food and fibre exporting state, accounting for over 28% of the nation’s food and fibre exports.2 The sector supports around 200,000 jobs, with 76% of agricultural employment concentrated in regional areas.3 But regional economies have been hit hard by a succession of extreme events, including drought, bushfires and the COVID-19 pandemic. More than ever, a focus on sustainable long-term economic growth and development is needed to benefit businesses and communities. Each region has unique attributes that can grow economies, create jobs and transform industries. Infrastructure investments that build on existing industry strengths or advantages are most likely to effectively deliver economic growth.4
Agriculture, related manufacturing industries and tourism are economic strengths, capable of driving wider regional growth and development.
New opportunities are emerging in sectors such as mining and renewable energy.5 Industry specialisations differ from region to region. For example, in agriculture, the Mallee specialises in broadacre cropping and irrigated agriculture,6 Gippsland7 and Great South Coast8 have strong dairy industries, and the Goulburn region is a major producer of processed and fresh fruit.9
But our investigations found the associated infrastructure opportunities and potential constraints are often shared across Victoria’s regions. Adaptable infrastructure interventions can help link regional and rural businesses to domestic and export markets and unlock wider economic growth.
Better freight networks can lift regional Victoria’s productivity
Regional economies can only operate and grow if they can efficiently move goods between primary producers, manufacturers, wholesalers, importers and customers.10 Transporting agricultural produce, mineral products and manufactured goods from the regions to markets requires safe, reliable and efficient freight connections. Transport accounts for a significant share of overall production costs. For example, road and rail costs average 10% of overall farm production values,11 affecting the profitability and competitiveness of Victorian agriculture.12 Victoria needs efficient and fit for purpose road and rail freight networks to help regional businesses minimise transport costs and remain competitive.13
Freight volumes in regional Victoria are forecast to grow an average 1.5% each year until 2051.14 As the freight task grows, demands on the road network are increasing. In the last two decades, people and freight travelling on Victoria’s major country roads have increased by 20% and this growth is expected to continue.15
An increasing proportion of the regional road network is in very poor condition, presenting a growing risk to public safety and increasing the costs of travel through increased fuel use, vehicle maintenance costs and travel times.16 Regional or rural roads already account for three out of every five fatalities on Victoria’s roads, despite accounting for less than a quarter of the state’s population.17
Accommodating growing road freight movements while ensuring safety for all road users requires well-maintained roads, designed and managed to keep road freight productive and efficient.
Rail freight moves many agricultural and mining exports from regional areas to ports.18 For these industries, rail freight can be more cost-effective than road freight when transporting bulk commodities over long distances.19 Carrying more freight by rail can reduce the number of vehicles on regional roads. Rail freight also helps reduce road damage caused by heavy vehicles and congestion, traffic accidents, greenhouse gas emissions and noise impacts.20 However, Victoria’s share of freight on rail has not changed significantly for more than two decades and has gone backwards in some markets.21 The regional rail freight network’s efficiency is hampered by many factors, including different rail gauges, axle load restrictions, permanent and temporary speed restrictions and maintenance backlogs.22 Its relatively poor condition and lack of investment23 further impedes rail freight uptake.
Reviews have criticised Victoria’s road maintenance strategy, prioritisation processes and failure to optimise the maintenance program.24 Similarly, there is currently no transparent, sustainable maintenance plan for the state’s rail freight network. Despite significant one-off funding allocations, particularly for regional roads, neither network has clear long-term funding for maintenance and upgrades, making strategic and efficient management difficult.25
Infrastructure limitations can constrain economic growth
Businesses need solid access to basic infrastructure to operate,26 such as power, water, waste, transport and, increasingly, information and communications technology. Economic growth can be constrained by unreliable or expensive infrastructure access.
For example, agriculture and manufacturing industries in the Ovens Murray, Loddon Campaspe, Central Highlands, Great South Coast and Barwon regions report outdated power supply infrastructure preventing business expansion, a constraint shared with Wimmera Southern Mallee’s growing mineral sands industry.
Manufacturing businesses in Barwon, Central Highlands, Loddon Campaspe, and Ovens Murray report needing better water and waste disposal infrastructure to expand. In every region, tourism businesses flag problems with transport infrastructure or amenities at tourist sites.27 Victoria’s regions can face extra barriers to secure basic infrastructure upgrades compared with Melbourne. For example, upgrade costs may be prohibitive in places with fewer businesses to share them.28 This can affect regional and rural areas’ ability to attract new business investments or facilitate business expansion.29
Regional tourism has potential for future growth
Before 2020, global tourism had seen continuous growth during the past six decades, and was one of the largest and fastest growing economic sectors.30 Tourism was worth $9.4 billion to regional Victoria’s economy and generated around 110,000 jobs in 2018–19.31 For every $1 spent by visitors to regional areas, an extra 92 cents was created through supporting sectors, such as local small businesses.32 Tourism helps create jobs and diversifies regional economies from their traditional agricultural base. It can also enhance environmental conservation, preserve cultural history and heritage, and stimulate investment in transport and other infrastructure.33
Regional Victoria offers a diversity of natural assets such as alpine forests, deserts, coastal areas and rainforests. It contains important Aboriginal cultural and heritage assets.34 Across Australia, nature-based tourism has been an area of particularly strong growth, emerging as an important motivator for travel.35 In 2019, nature-based experiences drew 22% of visitors to regional Victoria.36 These natural and cultural attractions combine with a wealth of food and wine experiences, cultural festivals, local museums and galleries, and make tourism a strong candidate for regional growth.37 However, visitor expenditure in the regions trailed Melbourne in 2019. International visitors accounted for 40% of tourism spending in Melbourne, compared with just 5% in the regions. International tourists spent the most per person, but made up only 1% of visitors to regional areas, compared with 8% in Melbourne.38 Similarly, regional Victoria received fewer interstate visitors compared with other states and territories.39 Day trippers comprised over two-thirds of visitors to regional Victoria, but this group did not spend very much, accounting for just one-third of visitor spending.40
More than 75% of international visitors to the Great Ocean Road only visit for a day.41
In 2020, tourism spending in regional Victoria outstripped Melbourne for the first time. However, this was in the context of extended lockdowns in Melbourne during the COVID-19 pandemic. Despite strong performance relative to Melbourne, visitor expenditure in regional Victoria was 44% lower in 2020 compared with 2019,42 and the impact of the pandemic has been devastating for many segments of the tourism industry.43
In the long term, regional tourism’s challenge is to attract more overnight visitors from outside Victoria. Converting even a small proportion into overnight stays could have a significant impact.44 To achieve this in a fiercely competitive industry, Victoria’s regions need to develop the tourist experiences visitors increasingly expect.45 Inadequate tourist infrastructure can limit growth. In the short term, Victorian regional tourism’s heavy reliance on local tourists may be a strength, being less affected by travel restrictions, and offering options to all Australians unable to travel overseas. Prior to the pandemic, Victorians accounted for around 80% of tourism spending in the regions. More than half of Victorians had not travelled for an overnight stay in regional areas in the previous year, but half of these people would consider doing so.46
Early signs in 2021 indicate that regional tourism is starting to recover, as tourism has been booked solid during holiday peaks.47
This suggests local tourism can help the wider economic recovery of regions and there is capacity for the sector to grow, acknowledged in the Victorian Government’s $465 million tourism recovery package.48
Recommendations to enhance market access and regional economic growth
Infrastructure Victoria is making the following recommendations to enhance market access and unlock economic growth opportunities in regional areas. These interact with other recommendations to improve freight efficiency (see section 3.2) and to better connect regional Victoria (see section 4.2). Other regional growth opportunities include renewable energy generation (see recommendation 4) and recycling and resource recovery (see section 1.5).