Gold Coast: Modelled Future PIA Queensland Awards for Planning Excellence 2014 Nomination under Cutting Edge Research category

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1 Gold Coast: Modelled Future PIA Queensland Awards for Planning Excellence 2014 Nomination under Cutting Edge Research category Jointly nominated by SGS Economics and Planning and City of Gold Coast August 2014

2 PROJECT SUMMARY Context and project purpose The City of Gold Coast (Gold Coast) like all local government authorities around Australia, strives to be informed of the economic issues and challenges facing the city. SGS Economics and Planning (SGS) has been working with the Gold Coast to develop a range of innovative models to provide a robust evidence base and capability to evaluate strategic planning work. The work seeks to understand the economics of, and emerging trends within activity centres such as Southport CBD, Gold Coast Health and Knowledge Precinct (Griffith), Robina and Surfers Paradise. All these centres have varying structures, challenges and roles within the Gold Coast s activity centre hierarchy. A key driver of the project was to better understand activity and emerging trends within centres and the capability to evaluate initiatives and developments. SGS in partnership with Gold Coast has developed up an extremely comprehensive and detailed suite of models focused on the Gold Coast economy and its centres. The models track activity annually from 2003 to 2014 and include: - City wide employment, economic output, value added and exports by a detailed industry level (ANZSIC digit industry classifications) - Small area employment, economic output and value added by broad industry level (ANZSIC digit industry classifications). Along with this dataset an economic impact assessment tool was created to evaluate the impact of potential new initiatives on the Gold Coast economy. This tool extends on the traditional Input- Output modelling approach to provide a more focused and realistic understanding of the impact of new initiatives on the Gold Coast economy. Project originality and innovation While modelling employment and economic activity or measuring the economic impact of planned initiatives broadly is not fundamentally new, robustly completing this to inform centres planning and economic development initiatives is extremely innovative. Specifically, the following two key outputs: - Small Area Model (SAM) A range of official datasets from the Australian Bureau of Statistics (ABS) and local agencies were utilised to create a historical time series of employment, economic output and gross value added for several key centres. This type of information is extremely difficult for local governments to source and provides an improved understanding of the contribution of various centres to the economy. It clearly shows the links between the structural change in the broader Gold Coast economy, targeted planning/economic development initiatives and the performance of various centres. This is particularly relevant in the Gold Coast context where there are several similar sized centres which all play quite different roles in the economy. The Gold Coast: Modelled Future 2

3 - Input-Output Econometric (IOE) Model Traditional Input Output (IO) models have been widely used by local governments to estimate the flow-on economic benefits of various investments to the local economy. However, they have been heavily criticised for not adequately accounting for changes in the structure of the economy and constraints in labour supply. SGS developed a dynamic model which addresses these issues to provide a more realistic assessment of investments. This ensures Council has a more realistic understanding of how new developments and investments may impact the economy. The model combines a range of economic variables such as employment, gross output and value add for 506 separate industry types. This enables the development and tracking of performance of unique locally relevant industries and the capability to evaluate developments based on their end function and role in the local economy. Potential to inform the wider public debate and furthering the cause of good planning The models have been developed for the Gold Coast specifically, but the approaches and lessons learned could be applied to any local government area to better support their strategic planning and economic development programs. The development of a small area model allows monitoring and tracking of how the function of the centre is shifting in the local economy and against the role of the city s centres hierarchy, thus affecting land use. For example, tracking and monitoring industry structure by small area (or localised centres) illustrates the shifts occurring. Shifts that have emerged across Gold Coast centres include bulky goods retail taking up light industry land, industrial precincts accommodating more community based uses such as churches, gyms and dance studios and an emerging cultural and creative sector taking up older industrial space. In 2013, the City of Gold Coast led a major policy shift by declaring Southport as the Gold Coast s CBD. This shift to a centralised focus of economic centres from the traditional polycentric model is innovative for coastal cities that are influenced by the natural environment. The Southport CBD has a boundary that does not follow conventional statistical geographies and therefore required the development of the economic models to measure and monitor change. The SAM provided critical insight to the industrial and economic make-up of the CBD to key stakeholders such as CBD Office team, Southport business community and the City of Gold Coast. In 2014, the SAM provided a crucial insight on the economic shift that occurred as a result of the relocation of the Gold Coast hospital from the CBD to the Griffith University precinct (Griffith precinct). The SAM was able to model the employment and economic impact on the CBD and the uptake benefit to the Griffith precinct through the development of a 750 bed Gold Coast University Hospital. This economic shift highlighted the need to rethink how the CBD and Griffith precinct functioned. The requirement was to have both centres function in a complementary nature without competition for economic resources and business attraction. The outcome has been the Griffith precinct (which includes Griffith University, Gold Coast University Hospital, under construction private hospital and Commonwealth Games athletes Village with future legacy as Health and The Gold Coast: Modelled Future 3

4 Knowledge Precinct) to act as an anchor to the CBD connected by the new Gold Coast light rail. The CBD will shift its focus to professional services and headquartered private, and public sector offices. Without the economic models, quantifying the economic impacts and providing insight into the structural change of the CBD would not have been possible. At best a qualitative based opinion would have been the best outcome to explain the economic impacts on the CBD and inform policy direction. This process would miss the similar function and role that the CBD and Gold Coast Health and Knowledge Precinct would perform in the Gold Coast economy. Project Method The project involved three broad phases: - Analysis of broad economic and industry trends - Development of a Small Area Model (SAM) - Development of an Input-Output Econometric (IOE) Model Broad economic trends There have been some changes demonstrated in economic trends of Gold Coast and the broader economy over the last few decades. During the early 1980s, the economic structure of Australia was fairly homogeneous. Manufacturing was the primary income generator across most parts of the country. Of course, certain areas had specialisations in particular industries, for example, tourism, agriculture and mining in regional areas and advanced business services in the central core of cities. An economic evolution over the past 30 years has resulted in a far more complex picture. The rise of knowledge-intensive services, the resources boom, and an Australian dollar that reached historical highs which negatively impacted on the competiveness of trade-exposed industries such as tourism and manufacturing, have all together created a patchwork economy. These macroeconomic issues have specific impacts for the Gold Coast economy. A key historical driver for the Gold Coast economy has been interstate migration. Residents of Victoria and New South Wales have been attracted by a unique lifestyle, affordable housing and a range of economic opportunities. This has helped generate a virtuous cycle of population and economic growth, driven by domestic consumption of residents as well as tourism. These drivers have resulted in an economic structure dominated by population-driven and tourism-related sectors such as construction, retail, accommodation and recreation, along with a traditional manufacturing base. Small Area Model The City of Gold Coast and SGS developed a detailed baseline economic dataset of the Gold Coast economy in terms of employment, value added, output, exports and imports. The dataset is framed at both the 1 digit ANZSIC2006 industry level (broadly defined) and 4 digit ANZSIC2006 industry level (narrowly defined) annually for the period 2003 to The baseline economic dataset also includes net exports, domestic exports, international exports, domestic imports and The Gold Coast: Modelled Future 4

5 international imports at both the 1 digit and 4 digit levels. This tracked employment, economic output and value added for each centre over a 10 year time period to understand land use and industry trends. It can be extremely difficult to accurately create detailed economic data for individual centres without extensive land use surveying. For this reason SGS created an innovative way to progressively disaggregate publicly available datasets to increasingly smaller levels of detail. This ensured estimates of individual centres or industries always added up to a robust Gold Coast wide economy. In summary the process involved: 1. Disaggregating official Queensland State Accounts to a South East Queensland and then Gold Coast levels. 2. Disaggregating employment to progressively more detailed geographies (i.e. individual centres) and industry classifications, accounting for any under counts. 3. Using income differentials and other supporting datasets to capture variations in economic output and value add of individual industries. 4. Comparing and refining results with a range of locally specific information sources in selected sectors. The purpose of this small area model was to understand how the function and form of individual centres can influence the regional economy, and which industries drive the most output and value. The results showed that the Gold Coast has been undergoing significant economic restructuring which is heavily influencing the performance of its various centres. Significant economic sectors of the past are unlikely to provide the same level of economic stimulus in the future. The Gold Coast economy is becoming increasingly diversified with new sectors emerging and increased specialisation in existing sectors. Input-Output Econometric (IOE) Model The Economic Impact Assessment Model addresses some of the key shortcomings of the conventional IO assessment approach while still remaining simple, transparent and providing the ability to input detailed industry breakdowns specific to the Gold Coast economy. The dynamic tool evaluates the flow-on benefits from a particular development or economic development initiative. This can include; development proposals for a new office building or shopping centre, attraction of a new company headquarters, or expansion of a local industry in terms of employment or revenue. The flow-on impact is measured by looking at how firms do business and how reliant they may be on the local economy. If a new firm hires more residents and sources its materials and services from within the region, then the firm will have a larger local flow-on impact. The Gold Coast: Modelled Future 5

6 A critical and highly innovative aspect of the model is the ability to present an unconstrained and constrained estimate of this flow-on impact: - Unconstrained assumes ALL flow-on impacts will be brand new jobs/firms to the economy. - Constrained assumes that only some of the flow-on impact will be new and the rest will come from a restructuring and more productive use of the existing economy. This better reflects what happens in reality and captures labour/skills shortages. These impacts can be present in three different ways: - Employment, simply the number of additional full time equivalent (FTE) jobs created. - Economic output, the additional turnover of a company(s) created. - Value added, a measure of net output and is akin to the additional profit and wages created. Example of Economic Impact Assessment: A pharmaceutical company is looking to establish a business in the Gold Coast and is planning on hiring 100 (FTE) staff. Beyond the direct benefit of 100 new jobs in the Gold Coast economy there will be a range of flow-on impacts experienced by the broader Gold Coast economy. - Production induced: The pharmaceutical company will have a range of sub-contractors to support its operations. These may include IT and telecommunication support, financial services, catering, etc. Many of these services will be sourced from local firms which in some cases will result in further employment growth in the Gold Coast economy. - Consumption induced: The 100 new workers employed at this new pharmaceutical company will now be getting a wage. A portion of this wage will be spent locally on various consumer based goods and services, which will in turn further support additional growth in the local economy. Therefore, the full economic impact of this new pharmaceutical company on the Gold Coast economy is estimated at a total of 198 jobs (100 directly and 98 in-directly). The Gold Coast: Modelled Future 6