Australia's north must diversify its industrial base

Many people in Northern Australia do not see the need to develop secondary and tertiary industries when the returns from their primary industries are already adequate to support a comfortable lifestyle. However, Northern Australia needs to move away from this focus on primary industries and toward the value-adding secondary and tertiary industries. It is these that will provide opportunities for greater wealth creation.

Arguments supporting the development of Northern Australia have been around for many years. Reasons include the need to use the land fully before exploitation by overseas companies and the need to develop the resource extraction industry to meet both domestic and international demand for raw and processed material. Those arguing against development see the associated infrastructure as vulnerable to attack in times of war.

There is widespread recognition that Northern Australia is rich in natural resources. An estimated 9 million hectares of land in Northern Australia is being used for agriculture. Forests occupy a further 800,000ha. Other minerals, fisheries and water resources are spread across Northern Australia.

To date, the economy of Northern Australia has been dependant on the production and export of these raw materials, either in their or part-processed state. Three industries support most of Northern Australia.

1. Pastoral: convenient because it stretches over a large area of semi-arid to arid land and involves the relatively simple export of live cattle and carcasses.
2. Mineral: with the raw product sold to countries or taken out of the region to be further processed.
3. Agriculture: crops such as tobacco are grown and dried at the farm then transported out of the region for processing elsewhere.

Some people argue that our dependence on primary industry is simply due to the local environment and the tyranny of distance. However development would improve the quality of life for Northern Australians, and the money required to create services and infrastructure would in turn generate more wealth.

Northern Australia's emphasis on primary production means it misses out on the benefits of value-adding. With abundant raw materials the North would be well situated to provide a constant and reliable supply of goods for value-adding, thus ironing out some of the price fluctuations.

Price fluctuations for raw commodities are also common and if a region relies on one industry and the price of the commodity declines, the economy of the whole region is adversely affected. People and business relying on a steady flow of income can often not tolerate such fluctuations; they struggle through, close down, or never open in the first place. On the other hand, if a region has multiple industries it is better positioned to absorb the impact of fluctuating commodity prices.

Most economic theorists and planners argue that, in order to develop, a country or region needs to move away from an emphasis on primary production such as agriculture or mining. If northern Australia were to invest in more infrastructure to diversify industrially it would attract other industry and more services.

The development of infrastructure in northern Australia is essential for its future. Investment in more efficient modes of transport and communication and environmental management infrastructure would not only increase the efficiency of existing industry, but provide the incentive for new and emerging enterprises.

For example, more money were invested in telecommunications in rural areas would benefit not only the people in those places but also the national economy. Effective communication between individuals and companies is essential for trade and industries to flourish in an area.

Such infrastructure would also enhance existing and new secondary and tertiary industries. For example, the money generated by a tertiary industry such as a university specializing in health or commerce would benefit secondary industries like mineral processing and food processing and its graduates could use their knowledge to provide a service to primary and secondary industry. It would also enable partnerships between these different levels of industry to be formed. Such a top-down focus would allow improved use of infrastructure to generate further local income.

Business services to both public and private sectors would best complement existing and likely future primary and secondary industries in Northern Australia. Of particular value would be those dealing with marketing, economics, community and welfare areas and administrative activities. With these improved services possibilities for economic growth would increase, including a boost to tourism which currently brings in $2 billion to Australia annually. This economic boost would revolve around increased demand for the districts' food, transportation and accommodation services.

A combination of improved infrastructure and diversified industry would allow the people of Northern Australia to absorb better the fluctuations in commodity prices. Income would become more reliable, enabling service industries to establish with confidence. More money would consistently enter the community, and it would stay in the community for longer.

Northern Australia would become a more attractive place to live. Australia would benefit.