Economic impact of closing the Indigenous gap in the Goulburn Valley

Transcription

1 Economic impact of closing the Indigenous gap in the Goulburn Valley May 2010 Report by Access Economics Pty Limited for Business Council of Australia

2 Contents Executive Summary...i 1 Background Objective Geographical scope Approach to the analysis Access Economics approach for Reconciliation Australia Approach to the Goulburn Valley analysis Extending AE-RGEM Indigenous disadvantage in the Goulburn Valley Indigenous regional profile Populations of interest Population demographics Labour force and wages data Spoken English and education Economic impacts of closing the Indigenous gap Economic impacts of closing the Indigenous gap in the Goulburn Valley Conclusions References Appendix A: AE-RGEM Charts Chart 3.1 : Regional age profiles (2006) Chart 3.2 : Labour force statistics (2006) Chart 3.3 : Highest level of schooling completed (2006) Chart 3.4 : Highest level of education achieved (2006) Chart 4.1 : Indigenous life expectancy, base case and scenario, by gender Chart 4.2 : Goulburn Valley Indigenous employment, base case and scenario, by industry Tables Table 2.1 : Reconciliation Australia summary base case assumptions... 4 Table 2.2 : Summary of Reconciliation Australia modelling (the'what if' scenario)... 4 Table 2.3 : Employment, persons, by industry and region... 7 Table 3.1 : Indigenous population estimates (2006)... 9 Table 3.2 : Labour force data (2006) Table 3.3 : Level of spoken English (2006)... 14

3 Table 4.1 : Indigenous population in Goulburn Valley, as a share of the national Indigenous population Table 4.2 : Summary of direct impacts of closing the gap in the Goulburn Valley Table 4.3 : Proportional impacts of closing the gap, Table 4.4 : Impacts by sector, 2030, percent change, Goulburn Valley Figures Figure 1.1 : Geographical scope of analysis... 2 Figure 3.1 : Indigenous population distribution throughout the Goulburn Valley Figure A.1 : Key components of AE-GEM... 27

4 Executive Summary Introduction There are many aspects to Indigenous disadvantage including shorter life span, reduced health outcomes, lower rates of labour force participation, employment, educational attainment and lower wages compared to other Australians. Collectively, these aspects, and others, define the Indigenous gap. The aim of this project is to quantify the additional economic value that would accrue if the gap was closed in the Goulburn Valley. Closing the gap will lift employment rates and productivity for the Indigenous population, with broader flow on benefits to the rest of the economy. Conceptually, this question represents a hypothetical what-if style scenario, reflecting the potential economic upside to improving the outcomes for the Indigenous population, without considering the costs of achieving it. Most reporting of Indigenous disadvantage focuses on states and territories or Australia as a whole. Improving knowledge about gaps at a regional level and the impacts of their closing is highly useful, particularly for planning of services and infrastructure needs. The specific issue here is the magnitude of the potential benefits over a 20 year period. Our approach is based upon the 2008 Access Economics work for Reconciliation Australia, entitled An overview of the economic impact of Indigenous disadvantage. Access Economics has undertaken a similar study here specific to the Goulburn Valley, drawing on this earlier work but ultimately generating results specific for the Goulburn Valley. Approach The analytical part of this project has involved three major components, as follows: 1. Define the gap in the Goulburn Valley, through profiling of the Indigenous population of the region, the non-indigenous population of the region, and the entire Australian Indigenous population. A regional economic profile was also developed to assist in the modification of a computable general equilibrium (CGE) model to include the Goulburn Valley (Step 3 below) as a discrete economy, apart from the rest of Victoria. 2. Direct impacts of closing the gap by 2026 on the Indigenous population of the region, in particular impacts on population, labour supply, productivity and wages. 3. Flow on and total economic impacts of closing the gap. This involved the use of a CGE model with the Goulburn Valley as a discrete economic region to calculate the overall economic impacts of closing the gap, including both the direct effects and the flow on impacts of the economic adjustments that occur if the gap is closed. Even though we model the gap as having closed by 2026, the CGE model is run out to 2030 to allow for all economic adjustments and flow on impacts to have occurred. A key aspect of the approach has been the modification of our CGE model to incorporate the Goulburn Valley as a separate trading entity from the rest of Victoria. This is the most rigorous approach to regional modelling, and ensures that the economic relationships between the Goulburn Valley and other regions of Victoria, other states and nations are fully captured within the model. It also dynamically (i.e. within the model) reflects the characteristics of the i

5 Goulburn Valley economy and how it interacts with the broader state, national and international economies. Results The 2,000 Indigenous people living within the Goulburn Valley represent almost 3.5% of the total Goulburn Valley population, higher than the equivalent national figure of 2.5 %. Not only is the proportional size of the Indigenous population in the Goulburn Valley larger, but they also have different characteristics in some important ways. Compared to the national Indigenous population, the Indigenous population of the Goulburn Valley have: a slightly lower median age, with proportionally many more 0 to 14 year olds; a lower labour force participation rate, a significantly higher unemployment rate and, consequently, a significantly lower proportion of the Indigenous population employed; slightly higher income levels; proportionally more of the employed population in Health Care and social assistance and manufacturing, and proportionally less employment in public administration and safety; higher literacy rates; and lower educational attainment rates, both in terms of level of schooling completed and post-schooling qualifications. These results are in comparison to the national Indigenous population, and highlight the difference in outcomes for the Indigenous population of the Goulburn Valley region. However, the comparison of interest in defining the gap was the difference between the Indigenous versus the non-indigenous populations of the Goulburn Valley. The gap defined this way isolates disadvantage linked to Indigenous status as the sole variable of interest. Had the gap been defined as the difference between the Indigenous population of the Goulburn Valley versus the entire Australian population, then some of the results would also reflect regional disadvantage, not just disadvantage relating to Indigenous status. It should also be noted that the non-indigenous population of the Goulburn Valley does not perform as well as the overall non-indigenous population across many of the aspects that define the gap. This has the effect of reducing (in a definitional sense) the size of the gap in the Goulburn Valley, because the standard for comparison (in terms of the non-indigenous Goulburn Valley population) is not as high. In summary, aspects of the gap that relate to labour force participation, employment and education are typically larger within the Goulburn Valley than they are at the national level, while in relation to wages and literacy they are smaller. Overall and in proportional terms (per Indigenous person), the Indigenous gap is slightly smaller in the Goulburn Valley than it is at the national level, but this difference is very slight. Despite this, the modelling suggests substantial economic benefits if the Indigenous gap in the Goulburn Valley is closed. The results presented here consider the economic impacts of closing the gap for less than half a per cent of the total Indigenous population, and only 0.01% of the population, yet the impact of changes to such a small group are noticeable even in the national impact figures. ii

6 In aggregate, the modelling suggests that improvements in Goulburn Valley Indigenous life expectancy, labour force participation rates and labour productivity will result in significant improvements to gross domestic product (GDP) and output per head. Key results include: The proportional impacts are greatest in the economy where the direct impacts are experienced. The proportional impacts become more diluted across larger economies, although there are smaller spill over benefits to regions outside the Goulburn Valley. The gross regional product (GRP) for the Goulburn Valley is forecast to be $61.0 million higher (2008 prices) by 2030 if the gap is closed, with a small gain of $2.1 million also flowing to the rest of Victoria and an even smaller gain of $0.4 million to the rest of Australia. Across all of Australia, real GDP will be around % higher than otherwise in In net present value (NPV) terms, the GRP impacts from 2010 to 2030 on the Goulburn Valley are $216 million, or approximately $2,260 per person (based on current population). Employment in the Goulburn Valley will be higher by 1.27% (almost 300 new jobs based on current labour force numbers, or over 300 based on 2030 labour force numbers). This includes both the extra employment for the Indigenous population, and employment created elsewhere in the Goulburn Valley economy as a result of the stimulus from the increased Indigenous participation. Conclusions The analysis in this report shows there are economy wide benefits to be achieved from improving the quality of life of Indigenous Australians in the Goulburn Valley. In a what if scenario based on raising the life expectancy of Indigenous Australians commensurate with that of all Australians, and on increasing the proportion of the Indigenous population in the workforce who are also able to take on higher skilled and better paid jobs, real GRP could be 1.3% higher than otherwise, or approximately $60 million, or an NPV of the annual impacts on GDP of over $215 million. Impacts outside of the Goulburn Valley are less dramatic, but still notable given that the modelled scenario has no direct impacts outside of the Goulburn Valley. By 2030, gross state product (GSP) in the remainder of Victoria (excluding the impact on the Goulburn Valley GRP) will be $2.1 million higher, with a smaller $400,000 increase in the rest of Australia. Further, since the increase in GRP is larger than the forecast increase in the total population as a result of the closing of the gap, living standards for all residents of the Goulburn Valley will, on average, increase. Therefore, there is a clear economic justification for government action to explore the costs of policies to reduce Indigenous disadvantage. The economic benefits identified here depend upon the health and educational attainment of Indigenous Australians improving. In fact the modelling outcomes are predicated on the many facets of Indigenous disadvantage that contribute to their poorer health and labour market outcomes being addressed. Much of this $60 million impact is realised directly by the Indigenous population themselves. However, the benefits of closing the Indigenous gap of the Goulburn Valley would be spread throughout many groups, including non-indigenous iii

7 populations of the Goulburn Valley, and, to a smaller extent, the populations of the rest of Victoria and Australia. iv

8 1 Background There are many characteristics defining the gap between Indigenous and non-indigenous Australians. Indigenous Australians have a shorter life span, poorer health outcomes, lower rates of labour force participation, employment, educational attainment and lower wages compared to other Australians. Collectively, these aspects, and others, define the Indigenous gap. The aim of the project is to quantify the additional economic value that would accrue if the gap was closed. Closing the gap will lift employment rates and productivity for the Indigenous population, with broader flow on benefits to the rest of the economy. 1.1 Objective Access Economics was asked by the Business Council of Australia to explore the likely economic benefits of closing the gap in Indigenous disadvantage in the Goulburn Valley - to bring Indigenous outcomes in areas such as health, labour force participation, educational attainment and literacy to the same level as non-indigenous Australians. The aim of this report is to: Explain and justify the link between closing the gap and broader economic impacts, firstly in terms of labour force participation and productivity and, secondly and more broadly, in terms of gross domestic product (GDP), employment and real wages. Identify the gap in the Goulburn Valley. This involves profiling the Indigenous population within the Goulburn Valley against the non-indigenous population to quantify the differences in outcomes. Those differences are defined as the Indigenous gap. The profiling also extends to the entire Australian Indigenous population, to determine whether, in proportional terms, the gap in the Goulburn Valley is smaller or larger than it is for the nation as a whole. Quantify the impacts of closing the gap within the Goulburn Valley over a 20 year period, including both the direct impacts on the Indigenous population through their own improved outcomes, and the overall flow on effect of this on the rest of the economy. The study explores impacts not just on the Goulburn Valley, but also on the rest of Victoria, and the nation as a whole. Our approach estimates the overall economic impacts of closing the gap. It does not account for any costs in doing so. Therefore, the work should be seen as identifying, and explaining, the potential benefits and economic upside of a hypothetical what if scenario, rather than being a forecast per se. 1

9 1.2 Geographical scope The Goulburn Valley region is defined here as the City of Greater Shepparton Local Government Area (LGA), comprising three Statistical Local Areas as illustrated below. This region covers an area of 2,422 sq km and has a population of approximately 60,000. Figure 1.1: Geographical scope of analysis MURRAY RIVER LAKE MULWALA NATHALIA NUMURKAH RUTHERGLEN ECHUCA-MOAMA (ECHUCA PART) GOULBURN RIVER KYABRAM MERRIGUM (L) SHEPPARTON-MOOROOPNA MIDLAND HWY WARANGA BASIN TATURA GR. SHEPPARTON (C) - PT B WEST RUSHWORTH (L) MURCHISON (L) GR. SHEPPARTON (C) - PT B EAST GR. SHEPPARTON (C) - PT A GOULBURN VALLEY HWY DOOKIE (L) BENALLA LAKE MOKOAN WANGARATTA EUROA NAGAMBIE HUME FWY SLA boundary Urban area SEYMOUR City of Greater Shepparton LGA Study Area Note: Basemap data Commonwealth of Australia,

10 2 Approach to the analysis The approach to the analysis, in broad terms, was in three distinct parts: 4. Define the gap in the Goulburn Valley, through profiling of the Indigenous population of the region, the non-indigenous population of the region, and the entire Australian Indigenous population. A regional economic profile was also developed to assist in the modification of a computable general equilibrium (CGE) model to include the Goulburn Valley (Step 3 below) as a discrete economy, apart from the rest of Victoria. 5. On the basis of the gap as defined in Step 1, model what a closing of that gap over 20 years means to the Indigenous population of the region, in particular the direct effects on the population, the labour force, their productivity and wages. 6. On the basis of the direct impacts of closing the gap in Step 2, use a CGE model with the Goulburn Valley as a discrete economic region to calculate the overall economic impacts of closing the gap, including both the direct effects (Step 2) and the flow on impacts of the economic adjustments that occur if the gap is closed. Access Economics has undertaken work in the past to model the economic impacts of closing the gap, most recently for Reconciliation Australia (2008). A broadly similar approach has been adopted in this project, with the main difference being that this is a regionally specific study focussing on the impacts of closing the gap in one region explicitly, rather than the Reconciliation Australia study that explored the impacts of closing the gap across the whole country. 2.1 Access Economics approach for Reconciliation Australia The work for Reconciliation Australia considered the economic impact of closing the gap of Indigenous disadvantage across Australia. The report demonstrated the size of the change in both the economy and government budget outcomes if health and education outcomes for Indigenous Australians were to rise over time and meet the national average. This modelling involved many steps, but in summary converts the closing of the gap to an increased labour supply (reflecting longer life expectancy, higher labour force participation and employment rates) and higher wages (reflecting increased productivity) driven by higher educational attainment and improved health. Lost output due to the gap was estimated by comparing the base case with the what if scenario, as we do in this project. The flip side of the same equation is the benefits to the economy if the gap were to be closed. A summary of the base case used in the Reconciliation Australia report is provided in Table

11 Table 2.1: Reconciliation Australia summary base case assumptions Population Labour force participation Labour productivity AWE= average weekly earnings. Australian average Life expectancy increases based on historical average for last 100 years Constant at current rates Industry specific AWE increase based on historical average wage inflation rate for the last 10 years Indigenous people No change in mortality rates so life expectancy constant at current levels Constant at current rates Gap between Indigenous and Australian average income, adjusted for fulltime/part-time differences and, increasing at 0.4% per annum based on increase in historical disparity in income over the 5 years to 2001, applied to Australian average AWE. Under the what if scenario, the life span of Indigenous Australians was gradually increased over time, so that life expectancy of Indigenous Australians matched the Australian average by Indigenous labour force participation and labour productivity also gradually increased to match the Australian average by The scenario modelled for Reconciliation Australia, the so-called what if scenario, is summarised in Table 2.2. Table 2.2: Summary of Reconciliation Australia modelling (the 'what if' scenario) Benchmark Change Indicator Average Australian life expectancy in 2026 Average Australian labour force participation rates in 2026 Average Australian labour productivity in 2026 AWE= average weekly earnings. Indigenous life expectancy matches the benchmark by 2026 Indigenous labour force participation rates match the benchmark by 2026 Indigenous labour productivity matches the benchmark by 2026 Australian average annual population growth rate Australian wide average industry specific labour force participation rates Australian average industry specific AWE (increasing at rate of annual wage inflation) The modelling approach was based on a combination of forecasting constructs. The first was an Excel-based model used to predict the impact of changes in the prescribed parameters on a range of macroeconomic indicators (relating to the entire population) over a 20 year time horizon. The impact on each macroeconomic indicator was expressed as the difference between the base case (or status quo ) and the what if the gap were closed scenario forecast results. The Indigenous population what if forecast was based on a basic linear model (or constant annual growth rate) over the 20 year time horizon. The resultant annual changes in each of the three macroeconomic indicators were then used as inputs into AE-GEM (Access Economics - General Equilibrium Model), a modified version of which is used in this project. The model projects changes in macroeconomic aggregates, such 4

12 as GDP, employment, export volumes, investment and private consumption; and sectoral aggregates, such as output, exports, imports and employment. Using AE-GEM, we estimated the deviation from a business-as-usual scenario of the changes in the three macroeconomic indicators listed in Table 2.2. This approach yields estimates of the overall economic impacts of closing the gap. It does not address the question of how the gap would or could be closed, or accommodate the costs of doing so. Box 2.1: Explanation of why this report refers to both 2026 and 2030 Throughout this report references are made to the years 2026 and While this can cause confusion, it reflects the nature of the parameters used as inputs to the modelling, and our modelling aims. In the Reconciliation Australia report, the modelling objective was to project gross domestic product (GDP) 20 to 30 years into the future. This projection period was chosen based on an approximation of the length of a generation. However, projections of the Indigenous population were only available to 2026 (because of the underlying fertility, mortality and other input projections available). The estimates made in this paper therefore assume the gap in life expectancy between Indigenous people and all Australians is closed by the year Nevertheless, the modelling generates projections to In other words, the gap is closed by 2026, but the impacts are modelled out to 2030 to make a 20 year projection period. In order to maintain comparability between the Reconciliation Australia report findings and the current report, this reference to 2026 has been maintained here. 2.2 Approach to the Goulburn Valley analysis A similar approach to that of the Reconciliation Australia report was adopted here, with a narrower region of interest. The first-stage Excel model was updated to encompass only those Indigenous Australians living in the Goulburn Valley region, using data on the population, life expectancy and employment outcomes for Indigenous residents in the Goulburn Valley. Under the what if scenario, the standards of living of these Indigenous residents gradually rise to match that of the non-indigenous population in the Goulburn Valley. The non-indigenous Goulburn Valley outcomes are used as the counterfactual for several reasons. Although the Reconciliation Australia report considered closing the gap to national averages, this does not imply that differences in regional economic performance will be eliminated. The geographic and other distinguishing features of regions will remain, and consequently it is best to use the regional-specific data. The life expectancy, labour force and productivity estimates reflect changes in health and education outcomes. Neither health nor education is explicitly modelled, however a closing of the gap in these is implicit in the variables that have been used. Improvements in both health and education generate the improved life expectancy, workforce participation and productivity results. 5

13 The model is designed to automatically update estimates of the economic shocks resulting from closing the gap compared with no change. These shocks are used as inputs to the CGE model, enabling estimation of the impact of closing the gap in the Goulburn Valley. For this project Access Economics used a modified version of its in-house CGE model, Access Economics Regional General Equilibrium Model (AE-RGEM). AE-RGEM is a large scale, dynamic, multi-region, multi-commodity model of Australia, its states, and the world economy. The model allows policy analysis in a single, robust, integrated economic framework. This model projects changes in macroeconomic aggregates such as GDP, employment, export volumes, investment and private consumption. At the sectoral level, detailed results such as output, exports, imports and employment are also produced. Further details on AE-RGEM can be found in Appendix A. 2.3 Extending AE-RGEM A key feature of this modelling task has been the modification of AE-RGEM to separately identify the Goulburn Valley. Identifying the Goulburn Valley as a separate region within the model allows a more accurate estimation of the likely economic impacts of the policies on the Goulburn Valley economy, its industries and households. Furthermore, it allows for the spill over benefits to the rest of Victoria and all of Australia of closing the Indigenous gap in the Goulburn Valley to be identified separately from the benefits specifically to the Goulburn Valley. The standard version of AE-RGEM has each Australian state and territory represented as a separate region integrated into the global economy through trade links and resource flows to the rest of the world. The process of adding the Goulburn Valley to the model s database involved the disaggregation of the Victorian database into two new regions, Goulburn Valley and the Rest of Victoria. In AE-RGEM, the structure of each region s database is a modified Input-Output (IO) table. The process of disaggregating the Goulburn Valley is therefore similar to building an IO table of the new region. The process of disaggregating a region or building a new IO table in models like AE-RGEM is complex, requiring a considerable amount of data specific to a region of interest; much of which is not readily available. Hence a number of simplifying assumptions need to be made. The overriding assumption is that missing data is imputed using the appropriate share weighted data from the parent IO table, either the AE-RGEM Victoria database or the Australian Bureau of Statistics (ABS) Australian IO table. The key source of data for building the new region into the model was ABS Census data on employment by industry for the Goulburn Valley. The data used in the final database construction was a mix of employment data at the Australian and New Zealand Standard Industrial Classification (ANZSIC) 1 and 2 digit levels to line up with the underlying AE-RGEM database. Table 2.3 shows the employment data at the ANZIC digit 1 level (noting that finer level industry data was used in the process than what is summarised in the table). Other information referenced included ABS data on population, household income, weekly earnings and taxable income, for both the Goulburn Valley and Victoria. 6

14 Industry Table 2.3: Employment, persons, by industry and region Victoria Goulburn Valley Vic % of total GV % of total Agriculture, forestry and fishing 60,651 2, % 9.62% Mining 5, % 0.10% Manufacturing 276,079 3, % 13.34% Electricity, gas, water and waste services 19, % 2.51% Construction 159,032 1, % 6.12% Wholesale trade 109,546 1, % 4.15% Retail trade 254,390 3, % 13.82% Accommodation and food services 124,744 1, % 4.86% Transport, postal and warehousing 97,995 1, % 4.10% Information media and telecommunications 48, % 1.40% Financial and insurance services 90, % 2.43% Rental, hiring and real estate services 30, % 0.98% Professional, scientific and technical services 158, % 3.90% Administrative and support services 71, % 2.47% Public administration and safety 114,001 1, % 4.25% Education and training 170,782 1, % 7.67% Health care and social assistance 229,024 3, % 12.95% Arts and recreation services 34, % 0.70% Other services 79, % 3.90% Inadequately described 22, % 0.62% Industry of employment not stated 2, % 0.10% Source: ABS Census of Population and Housing, Working Population Profile The employment by industry data was then multiplied by data on average weekly earnings by industry, for Victoria to estimate the payments to labour by industry for the Goulburn Valley. The average across all Goulburn Valley industries was then cross referenced again to ABS data on average weekly earnings in Goulburn to ensure consistency and scaled as necessary. The estimated payments to labour were then multiplied by the relevant value added and output to value added shares from the Victorian AE-RGEM database and the Australian IO table to estimate total value added, gross regional product and the output of each industry in the Goulburn Valley. These above steps provided sufficient detail to build a simple IO structure for the Goulburn Valley that can be inserted into AE-RGEM. The other new region, Rest of Victoria was set as the remainder after the Goulburn Valley was subtracted from the original Victorian database. The new regional databases where then re-balanced to fit into the global structure of the database. 7

15 3 Indigenous disadvantage in the Goulburn Valley Indigenous regional profile 3.1 Populations of interest In defining the gap in the Goulburn Valley, and determining the economic impacts of it closing, five groups are the focus of this analysis, for comparative purposes. These are: the total Australian population; the total Australian Indigenous population; the Goulburn Valley population; the Goulburn Valley Indigenous population; and the Goulburn Valley non-indigenous population. This project focussed on these five populations across two geographical units. A more formal process of ranking all Indigenous Regions of Australia according to an index of relative Indigenous socioeconomic outcomes has been undertaken recently by the Centre for Aboriginal Economic Policy Research (Biddle, 2009). In this study nine outcomes across employment, education, income and housing from the 2001 and 2006 Censuses are used to create a single index for the Regions. Biddle (2009) ranked the Greater Shepparton Indigenous Region 266th out of 531 in 2006, the same ranking the region achieved in The equivalent index for the non-indigenous population in 2006 had the region ranked 318. In comparing data between these populations, there are two key comparisons of interest in this study: The difference between the Indigenous versus the non-indigenous populations of the Goulburn Valley. This is the difference that we are defining as the Indigenous gap in the Goulburn Valley. The gap defined this way isolates disadvantage linked to Indigenous status as the sole variable of interest. Had the gap been defined as the difference between the Indigenous population of the Goulburn Valley versus the entire Australian population, then some of the results would also reflect regional disadvantage, not just disadvantage relating to Indigenous status. The difference between the Indigenous population of the Goulburn Valley versus the national Indigenous population. The interest in this is whether and, if so how, the level of disadvantage amongst the Indigenous population in Goulburn Valley is greater than the disadvantage facing the total Indigenous population. The data identified in this chapter becomes input into the modelling part of the project, discussed in Chapter Population demographics From the Indigenous Population Profile of the 2006 Census of Population and Housing (the census), there were 455,030 people classified as Indigenous from a national population of 19.9 million, with 1,818 of them living in the Goulburn Valley (or 0.4% of the total Indigenous population). 8

16 Updated 2006 population estimates are available from the ABS Experimental Estimates of Aboriginal and Torres Strait islander Australians (ABS Cat no ). This suggests the Indigenous population living in the Goulburn Valley is slightly higher at 2,058, which once again represents 0.4% of the national Indigenous population (which was also revised upwards in the Experimental Estimates). The two sources of Indigenous population estimates are summarised in Table 3.1. Table 3.1: Indigenous population estimates (2006) Census Experimental Estimates National population 19,855,288 20,697,880 National Indigenous population 455, ,043 % of national population that is Indigenous 2.29% 2.50% Goulburn Valley Indigenous population 1,818 2,058 % of Goulburn Valley population that is Indigenous 3.18% 3.46% % of National Indigenous pop in Goulburn Valley 0.40 % 0.40 % Data source: ABS Experimental Estimates of Aboriginal and Torres Strait islander Australians, ABS Census of Population and Housing, Indigenous Population Profile. As a proportion of total population, there are more Indigenous people living in the Goulburn Valley (3.46 % of the population from the Experimental Estimates) compared to all of Australia (2.50%). This population is not distributed uniformly throughout the Goulburn Valley in line with overall population density. As displayed in Figure 3.1, there are three distinct clusters of Indigenous populations throughout the region; in the inner and outer south eastern areas of Shepparton, the outer northwest of Shepparton, and in the Mooroopna township to the west of Shepparton and the surrounding rural lands to Mooroopna s west (including the locality of Ardmona). 9

17 Figure 3.1: Indigenous population distribution throughout the Goulburn Valley GOULBURN RIVER GR. SHEPPARTON (C) - PT B EAST KYABRAM GR. SHEPPARTON (C) - PT A DOOKIE (L) MERRIGUM (L) SHEPPARTON-MOOROOPNA MIDLAND HWY TATURA GR. SHEPPARTON (C) - PT B WEST WARANGA BASIN USHWORTH (L) MURCHISON (L) GOULBURN VALLEY HWY % of population that is Indigenous By Census Collector District > 4.5 % 2.5 to 4.5 % 1.5 to 2.5 % 1 to 1.5 % 0.5 to 1 % < 0.5 % SLA boundary Urban area Study Area BENALLA Data Source: 2006 Census of Population and Housing, Base data Commonwealth of Australia In terms of the age demographics of the Indigenous populations, the Indigenous population of the Goulburn Valley is typically younger with a median age of 19 years versus the median age of the national Indigenous population of 20 years. By comparison, the median age of the total Australian population is 37. The age breakdown within the five study populations is illustrated in Chart

18 Chart 3.1: Regional age profiles (2006) 30% 25% Percentage of population 20% 15% 10% 5% 0% Australia Australia Indigenous Goulburn Valley Goulburn Valley Indigenous Goulburn Valley Non Indigenous 0-4 years 5-14 years years years years 65 years and over Data source: ABS Census of Population and Housing, 2006, Indigenous Population Profile. 3.3 Labour force and wages data Key elements of the Indigenous gap are found in labour force statistics, in particular labour force participation, employment rates, unemployment rates and wages. These are identified in Table 3.2. In two key labour force measures, the gap is significantly larger in the Goulburn Valley than it is at the national level. The unemployment rate of the Indigenous population in the Goulburn Valley was just under 20% in 2006, significantly higher than the unemployment rate of the non-indigenous population of 5.8%, and even higher than the national Indigenous unemployment rate of 15.6%. Likewise in labour force participation, the gap is bigger in the Goulburn Valley than it is at the national level. In terms of wages, the Indigenous population of the Goulburn Valley earn slightly more than the total Indigenous population ($298 per week versus $278), but still well less than the non- Indigenous population of the Goulburn Valley of $430. Overall incomes for the Indigenous population of the Goulburn Valley are over 30% lower than they are for the non-indigenous Goulburn Valley population. These labour force statistics are presented in Table

19 Australian population Table 3.2: Labour force data (2006) Australia Indigenous population Goulburn Valley total population Goulburn Valley Indigenous population Goulburn Valley non- Indigenous population Labour force participation 60.4% 51.2% 61.1% 48.6% 61.5% Labour force (% of pop) 48.4% 32.0% 47.6% 28.7% 50.6% Employed population 9,104, ,749 25, ,874 Unemployment rate 5.2% 15.6% 6.0% 19.9% 5.8% Median Individual income ($ per week) $466 $278 $426 $298 $430 Source: ABS Census of Population and Housing, 2006, Indigenous Population Profile. Indigenous employment in the Goulburn Valley is dominated by four sectors of the economy, as identified in Chart 3.2: health care and social assistance (23% of the employed population), manufacturing (10%), public administration and safety (9%) and education and training (9%). Compared to the national Indigenous population, the Goulburn Valley Indigenous population has proportionally more employment in health care and social assistance (where the national figure is only 12%), and manufacturing (where the national figure is only 7%). There is proportionally less employment in public administration and safety (only 9% in the Goulburn Valley compared to 17% at the national level). Relative to the non-indigenous employed population of the Goulburn Valley, the Indigenous population there has proportionally more employment in health care and social assistance (23% versus 12%), public administration and safety (9% versus 4%), accommodation and food services (7% versus 5%), and education and training (9% versus 7%). With these four sectors dominating Indigenous employment in the area, other sectors of the economy are generally under represented. Most notable in this respect is retail trade (7% versus 13%), and agriculture, forestry and fishing (3% versus 10%). In interpreting these figures, it is important to note that they are industry employment as a function of the employed population, as distinct from the total population. The Indigenous population would be proportionally underrepresented in more industries if the latter comparison was used. A general trend worth noting here, that ultimately influences the results of this report, is that the Indigenous population of the Goulburn Valley has proportionally stronger representation in the higher paying industries compared to the national Indigenous population, and proportionally less in the lower paying industries. This would partially explain why one aspect of the Indigenous gap wages is not as big in this area as it is for the entire Indigenous population, as noted previously. 12

20 Chart 3.2: Labour force statistics (2006) Percentage of employed population 25% 20% 15% 10% 5% Australia Australia Indigenous Goulburn Valley Goulburn Valley Indigenous Goulburn Valley Non Indigenous 0% Data source: ABS Census of Population and Housing, 2006, Indigenous Population Profile. 3.4 Spoken English and education There is no single, universally agreed definition of literacy that can be readily informed by regional statistics in Australia. Nevertheless, several questions in the census can shed light on the issue, including how many people speak English at home and, of those who speak an Indigenous language, how well they can speak English. On the basis of these (albeit imperfect) indicators of literacy, the Indigenous population of the Goulburn Valley are significantly more English literate than the entire Indigenous population. In fact, no one in the Goulburn Valley, either Indigenous or non-indigenous, claims to speak an Indigenous language at home and speak English "not at all" or "not well". According to this data, the particular aspect of the gap that relates to literacy is not a big issue in the Goulburn Valley. Across Australia, the lack of English literacy skills is most apparent in remote Australia, more so than in and around the more densely populated regional areas such as the Goulburn Valley. 13

21 Table 3.3: Level of spoken English (2006) Australian population Australia Indigenous population Goulburn Valley total population Goulburn Valley Indigenous population Goulburn Valley non- Indigenous population Speaks English only at home 78.47% 81.76% 85.29% 94.17% 88.03% Speaks Indigenous language at home and speaks English "not at all" or "not well" Speaks Indigenous language at home and speaks English "very well" or well" 0.05% 2.18% 0.00% 0.00% 0.00% 0.22% 8.98% 0.02% 0.55% 0.01% Source: ABS Census of Population and Housing, 2006, Indigenous Population Profile. A self reported census is not the ideal mechanism on which to quantify regional literacy. The gap in the English literacy rates of Indigenous and non-indigenous people of Australia is well researched, and, as noted by the Indigenous Literacy Project (2008), the general trend is that the gap is wider for Indigenous people living in remote and isolated communities. The Indigenous Literacy Project (2008) cite data showing that, in the Northern Territory, only one in five children living in very remote Indigenous communities can read at the accepted minimum standard. By Year 7, just 15% achieved this benchmark, 47% behind their urban Indigenous peers and 74% less than non-indigenous students. Indigenous parents are less well resourced and less educated than non-indigenous parents, and Indigenous homes, particularly those in remote communities, have fewer books, computers and other educational resources than non-indigenous homes. All of these factors are linked to children s achievements at school and in the development of English literacy skills (Bortoli and Cresswell, 2004). While the gap in the Goulburn Valley does not appear apparent in spoken English, it is very apparent in educational attainment. The Indigenous population of the Goulburn Valley have, on average, lower school level attainment (Chart 3.3) than the Indigenous population of all of Australia, and lower post-schooling qualifications across most types of qualifications (Chart 3.4). It is significantly lower than the educational attainment levels of the non-indigenous population of the Goulburn Valley. 14

22 Chart 3.3: Highest level of schooling completed (2006) 40% 35% 30% Australia Australia Indigenous Goulburn Valley Goulburn Valley Indigenous Percentage of population 25% 20% 15% 10% 5% 0% Year 12 or equivalent Year 11 or equivalent Year 10 or equivalent Year 9 or equivalent Year 8 or below Did not go to school Data source: ABS Census of Population and Housing, 2006, Indigenous Population Profile. Chart 3.4: Highest level of education achieved (2006) 45% 40% 35% Australia Australia Indigenous Goulburn Valley Goulburn Valley Indigenous Percentage of population 30% 25% 20% 15% 10% 5% 0% Postgraduate degree Graduate diploma and graduate certificate Bachelor degree Advance diploma and diploma Certificate level Total over 15 with a qualification Data source: ABS Census of Population and Housing, 2006, Indigenous Population Profile. 15

23 4 Economic impacts of closing the Indigenous gap The first step in modelling the impacts of closing the Indigenous gap in the Goulburn Valley is to generate population projections reflecting the gap being closed. The assumption here is that the Goulburn Valley Indigenous population as a share of the national Indigenous population remains stable for each age group through to 2026, as detailed in Table 4.1. This moves with the age brackets over time, so for example by 2026 the Indigenous population aged years will equate to 0.371% of the total Indigenous population, as the individuals in this category after 20 years are the group currently aged years. It is possible that the Indigenous population in the Goulburn Valley will increase as a proportion of the total Indigenous population over time, if current inter-censal trends continue. This is based on information suggesting the trend is towards net movement of Indigenous people away from remote and very remote areas to relatively adjacent outer regional areas, and in turn, outer regional areas lose Indigenous population mostly to inner regional areas (Taylor 2006). Notably, the Council of Australian Governments National Indigenous Reform Agreement National Urban and Regional Service Delivery Strategy for Indigenous Australians identified net migration to particular regional centres in Australia, including Shepparton, Mildura, Dubbo, Broken Hill, Esperance, Charters Towers and Kalgoorlie. This has not been incorporated into the current study, however the forecast results may vary if this trend continues. Table 4.1: Indigenous population in Goulburn Valley, as a share of the national Indigenous population Age bracket Share of Indigenous population 2006 (%) 0-4 years years years years years Over 65 years These proportions move at the same rate in both the base case and the gap being closed scenario, as there is insufficient evidence to suggest that the life expectancy for Indigenous Australians differs according to location. Indeed, NHHRC (2008) notes that where you live has a strong influence on whether services are available but, for Aboriginal people, Aboriginality is a stronger predictor of life expectancy than place of residence. Life expectancy for Indigenous Australians living in the Goulburn Valley is therefore assumed to be the same as that of the Indigenous population as a whole, and moves in line with the life expectancy changes from the original Reconciliation Australia report. Indigenous life expectancy moves from 2007 levels in a straight-line fashion, reaching the 2026 national average in a pattern as detailed in Chart

24 Chart 4.1: Indigenous life expectancy, base case and scenario, by gender Life Exp. (F) 2007 Life Exp. (M) 2026 Life Exp. (F - shock) 2026 Life Exp. (M - shock) Forecast Year For labour market outcomes in the scenario, labour force participation rates for Goulburn Valley Indigenous Australians are assumed to gradually increase from the current rate of 48.6%, to match the non-indigenous Goulburn Valley rate by Labour force participation among Indigenous Goulburn Valley residents is currently lower than both the national average and national Indigenous average, implying a larger participation gap for the Goulburn Valley. The same approach applies to the unemployment rate, which is higher in Indigenous populations. These gaps are slightly larger in the Goulburn Valley case than the national case, implying a larger than proportional increase in participation in the labour force. Employment estimates are derived using the labour force participation improvements and changes in employment patterns, including a rise in full-time and fall in part-time employment rates to match the non-indigenous rates at the same rate as their non-indigenous counterparts as well as working age population estimates. Additionally, the productivity of labour will be influenced. The composition of the Goulburn Valley Indigenous labour force is assumed to change to match the non-indigenous Goulburn Valley labour force by This includes industry of employment identified in Chapter 2. The employment pattern for Indigenous Australians overall is more distinct from the national figures than the Goulburn Valley Indigenous employment pattern is from the non-indigenous Goulburn Valley, implying a smaller than proportional overall shift in employment. 17

25 Chart 4.2: Goulburn Valley Indigenous employment, base case and scenario, by industry 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% Participation Rate = 55% Participation Rate = 59% Participation Rate = 77% 0% Base Case Shock Base Case Shock Base Case Shock Base Case Shock Base Case Shock Govt Personal Services Construction Manufacturing Retail Business Services Other The model is designed so that the gap between Goulburn Valley Indigenous average weekly earnings (AWE) and the non-indigenous Goulburn Valley AWE has closed by The existing wage gap is indicative of a productivity gap between Indigenous labour and the non-indigenous total labour force, and the closing of this gap reflects improved productivity, itself a function of many variables including, most notably in the Goulburn Valley, education. A summary of the direct impacts of closing the gap on the Goulburn Valley is presented below, in changes to total population, labour force participation and wages, with the latter reflecting the direct impacts of the enhanced productivity of the Indigenous population. The figures represent proportional change in the Goulburn Valley. Table 4.2: Summary of direct impacts of closing the gap in the Goulburn Valley Direct Impact % Impact p.a. Difference at 2026 Total 2026 Goulburn Valley Population people Total 2026 Labour Force Size labour force participants Total regional average wages $8.60 Total regional wages 0.08 $792,970 18

26 4.1 Economic impacts of closing the Indigenous gap in the Goulburn Valley The direct impacts of closing the Indigenous gap in the Goulburn Valley, derived from the Excel modelling as detailed above, are then used as inputs to the CGE model. The impacts were applied specifically to the Goulburn Valley region within the model. As with the Reconciliation Australia study, the impact after 20 years is analysed. This 20 years is measured from 2010 (the point at which it is assumed that policy action to close the gap commences), and by 2026 the gap is assumed to have closed, with the CGE modelling simulations concluding by 2030 to allow time for the flow on economic adjustments to be realised. The modelling results reported below reflect the difference in 2030 economic outcomes from two different scenarios: With the new database developed, a Business As Usual (BAU) reference case was developed that modelled the Australian, Victorian and Goulburn Valley economies over the projection period to 2030, where the Indigenous gap in the Goulburn Valley remains. Against the BAU, another model run (the closing the gap scenario) was developed that included estimated increases in labour force participation, population and labour productivity by industry in the Goulburn Valley that are a direct result of the Indigenous gap in the Goulburn Valley being closed. The direct impacts were estimated on a single year basis and then fed into the model for each year from 2010 to 2030 to capture the long term nature of the policies. The total impacts of closing the gap are the difference in results between the two scenarios. As a result of closing the gap and the direct impacts on industries and the labour force, there are a range of flow on effects as the economy adjusts to the changed conditions. The final model results represent the combined impacts of the direct and flow on effects. The estimated economic impacts of closing the Indigenous gap are presented in Table 4.3. Results are presented in three categories. The first is the impact to the Goulburn Valley itself, relative to the size of the Goulburn Valley economy. The second is the impact to the rest of Victoria, and finally the impact for all of Australia is presented. Clearly, the proportional impacts are greatest in the economy where the direct impacts are experienced. The proportional impacts become more diluted across larger economies, although there are smaller spill over benefits to regions outside the Goulburn Valley, including the rest of Victoria and Australia. Table 4.3: Proportional impacts of closing the gap, 2030 Macroeconomic indicator Goulburn Valley impact Rest of Victoria impact Total Australia impact Real GRP/GSP/GDP % % % Employment % % % Labour Supply % % % Household Consumption % % % Investment % % % Real Wage % % % 19