The future of the Upper Hunter is "highly uncertain" and urgent action is needed if the region is to avoid the worst social and economic impacts of the coal market's decline, an internal State Government-commissioned report has warned.
The Upper Hunter Futures report also says a willingness to adapt and proactively prepare for rapid economic change is essential if the Upper Hunter is to make the transition to a stable and secure future.
If managed well, communities in the Dungog, Singleton, Muswellbrook and Upper Hunter Shire local government areas stand to capitalise on significant opportunities to improve social equity in areas such as housing, transport and community services and renewable energy generation.
"The economic future of the Upper Hunter is highly uncertain and could follow a number of different pathways based on global, national and local trends and disrupters," the report, classified as 'commercial in confidence' says.
The Department of Regional NSW commissioned the international economics consultancy Deloitte to produce the report in late 2020.
The 180-page document, obtained by the The Hunter Renewal Project under Government Information (Public Access) Act legislation, provides an objective analysis of the challenges and opportunities facing the region in the decades ahead.
Deloitte examined three possible scenarios facing the region.
Under a 'limited change' scenario, coal mining would continue to dominate the region's economic landscape for the next 20 to 30 years as existing mines expand or extend their lifespan and mining consents are renewed and new ones approved.
While this scenario would sustain mining over the longer term, it would also limit the growth of other industries and limit economic diversification within the region.
"This (the continuation of mining) is expected to involve trade-offs in the allocation of land, water and environmental resources, increasing the competitive pressures for these resources on other industry sectors - specifically agribusiness and industries associated with agricultural production, such as food manufacturing, transport and distribution, equipment manufacturing, and commercial and professional services. These factors will further diminish the availability of employment opportunities for low, unskilled and entry-level workers," the report says.
A 'transition scenario' would see coal mining operations gradually wind down over a 10 to 20 year period resulting in an orderly and coordinated shift in the region's industrial composition resulting in a diversified economy favouring agribusiness, tourism and other emerging industry sectors.
In a 'shock scenario' the Upper Hunter economy unexpectedly experiences a sharp and permanent contraction due to the sudden withdrawal of coal mining.
This results in a "rapid and disruptive shift" in the economic and industrial composition of the economy over the medium- term.
Given the unexpected pace of the economic contraction, government policies and programs designed to assist the transition process would need to be reactive rather than proactive and may not achieve their desired outcomes.
"Growth of the other existing and emerging industries fails to materialise to fill the gaps in the economy, and people relocate away from the Upper Hunter in response to limited employment opportunities and outcomes," the report says.
"The premise for this scenario is a rapid structural shift affecting global demand for thermal coal or some other 'black swan' event permanently disrupting coal mining activities in the Upper Hunter."
The report also discusses the increasing dominance of coal mining in the Hunter's economy in recent years. The growth has occurred despite calls for diversification and emerging opportunities in agriculture, tourism and renewable energy.
Mining accounted for 32 per cent of total regional employment and 57 per cent of gross value added (GVA) in 2019.
Agriculture was the second largest sector by employment, accounting for seven per cent of regional employment and four per cent of regional GVA.
Agriculture's share of employment and GVA has fallen since 2011. The drop was partially attributed to drought conditions.
Employment across utilities increased, with a further 300 jobs added in the region since 2011.
"The concentration of the region's economy means it is particularly vulnerable to changes in global economic conditions, consumer demand, and domestic policy," the report says.
The State Government announced during the recent Upper Hunter byelection that it was creating a Royalties for Rejuvenation fund. The program sets aside $25million of coal royalties each year to assist coal mining communities to develop new industries and transition to a clean energy economy.
The government will establish a statutory expert panel made up of community organisations from across the Hunter to steer decision-making around the Royalties for Rejuvenation Fund.
Upper Hunter MP Dave Layzell saidwhile there was some disagreement about the timeline for the region's energy transition, there was a general agreement and a sense of urgency about the need to start building a positive and achievable vision of the future.
"My belief is that the solution will be in the form of developing the manufacturing industry. An industry that can easily use the skilled workforce developed by the mining industry," he said.
"Manufacturing is an industry that needs to have reliable freight routes such as highways, rail and a port. These are strengths of the region. As well as a strong workforce and freight lines, manufacturing requires access to cheap industrial land, access to water, and access to large amounts of cheap, reliable power. Without all these elements being brought together to entice new industry, they will always choose to remain in the relative safety of metro centres such as Newcastle or Sydney."
Hunter Renewal Coordinator Dan Colemanalsosaid the report highlighted the urgent need to diversify the region's economy.
"This report provides much food for thought for our region - it indicates starkly that if we don't act now to start diversifying our economy, then there will be major negative impacts for people and the economy from declining global coal markets," she said.
"We're really glad the NSW Government has commissioned this work and is getting detailed advice about how we can best prepare and meet the future with optimism.
"We're also pleased to see the government appears to be moving in the right direction, having recently announced its Royalties for Rejuvenation scheme and Hunter Expert Panel. But more action is needed if our communities are to weather the storm of declining global coal markets."
A Department of Regional NSW spokeswoman said the report was commissioned to inform the planning of future economic diversification initiatives in the Upper Hunter region.
"The internal report identifies a number of possible opportunities, challenges and scenarios that the Upper Hunter region could hypothetically face," she said.
"The Future of Coal Statement, released in 2020, sets out the NSW Government's proactive and balanced approach to the future of coal mining in the state, including its intent to support economic diversification as local coal mining operations approach the end of their lifespan.
"The Deputy Premier's decision to establish the Royalties for Rejuvenation fund is another example of the NSW Government's commitment to the long-term future of the Hunter Valley."
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