Three things regional Australia badly needs

Increasing numbers of Australians are leaving the nation’s capital cities and moving to the regions, encouraged by proliferating work-from-home options and the digital wave revolutionising healthcare and education. The shift has slowed since the peak of the pandemic, yet the push is still there, raising questions of how rural Australia will cope with an inflow of people when social infrastructure in the regions is already stretched. Affordable rental accommodation is harder and harder to find in regional Australia, with average rents jumping by double digits in many regions year on year. Desperate renters tell stories of dozens of failed rental applications and finally sleeping in tents, garages and even in cars.

With massive knock-on effects across the board, the critical rural housing shortage has in turn has further ramped up the employment crunch: workers are deterred by a lack of affordable housing.

Housing, digital connectivity and water security are the three problem areas most cited by Australia’s regions. Infrastructure Australia, a statutory government body which provides independent research and advice to government and industry, surveyed Australia’s 48 regions and sought evidence to determine the nature and location of the nation’s infrastructure shortcomings.

Set out in the organisation’s Regional Strengths and Infrastructure Gaps report released in March, 26 regions cited the “availability, diversity and affordability” of housing as the primary infrastructure gap in regional Australia, confirmed by Infrastructure Australia’s own research. The report notes a lack of appropriate housing can hinder economic growth, exacerbate social issues and damage health and wellbeing.

Infrastructure Australia chief of policy and research Steve Brogan says housing shortages have massive knock-on effects across a range of fields. “It comes through clearly across all the eight states of Australia as an issue, not in every single region, but in 26 of the 48 regions,” he says. “It is certainly the most frequently called-out issue.”

Rural rents have seen eye-watering increases in some Australian regional towns, according to In September, average regional rents had increased by 65 per cent year-on-year in Western Australia’s Coolgardie region, 55 per cent in Broome, and 46 per cent in Augusta-Margaret River. In Broken Hill, in NSW, rents had jumped by 20.4 per cent, and in Queensland’s Bundaberg by 25 per cent.

The second-most frequently cited regional infrastructure gap in the Infrastructure Australia report was broadband and mobile connectivity. Nominated by 23 regions, a shortfall in connectivity can have far-reaching effects, limiting or even denying access to an ever-increasing range of health, education and government services.

“Broadband and mobile connectivity is an enduring shortage across many communities,” says Infrastructure Australia chief executive officer Adam Copp. “As we’ve seen, it’s crucial to the economic and social wellbeing of regional Australia. The Covid pandemic has also thrown up digital as a channel to access many infrastructure-related services like healthcare, schooling and payments.”

He points out the federal government is already working to overcome shortfalls in this field, in November committing $2.2 billion to regional telecommunications investment. This package will include $20 million for an independent audit of mobile coverage to determine where the black spots are, and $6 million to extend the Regional Tech Hub which is intended to provide advice to regional consumers on how to connect and stay connected.

The third most-frequently cited problem in the Infrastructure report was water security. A gap worsened by ongoing climate change and the barrage of natural disasters that has hit Australia in recent years, notably massive floods and bushfires, a lack of water security was cited by 22 regions across the nation. The difficulty of providing clean drinking water has been exacerbated by Australia’s vast size.

“There is an issue with some remote communities not having clean drinking water or drinking water that isn’t very appealing to drink,” Copp says. “It might be safe to drink, but it’s salty or it has a colour, so people don’t drink it. So that’s an issue in a range of states and territories.”

An issue that cuts across a number of fields, including sustainability, resilience and climate change adaptability, and traverses multiple levels of government, water security improvement is a massive task, say Copp and Brogan, adding it needs a full understanding of where the weak links are in water distribution systems along with a comprehensive data framework to help people understand what is happening.

Copp says Australian governments are currently faced with a raft of pressing infrastructure claims and the Infrastructure Australia report helps to prioritise need.

But rather than a tight focus on specific fields, chief executive officer of the Regional Australia Institute Liz Ritchie says a comprehensive framework is needed to address the whole range of complex and interlocking shortages in the nation’s regions, which are already stressed and will be further stressed as the migration from capital cities continues.

The Institute, a thinktank devoted to regional issues, has crunched data from ten million Commonwealth Bank customers to fuel its regional movers index, and in September found that while overall net migration to the regions from capital cities had declined since the end of Covid lockdowns it continued to be nearly 70 percent higher than the levels in the two years before the pandemic.

“The research tells us that city-dwellers are rethinking their lives, they want to move,” Ritchie says, adding urban jobseekers could choose from a range of regional positions. “There’s more job growth than ever before; it’s growing at a faster rate than capital cities at the moment,” she adds, pointing to the “sophistication” of regional economies and noting most of the jobs available were professional roles.

In September, the Institute released its Regionalisation Ambition 2032 report, a strategy for regional Australia that covers regional housing, education, health, jobs and skills, digital inclusion, transport, childcare, community participation, migration, climate, innovation and the resilience of regional communities – as well as setting a target of 11 million people living outside Australia’s capital cities within the next ten years.

The report is a broadscale look at interlocking social infrastructure in the regions, Ritchie says, adding that she understands the federal government is also working on a regional framework.

The Institute found more than 3.7 million regional Australians currently live in a ‘childcare desert’, regional home building approvals had declined in five of the last 10 years, and remote students do half as well in the NAPLAN literacy and numeracy tests as their metropolitan peers.

“Australia needs a new national population plan that deals with potential settlement patterns and what are the social services, both hard and soft infrastructure, needed to service that,” Ritchie says. “We’ve found ourselves caught short.”

Sweeping digital transformation will continue to evolve in certain fields, such as healthcare and education, she says, but “high-touch, high-care” specialities such as childcare, aged care and disability services require a tangible human presence, and they would provide the job opportunities of the future.

Meanwhile, chief executive officer of the National Rural Health Alliance Susanne Tegen says digital healthcare can never wholly replace in-person care and the solution for rural healthcare shortages was simple: community control.

Millions of Australians living in rural areas continue to be shortchanged in terms of healthcare because the lack of scale in smaller communities leads to a shortfall in healthcare provision, she adds.

“Despite the budgets for rural and remote Australia, health funds are underspent,” she says. “Rural and remote areas have 50 per cent fewer health providers per capita than major cities. Fewer GPs, psychologists, dentists, pharmacists, physiotherapists, podiatrists, optometrists – and so the burden of disease increases with remoteness.”

More isolated regions can also have trouble attracting healthcare professionals, Tegen says. Digital healthcare can only pick up some of the slack, and urban health professionals may have difficulty understanding the range of interlocking health problems and conditions that affect rural populations. “(Telehealth options) should be in addition to seeing a doctor in person, not instead,” she says.

The National Rural Health Alliance wants government to use the funds set aside for rural health, and largely unspent because of the widespread shortage of health providers, to be used to establish local community-controlled health organisations in rural areas. Federal, state and local governments, local industries and the local communities would all be involved.

“It’s a model where you include local people who understand and learn to understand why there are difficulties in attracting and retaining health professionals,” Tegen says.

The community health organisation would employ healthcare professionals as needed, potentially including doctors, nurses, dentists and allied health professionals, and perhaps visiting services, she adds. “It’s a one employer model, rather than expecting people to run their own businesses.”

Housing adversity hits regions

In north-western Queensland’s far-flung Flinders Shire housing is urgently needed to accommodate an expected surge of incoming residents – just one of the rural districts where Australia’s housing crunch has become an urgent problem.

More than seven million Australians now live outside the nation’s capital cities, and a pandemic-driven boost of the numbers of people shifting from the city to the country has increased the stress on social infrastructure in the regions, particularly affordable housing.

A microcosm of rural Australia’s changing economic landscape, Flinders Shire has seen the wool and rail industries gradually dwindle to be replaced by an edible grapes farm and a polypipe factory. Soon the Copper String power project, a 1,000 kilometre high-voltage network line expected to employ 350 workers at its peak, and a massive wind farm, eventually supplying 1800 megawatts of power, will come to town.

Flinders Shire mayor Jane McNamara says the district’s population had been slowly shrinking, from about 4000 in the 1960s to about 1500 now, and the new projects were most welcome.

But most days now it’s impossible to stay overnight in the main town of Hughenden’s always-full three motels and the grape workers have been put up in 76 dongers, appropriate only for singles. There are no suitable vacant houses to rent. The local childcare centre is full and needs appropriate premises for expansion. The polypipe factory employs 22 people in Hughenden now, and the company owner plans to bring another 30 families to town for permanent jobs.

“It’s great for every reason,” McNamara says of the incoming industries. “We need cleaners, careworkers, teachers’ aides, so it’s really important for us to be able to attract a developer into town to build the houses.”

Negotiations have begun with banks and governments. “We’re happy to go knocking on doors if that’s what it takes,” she says. “There’s no rentals in the town now, so if there were houses built now they would be used.”

Flinders Shire council chief executive officer Hari Boppudi, a civil engineer by trade, says remote districts are forced to deal with “postcode discrimination”. Banks might only require a ten per cent deposit from a Townsville resident looking to buy a house, he adds, but a Hughenden local would likely have to come up with 50 per cent.

Developers building housing in remote towns had to factor material transport costs into the equation, along with a likely shortfall in economies of scale. “Investors are still watching, they want to see the reality of the growth,” he says of housing investment in Flinders Shire. “It will only happen if there’s a government initiative to boost confidence of investors. It’s the state scenario everywhere the moment you get out of urban population areas.”

Queensland’s state government recently convened a housing summit to explore questions of housing stress, and premier Annastacia Palaszczuk in October boosted the Regional Housing Fund with $1 billion, doubling its size, and funding 5,600 new social and affordable homes by mid-2027.

Queensland Council of Social Service chief executive officer Aimee McVeigh says it’s not clear where the new housing would be built, nor how much would be social housing for the disadvantaged and how much affordable housing.

“The recent auditor-general’s report showed we don’t have enough housing, the population is growing, the Queensland government has done no forecasting of future need, and the current stock and the register of need are poorly managed,” she says, adding that 46,000 Queenslanders are now on the social housing waiting list.

The need is urgent, she adds, with a knock-on effect across the board. “We know that the lack of affordable housing means it’s very difficult for regional areas to recruit essential frontline workers. If you can’t get childcare workers, if you can’t get disability support workers, aged care workers – how are people going to be able to go and work? You need the care economy.”

Grattan Institute economic policy program director Brendan Coates says Australia had a shortage of rural housing before the pandemic, but the Covid upheaval had accelerated the trend of city-dwellers moving to regional areas.

“It doesn’t take many extra people moving to regional NSW or Queensland to put a lot of pressure on the local housing stock,” he says, noting that if 1,000 people move to a town from Sydney or Melbourne, that might equate to five per cent of the town’s population, even though it’s a tiny share of a capital city’s resident numbers. “The housing stock just can’t keep up, even if we were doing everything we could to build more.”

There are only three ways to deal with the regional housing crisis, Coates says. Firstly, build more housing stock, which obviously takes time; secondly, use tax settings or regulations to drag some of stock out of other parts of the housing market, such as holiday rentals; and thirdly increase rental assistance for the disadvantaged who can’t afford a roof over their heads.

“There’s still a real lack of urgency considering the extent of the problem being faced,” he says. “Nowhere is that clearer than in Victoria, with a state election going on. Neither major party is offering solutions that will solve this problem in the short term.”

Onerous land tax regimes deter investors in the residential rental market, Coates says. Land tax is charged at a progressive rate on the totality of the holding, rather than on each property individually. Large-scale investors may well baulk at losing between ten and 30 per cent of their investment rental yield to land tax. In Queensland, he adds, the land tax threshold is relatively low – $600,000 on the land value – so a lot of small operators, mum-and-dad investors who might own a single investment property, don’t pay land tax. But a fund that owned 100 or 1000 rental properties would pay a substantial amount.

The Grattan Institute has been encouraging state and territory governments to rethink the land tax aggregation provision and charge the land tax per property rather than on the total holding.

This land tax could even be tailored to apply only to residential properties, Coates says. In exchange for this tax reduction, governments could introduce stronger tenancy laws, he points out, adding that increased institutional investment would provide increased security of tenancy for the renter and more stock on the market. “It’s a real win-win.”

Australian Financial Review