It is unquestionable that the current opportunities on offer to Australians in general are providing greater potential than ever for them to achieve their goals, including that of increased wealth creation. The lowest levels of unemployment for thirty years, low interest rates and consistent growth across the economy are driving these opportunities, which can be attributed to the last ten years of responsible Government under the stewardship of the Federal Liberal and National Coalition.

However, it is also unquestionable that over this period of time and up to today, we see an increasing trend of people migrating from regional and rural localities to metropolitan and coastal areas of Australia. While numerous factors would account for this continual movement of people, such as the lure of a particular lifestyle for retirees, first hand experience reinforced by documented analysis confirms that local industry and structural change (and the ability of an area's economy to adapt using its existing economic base) are the more significant drivers for change.

While data from numerous sources, including Planning and Forecasting Units of State Government Departments, all publish data which depicts this growing trend, they haven't specifically measured the correlation between social and economic factors and declining populations, which is vitally important to firmly establishing the reasons why this is occurring.

The Australian Bureau of Statistics has developed indices of social and economic disadvantage based on Census data. These indices of socio-economic indices for areas (SEIFA) use a range of indicators to define the issue. For example, one SEIFA index is the index of advantage/disadvantage, which uses indicators such as income, education and occupation to define the issue. Comparing population change between the 1996 and 2001 Census and the socio-economic index of advantage/disadvantage for over 650 urban centres and localities around Australia, it was found from a statistical point that there didn't seem to be any correlation between population decline or size and the index. For example, the town of Woodford, located inland of the Queensland Sunshine Coast, grew by 44 per cent between the two censuses, yet it had one of the lowest socio-economic index scores.

However, still using Census data, the ABS has gone further in its attempt to analyse the cause of population decline and growth. From this analysis it was concluded that growth and decline appeared to be related to the industries that support a region's economy. For instance, across Australia at the time, towns in the sheep and wheat belts experienced decline. The decline was assessed to have been attributed to the greater mechanisation in the industries requiring less labour. This is also exemplified in the example of mining towns in the La Trobe Valley, where these towns have experienced decline as the demand for brown coal has fallen. Not surprisingly, the analysis confirmed structural change, and the ability of an area's economy to adapt, using its existing economic base, as a significant factor. Without a strong and diverse economic (industry) base in these areas, it was evident that bigger regional centres, such as Dubbo, were attracting people from outlying small towns as people and business moved to take advantage of the wider range of facilities these centres offered.

While the business climate and the current policy mix that drives it is delivering economic success to much of the country, this shouldn't be used as tacit acceptance of rural and regional casualties.

Government needs to address this rural and regional component of the Australian economy. It is acknowledged that there have been a number of concerted attempts through Commonwealth Government commissioned action plans, inquiries, summits and studies to seek to address the problems of rural and regional economic development. More recently, Commonwealth Government efforts have included the 2001 announcement of the development of an action plan for sustainable regional business growth, and the 2003 inquiry by the Senate Economics References Committee into the structure and distributive effects of the current tax burden on individuals and businesses.

Action by the Commonwealth Government has produced reports, which while delivering recommendations for change, desired by rural and regional communities, has not always been adopted and implemented. In relation to those that have been implemented and take the form of regional/small business grants and financing programs, while undoubtedly important and have resulted in jobs and a degree of economic flow-on to the area, do not have the capacity to create a business climate that could realise investment and economic prosperity over the long-term.

Even as a young country, Australia has continually shown ingenuity in addressing each challenge that has been presented before it. It is important that the Commonwealth Government continues to display its willingness to address current and emerging economic challenges, and this should include addressing the long-term economic futures of rural and regional areas of our de-centralised country.

The following paper puts forward the case for a policy of zonal taxation as a means to create in depressed areas of Australia, a business climate that could realise investment and economic prosperity over the long-term. The Paper addresses the following aspects:

• Policy of Zonal Taxation
• Record of Zonal Taxation in Developed Economies
• The Constitution and Zonal Taxation
• Zonal Tax Offset (rebate) Scheme and Enterprise Zones


Policy of Zonal Taxation

The economies of rural and regional areas have to be broadened to make them less reliant on largely, the vagaries of seasonal change, and its 'boom and bust' influence on traditional agricultural industries. However, more broadly, the economies of rural and regional areas of Australia, in order to avoid being an even poorer cousin and face the prospect of continuing to diverge from metropolitan and coastal areas, need the creation of a climate within their area that will encourage long-term and varied business investment.

While it is not the role of Government to control the decisions of individual businesses, it is incumbent on the Government to introduce policies and economic development tools that are going to provide incentive and positively influence the interest of businesses in conducting their business in rural and regional Australia. Without action by Government to directly assist in the creation of this business climate, it is unlikely that these areas of Australia are going to be able to adopt the same level of responsibility in developing their economies as their city cousins do.

The policy which I believe is necessary to act as a conduit for business uptake, and therefore, the expansion of the economies of rural and regional areas and their desirability as a location, is Zonal Taxation.

Zonal taxation is a simple and cost effective means of inspiring new business opportunities, increasing productivity and ensuring future social and economic security for rural and regional areas.

As the income of workers and business owners is what provides the lifeblood of rural and regional communities, it is critical that this mechanism be the centre point of a zonal taxation policy.

For areas of regional and rural Australia which are determined as being depressed, zonal taxation would work through