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The contribution of Mount Alexander Shire (MAS) built heritage assets to the Shire’s economic activity in 2010-11
Prepared by the
National Institute of Economic and Industry Research (NIEIR)
ABN: 72 006 234 626
416 Queens Parade, Clifton Hill, Victoria, 3068
Telephone: (03) 9488 8444; Facsimile: (03) 9482 3262
Email:
For the
National Trust of Australia (Victoria)
Mount Alexander Branch
May 2012
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While the National Institute endeavours to provide reliable forecasts and believes the material is accurate it will not be liable for any claim by any party acting on such information.
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Forward
The Mount Alexander Branch of the National Trust of Australia (Victoria) commissioned the National Institute of Economic and Industry Research to study the economic value of heritage to the Mount Alexander Shire with a number of objectives.
- To provide a framework to stakeholders that can be used to estimate the economic value of heritage to a particular jurisdiction or locality.
- To encourage the development of common tools which are necessary to be able to effectively engage local communities in the overall value of heritage protection and its contribution to the economic and social life of their residents.
- To encourage the development of common comparative studies which can be used in soundly based policy debates encouraging heritage protection.
The initial pilot surveys to test the theoretical bases and assumptions have been scaled up and supported by alternative statistical analysis. The correlation between the three approaches demonstrates the validity of the results.
It is clear that heritage should be protected, not only because of its visible and tangible linkage to the past and its contribution to a sense of community and social cohesion in but also because of its role in attracting communities which are best skilled to contribute to economic growth to live in the region.
The study shows that the strong belief in the value of heritage is widely spread throughout the community – an encouraging finding to the National Trust of Australia and a positive indication for the future course of heritage protection policy.
Janet Gilmore
President
Mount Alexander Branch of the National Trust of Australia (Victoria)
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Executive summary
In the past, that is pre 1970, the economic value of heritage arose mainly because wealthy households tended to want to live in heritage precincts, provided the precinct was within commute distance from major employment nodes, and tourists wanted to visit the precincts provided they were located in locations of superior geographical qualities (beaches, mountains, etc.).
Since the supply of built heritage by definition is in limited supply, this constrained the contribution of the economic value of heritage to economic activity, which meant that the importance of heritage to a region’s economic activity steadily declined provided the region was growing in population and employment. However, heritage precincts were attractive to artists, writers and non-traditional (gay) households. This created a cultural environment that was to become an important driver in the post 1970 world.
The past 1970 world was characterised by two technological revolutions. The first was the so-called knowledge economy revolution where economies of scale and scope were complemented and sometimes replaced by the rate of innovation as a key competitive instrument of enterprises. This in turn required the employment of workers with the skills to implement and sustain cycles of innovation. These so-called knowledge workers were drawn mainly, though not exclusively, from the tertiary qualified workforce. These so-called knowledge workers more often than not wanted to live in localities with strong values in cultural diversity, which in turn were, more often than not, were localities with strong built heritage values. Enterprises found that one of the best ways of being able to employ the best qualified and experienced knowledge workers was to locate their facilities within commute distance of precincts with high built heritage values.
The post 2000 communications revolution, based on the platform of high speed broadband, has now removed the need to locate enterprise facilities within commute distance of localities with high built heritage values. The productivity of the internet now allows services to be imported into a region from anywhere else in the world and this importance is continually increasing with the rise of the network model of production and 3D printing manufacturing technologies which allows products to be delivered over the internet.
The implication, as of 2011, is that regions with strong built heritage and associated cultural diversity, such as Mount Alexander Shire, would be expected to be regions where the economic value of heritage is not only significant, but it is also increasing.
In order to test the validity of this expectation, the study adopts a dual methodological approach. One methodology was the surveying of businesses, residents and tourists in the MAS to assess personnel assessments of the value of heritage. The complementary methodology was to use statistical analysis where the economic outcomes and drivers of economic growth of the Mount Alexander Shire are compared with outcomes and inputs for all othe local government areas (LGAs) in Victoria in order to extract the contribution of built heritage.
The survey results
Amongst residents the survey indicated that Mt Alexander’s historic buildings are an important factor in people’s decision to live here. Around 30 per cent of respondents considered the historic buildings as a “very important” factor, compared to 12 per cent to whom it was “not important”.
68 per cent of residents believed that our historic buildings and heritage contribute materially to the higher value of property in the Shire. The premium on property values that respondents attributed to heritage ranged from 10 to 20 per cent.
The knowledge economic is an important element in creating future economic growth and solid economic foundations. 77 per cent of respondents rated historic buildings as significant in attracting creative and skilled people to live here and stated that these 76 per cent include Mt Alexander’s historic buildings and heritage when promoting the Shire to visitors. The towns of Maldon and Chewton were mentioned. Residents believe that Mt Alexander’s heritage ranks higher than other towns.
Typical responses were that Mt Alexander’s historic buildings and heritage contribute “a lot” to the cultural life of the region. It creates an “atmosphere” that attracts visitors and encourages diversity. The general consensus is that there are benefits, and that residents and visitors are the main beneficiaries. 93 per cent of residents believed that visitors perception of Mt Alexander as a place to live, work or visit is improved by the historic buildings and heritage. Residents considered that without its historic buildings and heritage Mount Alexander would have less sense of community, less diverse population and be more like a fringe suburb of Melbourne.
Whilst 38 per cent of respondents felt that they would shop locally even if Mt Alexander did not have the strong historical and heritage environment, 61 per cent felt that they would make extra trips to other towns to shop. 61 per cent felt that some extra income would be required to entice them to move to a similar town without the heritage and cultural assets.
The largest group of respondents was retirees. Education and Community workers were also a significant group.
Visitors to the area rated the heritage buildings as a very significant attraction. While more than half the respondents felt that the historic buildings are important strengths for Mt Alexander, other heritage points of interest, such as the goldfields heritage, are also important in recommending visitors to Mt Alexander. The average expenditure of visitors to the region averaged out to $189 per person. While most respondents had made 5 or fewer trips to Mt Alexander, a quarter had been more than 5 times. 22 per cent had been visiting for more than 10 years. They also felt that the historic buildings and heritage were an attraction to events such as the State Arts Festival. However, it should be noted that the lack of entertainment and quality restaurants were factors that reduced the number of visits from tourists.
On average, business operators interviewed attributed 31 per cent of turnover to visitors from outside the Shire and suggested that probably half of this was due to heritage attractions.
The evaluation indicator
The economic contribution of heritage is derived by estimating the contribution of built heritage to the Mt Alexander Shire’s gross regional product of residents. Gross product is the common measure used nationally, and at the state and regional level, to assess the impact of economic growth drivers and policies. It measures the income residents receive from work, either from employment in the Shire or outside the Shire, such as Melbourne City, including the export of services. It also includes the interest and dividend income received by households in the Shire no matter where the income is derived from, plus the rental income (actual and imputed) derived from the value of the dwelling stock in the Shire.
The economic value of heritage
A series of estimates outlined in the study translates the survey results into direct estimates of the contribution of heritage to the MAS gross regional product. The methodology involved calculating lower bound, upper bound, and mean estimates.
A similar methodology was employed in terms of interpreting the results from the statistical analysis. The two estimates were then combined to form a composite estimate of the direct impact of heritage on economic activity in the MAS with the indirect flow-on impacts estimated from an input-output model of the Shire.
The overall results are given in the attached table.
The headline conclusion is that as of 2010-11 the economic contribution of heritage to MAS economic activity, as measured by gross regional product (residents), is somewhere between a little under one fifth to a little under one third. The credibility of the estimates is enhanced by a close correspondence between the survey estimates and the statistical estimates. Assuming, prima facie, that the statistical estimates should receive a higher weight in the evaluation the inference is that the residents in general have a good understanding of the contribution that heritage makes to the economic activity in the Shire.
Finally, the inference from the analysis is that the contribution of heritage is increasing. There are several reasons for this. Firstly, the development of the National Broadband Network (NBN) which will increase the potential of regions with strong heritage values to further increase their share of national economic activity, and the fact that the heritage values of the region allows the region to attract households with the income potential to finance the construction of new dwellings in the region and therefore the ability of the region to maintain long term growth. Without its strong heritage values the Shire would have economic outcomes similar to the Loddon Shire..
As a result, provided the heritage values of MAS are at least maintained and desirably enhanced, it will not be too many years before the mean value of heritage to the economic activity in the Shire is assessed at one third or more.
Table E.1The value of heritage to MAS – 2010-11 (2008-09 $m)Lower bound / Mean / Upper bound
Local gross product – resident and construction / 63 / 88 / 113
Type II multiplier flow-on to local gross product(a) / 24 / 33 / 42
Growth and ownership of dwellings / 8 / 14 / 20
Total / 95 / 135 / 175
Per cent of 2010-11 local gross regional product – residents / 16.8% / 23.8% / 30.9%
Note:(a)Estimated for a 49 industry input-output table for MAS with direct allocation of imports.
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1.Study background
The objective of this study is to quantify the contribution MAS heritage assets contribute towards economic activity in the Shire. The period of evaluation is the 2010-11 fiscal year.
There are at least four questions which arise from this statement of objective. They are:
- Why would heritage assets be expected to contribute towards economic activity?
- What is the economic structure of MAS?
- What is the specific indicator/matrix that should be used to quantify the value of heritage?
- What is the methodology that will be applied to derive the heritage contribution estimate.
In this chapter each of these questions will be answered in turn. It should be noted that although heritage is often used in stand-alone below, for this study heritage means built heritage.
1.1The economic value of heritage: Background
The economic value of heritage is best discussed in terms of a dichotomy involving a distinction between:
(i)the traditional role of heritage in attracting high income/wealth households; and
(ii)the role of heritage in driving economic growth in the post 1980 regime of information technologies.
1.1.1Economic activity: The traditional role of heritage
The traditional role of heritage in contributing towards economic activity is via the creation of precincts of high ambient value which only high income/wealthy households could afford. Thus, built heritage attracted and retained high income/wealthy households that would not have located to the region in the absence of the built heritage assets. Economic activity would therefore be higher to the extent that the higher income from the heritage precinct leads to higher expenditures in the region and, therefore, additional employment, etc.
Extensive quality heritage precincts allied with other attractions (such as geographical features of beaches, rivers, mountains) and accommodation infrastructure can be magnets for tourists, which would attract additional expenditure into the region.
As heritage built assets are fixed their importance to economic activity would at best be static in relative terms and in all probability decline. The capacity of a region to attract additional high income households would be limited by the number of heritage dwellings capable of significant renovation, while the impact of tourism would be constrained by the capacity to supply supporting infrastructure and/or the potential growth of the market.
In this case, if the population of the region was steadily expanding, then the importance of heritage to economic activity in the region would decline.
1.1.2Economic activity: The role of heritage in the modern information intensive economy
The importance of the role of heritage as a contributor to economic activity changed with the advent of the innovation intensive technology (or high technology), especially with the economy since the 1970s.
Among the first to note this was the American economist, Richard Florida, in his book “The Rise of the Creative Class”, Cities and the Creative Classes”, etc. Florida noted that the modern industrial economy relied increasingly on constant innovation for the maintenance of business competitiveness and productivity growth. In turn, this process could only be sustained if the role of so-called knowledge workers, or the creative class, increased their role in the production process. Essentially knowledge workers are high skilled/trained workers in occupations that contributed to the design, development and implementation of innovation. Over the past 40 years the proportion of these workers in the labour force has expanded significantly.
In the 1980s and 1990s, high technology (that is, high innovation intensive) companies needed to expand their input of knowledge intensive workers. What they found is that to do this, because of scarcity of supply, the companies had to locate where these workers wanted to live. As Florida discovered, where they wanted to live was in regions with:
(i)built heritage qualities (good streetscape);
(ii)cultural diversity (authors, ??????, gays, or the so-called bohemian population); and
(iii)community infrastructure diversity (restaurants, cafes, medical, educational).
In the 2002-03 ALGA/NIEIR “State of the Regions” report it was found that these factors were indeed more important in determining where Australia’s high technology population was located than what Florida found for the United States.
The role of heritage is greater than suggested by its listing amongst a number of other drivers. This is because there is a strong link between heritage and cultural diversity. In the pre-1980s economy, regions with quality built heritage values were the regions where the bohemian population was attracted to and settled in because they generally combine quality physical ambience with low rents and capital values. They were also regions which maintained their commodity infrastructure of population and economic activity went into relative decline because that is where the medical staff and teachers wanted to live. This gives heritage a higher status as a driver than many of the others listed above. Heritage status is one of being a necessary condition for regional development for the regions where development would have passed them by in the absence of strong heritage values.
There are limits on the ability of large corporations to relocate to regions with strong heritage values without destroying the heritage values, or simply because of the availability of land and supporting infrastructure. This changed the 1990s with the advent of the personal computer and the internet. This allowed knowledge workers to increasingly live anywhere and provide services to businesses located anywhere else. This in turn allowed heritage values to increase its importance as a contributor to economic activity because heritage becomes a strong driver of economic growth.