SMALL TOWN CONCERNS IN COOMA

UNCLAS SECTION 01 OF 02 CANBERRA 000366

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON SENV AS
SUBJECT: SMALL TOWN CONCERNS IN COOMA


1. (SBU) Summary: Econoff and Econ adviser visited Cooma,
New South Wales (NSW) on April 7. Local political and
business leaders say that the economic downturn has dried up
financing for small businesses. Over the longer term,
leaders are worried about the threat of climate change on
nearby ski resorts which attract much of the tourism that
traffics through Cooma. Despite some successes in luring new
investment, 62 percent of Cooma's households are living on
less than A$40,000 (US$28,000) a year. The Rudd government
stimulus package is having only minimal impact for Cooma, and
the poor state of financing in New South Wales is frustrating
local businesses. Drought has hurt agribusiness, but the
town itself is in relatively strong position in terms of
water holdings. End summary.


2. (SBU) Cooma-Monaro shire is a combination of rural
villages and a regional center (Cooma) totaling just over
10,000 located at the base of the Snowy Mountain range in New
South Wales. It enjoys an advantageous position on the
highways linking Sydney, Melbourne, and NSW's South Coast.
Although it is an agrarian center, it benefits from tourism
in the Snowys and a number of small and medium enterprises
that have located in the town. It is closely linked with the
Snowy Mountain hydropower scheme (septel) and hosts the
scheme's headquarters. The town's population has been
relatively stable since the mid-1980s - a better performance
than many rural Australian towns which are losing population.
The Shire voted Labor 53-47 in the 2007 elections.

CLIMATE WEIGHS HEAVY ON TOURISM
--------------


3. (SBU) Econoff and econ adviser met with Cooma-Monaro Shire
Council General Manager John Vucic, ANZ bank Commercial and
Agribusiness manager David Shelley, and members of the
Chamber of Commerce and Industry on April 7. In a frank
discussion, they shared their views on the economic
challenges facing rural areas in Australia. Vucic, who was
previously the Deputy Transportation Minister for New South
Wales, said that despite the current economic downturn, his
biggest concerns were climate change and the superannuation
system. The shire is heavily dependent on snow tourists who
flock to Australia's most important ski centers in the Snowy
Mountains through Cooma. Vucic said there was some
skepticism about climate change in the rural populace, but
that most accepted the growing range of scientific evidence
that suggests much lower snowfalls in the region in the
future. Without snow tourism, many of the small businesses
in Cooma itself will find it tough to survive. Water is a
constant issue for agribusiness in the ongoing drought, but
the city itself is fairly well off, according to Shire
Council Environment Director David Smith. The city upgraded
infrastructure in the early 1990s, and therefore had a more
secure water reserve than many Australian localities. Cooma
has not had to institute water restrictions higher than Stage
2 (Canberra, Sydney, and Melbourne are all at Stage 3 or
higher, although scales vary) but some outlying communities
were at Stage 6 and often had to have water trucked in from
the city during the summer months. Residential water
efficiency programs had been pursued in the city, Smith said,
as "low hanging fruit" and NSW building codes now required
water and energy efficiency standards for new construction.
Much of Cooma's housing stock, however, was built in the
1950s as part of the Snowy hydro scheme and was horribly
inefficient, Smith said.
Qinefficient, Smith said.

INCOME UNCERTAINTY STILL AN ISSUE
--------------


4. (SBU) Vucic said that 62 percent of the households in the
shire were living on less than A$40,000 ($28,000) a year. If
the government passes an emissions trading scheme that raises
input costs for fuel, commodities, and energy, those families
would be under even greater stress. The government's
stimulus package had put A$900 in everyone's pocket, but
delivered only A$420,000 for the shire for ten small
infrastructure projects. That A$900 would be used, Vucic
predicted, to save or pay off debt, not to consume, and
therefore would have little effect on economic trends in the
shire. He predicted the next major emergency facing
residents would be in the mandatory superannuation retirement
scheme, which he said was a "mess" and would be under
increasing pressure as share markets continue to stagger.

5. (SBU) Shelley said that small-scale business lending in
the region has basically dried up as Australians have
recently saved more and banks have tightened lending
requirements. He agreed that the threat to tourism was a
major concern, but noted that falling foreign tourism trips
for frugal Australians had bolstered local markets. 2008 had

CANBERRA 00000366 002 OF 002


been a relatively good year for tourism, and he noted that
there were still some new investments being made, most
notably German super-grocer ALDI, which plans to open a
regional center in Cooma this year. Richard Mack, who runs a
10-person auto parts outlet in Cooma, said he saw uncertainty
about finance reflected most clearly in the stockyards.
Where grazers would normally sell 18,000 or so head of stock
in a single sale day, recent sales days had seen upwards of
25,000 head sold. The wool price had been unexpectedly
resistant to the downturn, Shelley said, and farmers who
could not get financing to cover feed costs were dumping
their herds now, with the hope that next year financial
conditions will have eased and allow them to re-capitalize
their flocks.

LITTLE HELP FROM NSW
--------------


6. (SBU) Vucic, Shelley and Mack all expressed exasperation
at the New South Wales government. The state of NSW finances
was "shocking," Vucic said, and the inability of the labor
government to enforce any fiscal discipline or achieve key
policy objectives like the electricity privatization proved
that they could expect little help from Sydney in the future.
Despite federal stimulus spending, transportation
infrastructure was terrible, Vucic said, but Cooma residents
still believed that the state should invest in improved
regional rail networks linking the coast to Canberra, Sydney,
and Melbourne. Shelley asked whether U.S. investors would
still be looking for opportunities in rural Australia, but
Vucic agreed that the ongoing financial crisis, lack of
certainty around carbon costs and the state of NSW's
financial position would all increase risk and drive down
outside investment in the region for the foreseeable future.


7. (SBU) Comment: We expect that any small community in rural
Australia would express similar concerns in the middle of the
global financial crisis. But the potential decline in
tourism and the continued failure of the NSW government put
particular pressure on leaders in Cooma. While it is
unlikely that the shire faces economic oblivion, its
longstanding reputation as a place where one can live a
country lifestyle in comfort (seen in the very stable
population numbers) may be slipping. The two greatest
threats, climate change and the drought, are outside Cooma's
control. Despite its beneficial location, Cooma may face the
same flight to the cities seen elsewhere in rural Australia
sooner than many would have imagined. End Comment.