Industry diversification in your LGA

What is it that protects a community from external shocks, like COVID or bushfires? What I’ve learn’t from extensive research is that there isn’t one thing, but a number of factors that help. One of these is a diverse set of industries.

A diverse industry structure means that if one industry is in a downturn and has to lose staff, then other industries in the area are still employing people. So unemployment will rise, but the impact on other support services (like retail, health, etc) is not going to be as large as it would have been if everyone employed in a large industry lost their jobs. Further, those with easily transferable skills will be able to find work in other industries. It’s a bit like investment advice – don’t have all your eggs in one basket, as if one stock or industry falls, you lose all your money.

So how do we measure industry diversification in an area? There are a number of ways, but most researchers use a ratio of the proportion of people employed in each industry in the area compared to the proportion for a much larger area. This is call the Hachman index. The assumption is that the much larger area is diverse, so this is used as a benchmark. In the Australian case, it is usual to use the Australian average as the benchmark. Put simply, the method compares the proportion of people employed in each industry in your area to the national average, and sums this to get an index. The formula is:

It should be noted that the Regional Australia Institute uses the Hachman index as their index of economic diversification (

The map below shows the Hachman index for each LGA across Australia. If you click on an area, you will also see the main employer in the area; and the percent employed in this industry.

It can be seen that areas close to cities tend to have higher diversity; whereas areas further from cities had less industry diversity. This is probably not surprising – many of the people living in these LGA’s close to cities will work in the city. Transport networks to and from these areas are also good, so industries find it easier to set up in these areas. This finding is also consistent with our findings from an index of adaptive capacity, designed by a team at the University of Canberra and published here. LGA’s on the Eastern seaboard also had reasonably high industry diversity.

There were a few areas in Northern NSW which had low industry diversity, including Walcha and Gwydir. The main employment in these areas was Agriculture. Areas with high industry diversity (eg, Bathurst; Wagga Wagga) tended to have the main employer being Health Care and Social Services. Both these inland cities have base hospitals. This attracts doctors, nurses, specialists, etc. Universities also contribute significantly to employment in an area, not only by employing individuals, but also by attracting in other industries, as there is a supply of graduates to work in the industry. Both Wagga and Bathurst have a university.

Figure 1: Map of Hachman index by LGA

So what can you do if your LGA shows low diversity? There are a number of options I would suggest.

  1. Identify what employers you do have, and work with them to attract supporting industries to your area. For example, if you are an agriculture based area, identify what type of agriculture is happening; and then look to find some people to start a supporting industry. If you are a dairy area, try to get some locals to start making cheese. If beef cattle, try to get some local restaurants started that use the local produce. If wool, why do we send our wool to China for processing? Start a small wool scouring plant locally and then build on it. Just some ideas – however see my next point on not relying on one saviour idea…
  2. Keep in mind that you shouldn’t rely on one saviour idea. The number of communities I have visited that thought a rail-trail and tourism was going to save them (numerous regional communities); or a casino/a rocket launching site (Christmas Island). You need a comprehensive plan, not a flash in the pan. This plan should start small; it should involve consultation with the community; it should use actual data from your community to inform it; and it should be applied.
  3. Read our report on the Community Adaptability Tool , designed as a theoretical and applied tool to develop adaptable communities.

As my previous posts have shown, we are going through turbulent times in terms of employment, and regional communities are going to bear the brunt of this. Your community needs to be prepared for an uncertain future by planning now.

In my next post, I will talk more about the community adaptability tool, and how this can be used in your community.