Australian Regional Capacity Index

Australian Regional Capacity Index

By any measure, Australia would be considered a resilient country, having weathered many economic and environmental challenges in recent times. Indeed, interest in this concept has recently gathered pace with resilience and related concepts of adaptation, adaptability and adaptive capacity finding their way into academic debate and government policy documents in the context of regional capacity.

Partner, Chief Economist

KPMG Australia


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Measuring regional resilience

This interest centres on the question of how well equipped are local and regional economies to adapt to challenges ranging from the rise of global competition for industries, unplanned major plant closures through to technological innovation revolutionising work practices. As we know intuitively, the capacity for individual regions to deal with significant economic, social and community challenges varies significantly.

In the USA, we have seen a regional capacity index developed to provide a single statistic summarising a region’s ability to bounce back from a future unknown stress. This work has been led by Dr Kathryn Foster, President of the University of Maine at Farmington. Dr Foster suggests that a region has a ‘pre-stress capacity for resilience’ and that, when a region encounters a stress event, it reacts with a ‘resilience performance’.1

"The implication of this analysis is that policy makers need to strive for the fundamentals of a diverse, investment-orientated economy as well as the complementary building blocks of an educated, healthy population and a safe and engaged community."

Brendan Rynne
Chief Economist, KPMG Australia

The has led to the development of the United States Regional Capacity Index (USRCI) made up of twelve equally weighted indicators, classified into one of three capacity types, that is, regional economic, socio-demographic, and community connectivity. This reflects the view that resilient regions need not only economic strength during times of uncertainty but also a strong social fabric binding the community together to ensure it can return to ‘good times’. Offering an alternative to traditional performance metrics, such as population or employment growth, the single statistic may be considered an indicator of capacity rather than past performance.

Drawing on available Australian data, I have applied this approach to the Australian context to explore the measurement and evaluation of regional resilience. The result is the Australian Regional Capacity Index. It is also based on the three dimensions of capacity as follows: 

  • Regional economic capacity – indicators capture concepts of income equality, economic diversification, regional affordability as well as a measure of the dynamism of the regional economy
  • Socio-demographic capacity – indicators capture concepts of poverty, educational attainment, female labour force participation and life expectancy
  • Community connectivity capacity – indicators capture how familiar with and civically active a region’s residents are as expressed by voter participation rates, net overseas migration, incarceration rates and participation in sport. 

These indicators do vary from the twelve included in the URSCI, however, these dimensions provide an ‘Australian-ised’ mix of factors influencing a region’s capacity to ‘bounce back’. It is recognised that other factors such as environment and geography, governance and ability to respond to natural disasters are also likely to affect a region’s resilience capacity. However, data for these types of indicators are rarely available or reported on a consistent basis across regions.

The thinking underpinning the development of Australian Regional Capacity Index is set out in this KPMG report. This report seeks to start the conversation. Ideas and insights on how the approaches applied in this analysis can be enhanced to support an ongoing evaluation of resilience at a sub-national level are most welcome.

1. Brookings Institute Press, Urban and Regional Policy and its Effects: Building Resilient Regions, p2



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