Grattan Institute chief executive John Daley has warned the Latrobe Valley not to pin its job creation hopes on decentralisation or to rely on governments to increase jobs.
His comments follow the publication of the Grattan Institute's State Orange Book, which provides guidance for state governments on policy priorities and argues decentralisation schemes are ineffective in encouraging people to move from cities to regional areas.
With job creation at the front and centre of the upcoming state election for the Latrobe Valley, Mr Daley said decentralisation schemes, such as the state government's GovHub, would not create many jobs "in the scheme of things".
"At the margins, you can get another hundred government jobs through the GovHub, of course you can, but the question has to be about whether this is the best way to spend taxpayer money?," he said.
"If you look at the SEA Electric electric vehicle factory ... that is possibly going to produce more jobs but of course the issue is at what price? Would that company have set up in the Latrobe Valley anyway?"
While the State Orange Book report stated assistance should be provided to regions with declining industries, such as the Latrobe Valley, Mr Daley said "we are wasting our time if we think government investment is going to materially increase jobs".
"It hasn't worked in the past, it hasn't worked around the world," he said.
"With less jobs in the power industry ... we need to be retraining them, but we do need to be upfront with them that many people will be better off if they move away from the Latrobe Valley."
Mr Daley said many low-income people who chose to move away from their hometowns as a result of losing their houses to Hurricane Katrina, that hit the US Gulf Coast in 2005, had better employment outcomes and incomes than those who had not lost their homes and stayed.
"They moved to a place that had better opportunities," he said.
"Of course people are attached to the place they live – I completely understand that.
"You have more chance of actually helping people if you confront the reality rather than create false hope. If the reality is that for some people, their lives will be much better if they move, we should be prepared to suggest to them that they move on."
Mr Daley said state governments should be investing money to "improve the lives" of people in the Latrobe Valley, such as health services, education and recreation facilities.
"Governments have obligations to people who live in the Latrobe Valley, but unfortunately governments do not have a magic wand to make economic growth happen in regional places," he said.
To read the Grattan Institute's State Orange Book report, visit grattan.edu.au/wp-content/uploads/2018/10/911-State-Orange-Book-2018.pdf.