Small-to-medium size communities like Gunnedah should not try to diversify their economy too much, according to a new report by the Regional Australia Institute.
Instead, they should keep doing whatever they do best - except if that 'specialisation' is in mining.
The counter-intuitive new findings are contained within a new report - 'The impacts of specialisation and diversification of Australia's mid-sized towns' - released this week.
The RAI report found that communities which 'double down' on industries where they have a competitive advantage were likely to build an economy with higher wages and stronger growth.
But mining towns, which tended to be buffeted by the economic headwinds of international markets, could build population and jobs by trying to build an industrial base outside the sector.
RAI Chief Economist Kim Houghton said the report findings were robust and provided useful direction for local political leaders.
"The dominant sort of discussions we hear from regional leaders is that they think they need to diversify. This analysis shows that that's not always the best option," he said.
"It depends a fair bit on what you specialise in and where you want to take your community."
'Sunrise' - emerging, new - industries like renewable power tends to help promote growth in a community.
But for communities dependent on 'sunset' industries like thermal coal mining, early diversification out of the sector could be a big economic benefit and avoid a rapid decline, he said.
"If your specialisation is an industry that's on the up then doubling down, getting more into it, is proven to work.
"If it's in a declining industry, the earlier you move the better. The experience from Europe and from this analysis shows that if you're able to parlay the skills and capabilities that were embedded in that declining industry and direct them towards an industry that's still got some prospects, that's the sweet spot.
"It's not to diversify completely out of everything to do with coal mining, in that sense. But to actually leverage those business capabilities that relate to that coal supply-chain and turn those towards something else."
Member for Parkes Mark Coulton said improving technology and productivity had, paradoxically, cost jobs because business could work more efficiently. He said diversification into industry and recycling would be a boon for the region.
"I think for too long we've thought about the jobs being in mining and agriculture," he said.
RAI researchers used econometric analysis to examine the growth patterns of towns and cities between 5000 and 50,000 people.