The South Australian Centre for Economic Studies has issued a wakeup call to the State Government and to the South Australian community in general in its latest assessment of the state of the South Australian economy.

 

In a recently released report the Centre finds that the South Australian economy grew only weakly over the past twelve months and that the immediate outlook is for continued weak growth in 2012-13.

 

The implications of this are that business conditions will remain difficult in many sectors of the State-s economy and new employment opportunities will be in short supply.

 

The Centre-s findings are contained in its latest Economic Briefing Report, which provides a twice yearly assessment of the state of the South Australian economy and is prepared by economists from the University of Adelaide and Flinders University.

 

In the report the Centre finds the weakness in the State-s economy is evident across several key sectors, including employment growth, household spending, new home building activity, and new private sector investment in the State.

 

The report states that while the State-s continuing low level of unemployment, at around 5.1 per cent, is an on-going positive outcome for the State, the reality is that labour market conditions in South Australia have continued to deteriorate over recent months. This is indicated by the fact that the number of persons employed in South Australia in May 2012 – the latest period for which official data is available – was less than the number employed through the middle of last year. Similarly, and even more worrying, the number of persons employed on a full time basis has also declined.

 

Growth in total employment in South Australia is now the weakest it has been for more than 10 years.

 

The report finds that the reason South Australia-s unemployment rate has not increased over the past twelve months despite the decline in employment is because there has been no growth in the State-s labour force. To the contrary, slower population growth and a decline in the labour force participation rate have resulted in a decline in the size of the State-s labour force.

 

According to the report the current weakness of the State-s economy is also evident in household spending, new home building activity and in new business investment.

 

Household consumption spending grew only weakly over the past twelve months (to March 2012), up only 1.8 per cent in real terms on the previous twelve months.

 

New home building activity in the past twelve months has fallen to its lowest level since 2001, and is still declining; while total new capital expenditure in South Australia (i.e. public and private expenditure) has remained essentially flat over the past twelve months.

 

The Centre does not expect economic conditions in South Australia to improve much over 2012-13.

 

The Centre expects growth in household spending to remain weak, notwithstanding the positive effects of the recent cuts to interest rates. Instead, growth in household spending will continue to be constrained by low levels of consumer confidence, continued weak growth in employment across the State, and a continuation of households- more cautious approach to borrowing and spending evident over recent years.

 

For similar reasons, new home building activity is also likely to remain weak.

 

Looking at new investment spending in South Australia, the report finds that while expenditure is this area will be supported over the next twelve months by the construction of the new RAH, the redevelopment of Adelaide Oval, and the continuation of a number of other major public sector infrastructure projects, the overall outlook is for only modest growth in new investment expenditure, at best. In particular, private business investment in the absence of the go-ahead for BHP-s massive Olympic Dam expansion project is expected to weaken in 2012-13. Whether or not the Olympic Dam expansion proceeds in 2012-13 is still uncertain, with the latest statements from BHP Billiton indicating that the BHP Billiton Board will now not give consideration to final approval of the project until later this year.

 

According to the report, the main bright spot in the South Australian economy over the past twelve months has been an increase in South Australian exports. This has occurred on the back of two consecutive good agricultural seasons and rises in mining output and mineral prices.

 

But even here the report is not overly optimistic, suggesting that there will likely be only modest further growth of South Australian exports in 2012-13, as “…agricultural exports are already at a high and the continuation of a strong $A will mean sustained difficult exporting conditions for South Australian manufacturers”. Mining exports are also likely to increase only modestly in 2012-13.

 

More information is here.