State budget estimates for future economic growth have again been rejected in a major economic report that expects “sluggish” performance in the next two years.

In its latest twice yearly assessment of the South Australian economy, the South Australian Centre for Economic Studies (SACES) finds that economic conditions in the state have deteriorated since late 2013.

The centre’s latest Economic Briefing Report, is being released today.

Its the latest economic assessment of the budget to reject key economic assumptions by the State Government. Uni SA economist Professor Dick Blandy said on Monday that the budget figures were misleading and unconvincing.

Today’s SACES report notes that South Australia’s economic performance measurement – state final demand – contracted over the summer period, falling by 0.2 per cent in real trend terms in the December quarter 2013 and a further 0.4 per cent in the March quarter 2014.

“A decline in business investment activity has been the biggest drag on final demand in South Australia, having fallen in three consecutive quarters,” the report notes.

“Manufacturing investment has fallen over the past year to be at its lowest level in 20 years.

“Mining investment did rise over the past year but appears to have reached the peak of its current investment cycle.

“A contraction in public sector investment and slower growth in public and household consumption expenditure have also contributed to the recent weakness in South Australian final demand.

“The latter would reflect ongoing soft labour market conditions and a decline in household confidence in response to a series of bad economic news, including GM Holden’s announcement late last year that it would eventually cease local vehicle manufacturing.”

The SACES estimates for economic growth in future years is at odds with official state Treasury estimates in the budget released last week.

Where state officials claim the economy will grow by 2.25 per cent and 2.5 per cent in the 2014-15 and 2015-16 years, SACES’s economists take a more conservative view, estimating movement of 1.25 per cent and 1.75 per cent for the respective years.

The credibility of the State Budget estimates was also queried earlier this week by the University of South Australia’s Dick Blandy who lashed out at the budget on ABC radio on Monday.

“This is a fraud,” Blandy had told Treasury officials last week.

“The document is not very convincing in its estimates of our economic progress,” he told 891ABC radio when asked about his outburst.

“It forecasts growth rate of 1.75 per cent in Gross State Product while also recognising a fall in employment.

“This means that labour productivity will have to rise three per cent for the GSP figure to be realised.

“There is no explanation how this surge in productivity (will occur).

“There is no discussion of what will drive the economy.

“There is no evidence for economic change.”

Blandy’s assessment of Treasury estimates followed last December’s rapid evaporation of forecasts in the Mid Year Budget Review.

On that occasion, the estimates of economic improvement lasted less than one day.

The MYBR document had estimated annual growth of 2.25 per cent for the 2013-14 financial year,but the following day ABS figures showed South Australia’s struggling economy retreating by -0.5 per cent, the fourth negative result from the last six quarters.

Today’s SACES report does, however, see some positives.

“One positive area of domestic activity has been residential building which has recovered solidly over the past year and should remain at a healthy level through 2014 given recent trends in residential building approvals,” it states.

“The weakness in domestic demand contrasts with strong growth in overseas exports of goods.

“The increase in exports has been driven by an increase in mining production while the move of the Australia dollar to a lower level over the past year has also supported exporters.”

The road ahead, however, remains sluggish.

“The outlook for the coming financial year is for a continuation of subdued GSP growth.

“The main factor detracting from the outlook is potential for a further decline in business investment.

“If businesses’ expectations from earlier in the year are any indication, business investment will decline in 2014/15. Expectations of lower capital spending are broadly based, with investment projected to fall for mining, manufacturing and other industries.”