Deloitte Access Economics’ quarterly Business Outlook forecasts economic growth in South Australia of 2.0 per cent in 2022-23 and 1.6 per cent the following year.
This compares with national real GDP growth of 3 per cent in 2022-23 and 2.5 per cent in 2023-24.
South Australia’s 2.0 per cent forecast growth in real growth state product is a significant fall from the 5.2 per cent forecast growth in 2021-22 and the 4 per cent achieved in 2020-21.
The growth in 2022-23 is expected to be driven by a 7.2 per cent boost in exports.
“There is some upside for SA commodity exports as a result of higher global prices – namely for agricultural products like beef and barley,” Author Stephen Smith said in the report.
“That benefit is likely to also extend to export volumes over the next 12 months as the state takes advantage of global demand.”
The state’s good record on keeping COVID largely under control and avoiding the longer, harsher lockdowns of other states meant SA was able to emerge a winner in terms of internal migration through the pandemic, the report said.
“That ended a prolonged period of losing out in the net interstate migration stakes over the 30 years in the lead-up to the pandemic,” Smith wrote.
“With state borders now open, a possible reversion to negative net interstate migration would put population-driven sources of economic growth in SA at risk, such as household consumption.
“It would also likely mean a slowing of jobs growth, which could see SA returning to the unenviable position that it held for some time prior to COVID, having a structurally higher unemployment rate than most other states and territories.
“Overall, the outlook for the SA economy in the coming year is relatively strong, but growth is set to moderate further out as the state grapples with many of the same structural challenges that it faced prior to the pandemic – most importantly, how to sustain population and employment growth at a time of particularly fierce competition for talent right across Australia.”
Nationally, Smith predicts that price growth will peak at 6.6 per cent in the second half of 2022, while the cash rate could peak below 2.5 per cent in the current tightening cycle.
“However, any sign of further acceleration in price growth would see the RBA lift rates further and make the balance between fighting inflation and supporting economic growth more challenging,” he wrote.
“That would inch Australia closer to ‘stagflation’ – a central banker’s worst nightmare.”
Plausible risks to the downside include the USA entering a recession that drags down the global economy, and a larger drop in house prices than the 15 per cent many are expecting.
There are also renewed concerns over Australia’s energy market with reliability issues around ageing coal-fired power plants, Smith wrote.
He predicts wage growth lifting to above three per cent in 2023, with his base case forecasts assuming a wage-price spiral is avoided.
“However, the prospects of that occurring are greater than before the pandemic, and would risk a period of more entrenched inflation.”
– With AAP
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