The Budget stimulus at the heart of the business taxation concessions is not going to translate into significantly higher economic or jobs growth, according to the Budget papers.

Economic growth will lag the rest of the country while employment growth – at a time when South Australia’s unemployment rate is the highest in the country at 7.6 per cent – is minimal.

The Budget papers show the state’s economic growth, measured by Gross State product (GSP), is expected to only edge up from an estimated 1.75 per cent in the year to 30 June to 2 per cent in 2015-16, where it will then flatline for the next two financial years. GSP growth of 2.25 per cent is then forecast for 2018-19.

By contrast Gross Domestic Product (GDP) nationwide is expected to grow progressively from 2.5 per cent in 2014-15 to 2.75 per cent, 3.25 per cent and reach 3.5 per cent by 2017-18.

Economic growth in the order of more than 3 per cent is generally regarded as necessary to start making a significant reduction in the ranks of the unemployed.

According to the Budget papers, employment in South Australia is expected to grow by 0.5 per cent in the financial year to 30 June and stay stalled at one per cent growth for the next three financial years, before growing by 1.25 per cent in 2018-19.

On the economic outlook, the Budget papers maintain “the trade-exposed sectors are expected to pick up as the dollar depreciates further and consumer spending improves”.

“The lower Australian dollar and very accommodative monetary policy will support new investment,” the papers say.

“However, the state will continue to face a range of challenges over the next few years arising from the significant structural adjustment task ahead when car manufacturing stops in 2017.

“Further challenges include falling commodity prices which are affecting mining operations in South Australia.”

Treasurer Tom Koutsantonis told the media that the economic assumptions included in the Budget were deliberately conservative and reflected the significant changes pending in automotive manufacturing and the related supply chain.

In his speech to Parliament, Koutsantonis will say the “significant impact of the closure of the Alinta operations in Port Augusta and Leigh Creek” could not be ignored.

“The loss of a coal mine and he closure of the coal fired power generation will have a significant impact,” his speech says.

Responding to the dislocation that will occur in the city’s northern regions, Koutsantonis announced that an extra $1 million would be added the Government’s  Northern Economic Plan, taking its funding to $5.4 million.

Koutsantonis said the plan “will focus on jobs creation and skill development” and support a number of projects in the near north, including a $2 million investment in the Northern Food Park that will provide “expansion opportunities for new and existing businesses that have outgrown their current premises”.

The processing plant at Olympic Dam

The Budget papers confirm that some of South Australia’s traditional industries are not faring well.

Mining royalties have dived $70 million in the current financial year under the combined effect of lower prices for oil and iron ore and the impact of lost production due to one of the main Olympic Dam grinding mills being out of commission for most of the past six months after an electrical failure.

Mining royalties have slumped from the $323 million estimated in the last Budget to an estimated $252 million in the year to June. And the royalty stream is expected to only recover slowly, reaching $332 million by 2017-18.

Reflecting depressed prices for key commodities, the Budget papers reveal that the Department of State Development is to “develop a copper strategy and a magnetite (a form of iron) marketing strategy in collaboration with industry, research institutions and community”.

On the broader economic front, the Budget forecasts that the Government’s fiscal position will turn around from an estimated deficit of $279 million this financial year to a 2015-16 surplus of $43 million. Surpluses are then forecast to rise in successive years to $654 million,  $727 million and $961 million by 2018-19.

Whether these convince market commentators like the credit rating agency Moody’s – which called this week for a credible plan to return the Budget to sustained surpluses – remains to be seen.