Holden may crash – and sooner than expected – but South Australia won’t, a leading economic report says.
The prospect of any substantial growth, however, is a long way off as the state manages its way through a prolonged period of setbacks including losing the car maker, Olympic Dam’s expansion and associated projects.
“Holden’s closure of its car making operations will hit the state’s manufacturing sector hard in the next few years, leaving a big enough hole to mean that neither new sectoral drivers or old ones will be able to generate much by way of immediate offsets in the short term,” the Deloitte Access economics Quarterly Business Outlook says.
“Yet that points to slow growth in this state rather than none at all.”
The report notes that growth in South Australia has been stuck in the slow lane for a quarter of a century.
The story wasn’t much better in 2013.
“Engineering construction activity in South Australia has been somewhat of a lame duck compared to what has been seen in the likes of Queensland, WA or the NT,” the report says.
“2013 turned out to be a year of ‘what ifs’ for the state, with the Olympic Dam expansion project placed on the backburner.
“And while public money in road and rail projects made some ground, it was never going to be enough to fill the pothole.”
The report – the latest in a line of economic reports that pitch South Australia as lagging national trends – comes as Premier Jay Weatherill talks up the state’s prospects.
“We’ve got to keep maintaining momentum for our state,” the Premier told FIVEaa breakfast this morning.
“We’ve rebuilt every part of our system here; our road network, rail and hospitals.
“There are people around who want to talk down the economy; last year we grew.”
Offical figures show South Australia’s economy receded in four of the last six quarters, while net growth for 2013 was 0.6 per cent, the lowest in mainland Australia.
Deloitte’s Outlook sees some positives in the economy’s future and urges the state to move on from the Holden setback.
“… a bit of perspective is handy here, at least in part because the automotive sector’s size and flow on effects are often exaggerated.
“To be clear, adding together both the car manufacturing and parts makers, they account for around 0.5 per cent of Australia’s economy and less than 1.5 per cent of South Australia’s economy.
“Besides, not all of the automotive sector will disappear in the next few years, suggesting that – with an upper limit of 1.5 per cent of its economy at risk – SA could at worst lose eight months of economic growth in a ‘typical year’ (the state’s growth averaged 2.4% a year in the past quarter of a century).
“That’s nasty. However, we would again plead for perspective: SA’s economy is larger and more resilient than many realise, and it is important not to exaggerate the risks here.”
The report warns, however, that the Holden impact may be sharper than expected, producing some short-term employment pain.
“Unemployment has already risen amid job losses over the latter part of 2013.
“Equally, there is a chance that the job losses in the auto sector will occur across just a couple of years, rather than being more spread out.
“Or, in other words, the economy is already weak, and the hit to it may be relatively concentrated in time rather than spaced out over a number of years.”
The report claims that while BHP Billiton has axed its planned Olympic Dam expansion, hope remains.
“Finally, although the expansion at Olympic Dam hasn’t yet got the go ahead, it will at some stage.
“This is a world class asset, and demand for its potential production will continue to rise over time.
“Moreover, initial exploration completed in the Arckaringa Basin suggests that there may be an enormous shale oil gas opportunity in the area surrounding Cooper Pedy.
“So feel free to mourn the loss of the Monaro. But don’t mistake a disaster for Holden’s local manufacturing operations and for some of its workers as being a disaster for the state as a whole.”
