There is a silver lining to the dark economic clouds that hang over South Australia, say the analysts at economic forecaster Deloitte Access Economics.

The silver lining is that the while 2000 direct jobs will be lost from Holden’s closure, most of the rest of the economy should hold up okay.

If that’s the good news, then the bad news must be a shocker.

“There’s not much joy to be had in the South,” Deloitte Access’s analysts say in the opening comments on SA in their latest Quarterly Business Outlook March 2014.

“The list of high profile job losses is pretty stark, and that pack of announcements regarding future job losses comes at a time when the state’s economy is already shedding jobs (and when job vacancies are falling even faster).

“In addition, room occupancy rates are not showing much strength, not helped by Australians holidaying overseas rather than in South Australia, while the state’s population and output growth is falling further behind the national average.

“Add in the impact of a cliffhanger election and a State Government dependent on votes over and above its own to stay in power, and it is no wonder that gloom is taking a toll. That gloom is, of course, centred on the loss of jobs at Holden.”

Still looking for the good news?

This is how the analysts painted a rosy glow on SA’s woes: “However, as we have been at pains to point out, although the news on that front may indeed be bad, it has also been very much overplayed.

“At the same time as Holden announced that its local manufacturing operations would close in 2017, the $A was dropping down from its peaks.

“We rate the latter development as more important than the former – including in terms of its implications for the state’s job outlook.”

Deloitte Access says the tales of the state economy’s death have been somewhat exaggerated.

“Would it surprise you to hear that South Australia’s exports just hit a record high, that business investment in the state remains at near record levels, and that the retail sector is enjoying its strongest showing for some time?” they ask.

“Or indeed that the leading indicators of growth in the pace of home building are all wagging their tails at the same time?”

Now that’s true – unless you adjust the export figure for year-on-year inflation and add the latest housing finance commitments data that show a slowdown in home building.

Deloitte Access, however, can still find a silver lining.

“It is true that population growth in South Australia is only half of that evident nationally, down from two-thirds just a few years back.

“Even so, that still leaves population levels growing around 15,000 people a year.

“That, combined with replacement of older housing stock and the changing housing requirements of the state’s population, provides the bedrock demand for housing construction in South Australia. Add in low interest rates, housing affordability at its best since the aftermath of the global financial crisis, and solid State Government assistance, and we expect further good news on the home building front in the offing.”

They do – but most economists don’t.

Deloitte extrapolates further: “In turn, good news on home building and renovation usually supports extra retail spending too, as do house prices (which may have risen less in Adelaide than other capitals, but have nonetheless made gains).”

We’ll take that little piece of positive forecasting; there’s precious little else to hang onto.

As for that Holden thing – don’t worry, the outlook has that covered.

“… the number of jobs directly lost in South Australia as a result of Holden ending its local manufacturing operations is likely to be less than 2,000 people,” it says.

“Although that is undoubtedly a disaster for the individuals involved, it isn’t a disaster when measured against the state’s employment base of 800,000 people. More broadly, although the state has a large car and parts manufacturing sector – the latter is two times larger in South Australia than in the ‘average’ State – it isn’t a major part of the wider economy.

“As we’ve said before, SA’s economy is larger and more resilient than many realise, and it is important not to exaggerate the risks here.”

There are other challenges, the analysts note, but the good news is that it can’t get any worse – they think.

“Although this state faces some considerable challenges, it is by no means clear to us that those challenges have been notably worsening of late.

“For example, the initial exploration completed in the Arckaringa Basin suggests there may be an enormous shale oil gas opportunity in the area surrounding Coober Pedy. And mining-related construction won’t be going away, with rich mineral deposits such as the country’s largest iron magnetite resource on the Eyre Peninsula.

“And while ageing is on the one hand a growth challenge for South Australia, too many people forget that it is also a massive growth opportunity for the state, with increasing demand for convenient access to a range of health and other services.”

So, in summary and over the long term, what do the analysts see in their outlook?

“We see pretty much the same longer term trend as we’ve been projecting for a while.”

Here’s how the DAE Business Outlook rates the rest of the nation:

• Australia is an economy in transition, with its economic strength gradually shifting from the resource States back towards the south and east. Yet that transition will be patchy, particularly thanks to the resilience of project spending in Queensland and the Top End. That will give growth in these two regions an Indian summer. And the transition is also patchy because the job killing abilities of the $A have cast a long shadow – for example, car manufacturing will still be shedding jobs in 2017. Even so, these dice have now been thrown, and we continue to expect the ‘two speed split’ in state performance to narrow a bit further in the next few years.
• NSW is inching its way up the growth league ladder. Low interest rates and a strong recovery in NSW housing construction have combined with problems for Victoria (due to the $A) and the resource States (due to the construction cliff) to boost NSW’s relative rank.
• Victorians have been reading horror headlines – Ford! Toyota! Alcoa! Yet the outlook isn’t nearly as bad as those headlines may make it seem. The $A’s recent fall is bigger and better news for job prospects in Victoria than the known negatives of a series of upcoming closures.
• Queensland has still got gas in its tank (with the mega gas developments still underway), and is also projected to be an outperformer in both retail and housing construction, with our forecasts seeing the State accounting for a rising share of these growing national markets.
• Western Australia’s mining construction boom is losing steam, as are its population growth and hotel occupancy rates, leaving the unemployment rate rising. Yet we see the slowdown as short-lived, with rising exports getting State economic growth back to trend by 2016-17.
• Tasmania has turned the corner – retail sales growth is back with a vengeance, population gains are lifting and unemployment is falling. Yet the good news needs to be taken in context: the State’s demographics are doleful, and there are some notable medium term challenges.
• The Northern Territory is in the prime of its business cycle, showing great strength. Yet that strength will be hard to maintain – the current level of project spending is enormous, and although there are new projects jostling in the pipeline, they may not match the Inpex effect.
• Canberra’s job gains are still outpacing those nationally – we kid you not. But there’s already pain in the job losspipeline, plus the risk the imminent Federal Budget adds to the pressures on an economy already feeling the squeeze from a shrinking housing construction sector.