“If you want sustained jobs growth in the state, you have to provide employers with confidence in the future,” Treasurer Rob Lucas tells InDaily’s Business Insight, adding hopefully: “Once they invest, they start to employ.”
It seems confidence has indeed been improving – although a direct causal relationship to the election of the new government is hard to draw.
And although businesses have been investing significantly in capital, spending on new employees has yet to catch up.
Business confidence seems to be improving
South Australian business owners and managers seem to have become more confident in the future.
But the link to the Marshall Government’s election or its policies is difficult to infer from business survey data, and both the figures and the survey methodologies used to obtain it are mixed.
The quarterly Bank SA State Monitor surveys of 300 small business owners and managers found that business confidence began to rise steeply in late 2017, surged through early and middle 2018 and came off the boil late last year.
Business SA’s quarterly survey of business expectations shows a somewhat similar trajectory: business confidence beginning to rise in early 2017 before surging dramatically through the start of 2018 and settling on a relative plateau since then.
According to yet another survey, the Sensis Business Index, small and medium-sized businesses reported a net confidence rating of 34 in December 2017, rising to reach 51 in December 2018 after a temporary dip in September.
“I think that the most encouraging sign we see is (growth) in terms of business confidence,” says Lucas, asked about the Marshall Government’s effect on the state’s economy.
He says the Marshall Government is injecting a new “sense of optimism” in the business community.
“That’s reflected in the business investment figures (which have been) improving, certainly compared to the national figures,” he says.
“And they tend to be a lead indicator.”
Businesses are investing, and the energy sector is up
So has the sentiment translated into investment?
“Business investment surveys are showing really, really brilliant results,” deputy director of Adelaide University’s SA Centre for Economic Studies Steve Whetton tells InDaily.
“We only have data up to September, but business investment is ticking along quite nicely.
“That doesn’t necessarily help with jobs growth in the immediate run … but it’s certainly supportive of long- or medium-term jobs growth.”
Business owners and managers have increased their investment in equipment, plant and machinery but not on building purchases or maintenance, according to data from the Australian Bureau of Statistics:
Whetton says the growth in investment has been relatively evenly distributed across industries, but that the renewable energy sector has especially benefitted.
And he says the industry is likely to be a key area of growth over the next 12 months, especially “if you get policy certainty”.
“The combination of the inter-connector (planned to connect South Australia to New South Wales) and a (federal) Labor Government could really help the South Australian investment side of things,” he says.
“There are quite a lot in the pipeline too.
“(But) I would expect a lot of those announced projects to not happen if Labor isn’t successful at the Commonwealth level.”
He argues the scale of investment also suggests power prices are likely to continue to fall – creating a virtuous cycle for both business and consumer spending.
“Because of the scale of current and projected investment in renewable energy, it is fairly likely that we’ll start to see power prices come down, and that obviously will be particularly helpful for the business sector and household spending as well,” he says.
Lucas says the inter-connector to New South Wales will help reduce costs for South Australian businesses.
“The cost of doing business in the state has to be nationally and internationally competitive,” he says.
“We need to try to drive down costs … the inter-connector to New South Wales will be a key part of that.”
Jobs growth has “stalled”
The latest unemployment figures, released last week, were met with conspicuously inconsistent interpretations from the Government and Opposition.
At 6.3 per cent in January, South Australia’s seasonally adjusted unemployment rate was “the third worst in the nation”, Thursday’s Labor Party media release (correctly) says.
“Since the Marshall Liberal Government came to power, the number of South Australians with a job has decreased. This is extremely concerning,” Opposition Leader Peter Malinauskas is quoted as saying.
The Government, on the other hand, boasted that there were 9600 more full-time jobs in the SA economy in January 2018 compared to January 2019, and noted that SA’s trend unemployment rate of 6 per cent was “the third lowest of the Australian states” (also true).
Let’s not nitpick…
“In recent months we have seen strong full-time jobs growth, with more people finding work in our state as a consequence of employers responding favourably to this government’s policies,” were the quotes supplied to the media from Industry and Skills Minister David Pisoni.
Whetton tells InDaily the truth is a mix of both perspectives.
“Whilst it (employment) is up on January 2018, it’s down on the middle of 2018,” he explains.
“Obviously the Labor Party wants to focus on what’s happened from April through to now – which does show a slight fall in employment.
“Basically, as far as you can tell from the employment data, employment peaked around the middle of last year.”
Whetton puts it down to “another bad year” in the agriculture sector and a slowing of the jobs dividend from the rollout of the National Disability Insurance Scheme.
There’s no obvious, big driver of jobs on the horizon – but then, South Australia hasn’t had a big jobs growth for quite a while.
Labor Treasury spokesperson Stephen Mullighan argues jobs growth has “stalled”.
But Lucas characterises his opponent’s focus on the seasonally adjusted unemployment figure as “nitpicking” and decries “the whingeing, whining, niggling of the Labor Party”.
“Let’s not nitpick like the Labor Party has tried to do,” he tells InDaily.
Suffice to say that in Opposition, the Liberal Party regularly used seasonally adjusted unemployment figure to criticise the Weatherill Government.
But Lucas believes South Australians accept that “the new government is going to take some time to (implement its) policies”.
These include the payroll tax cuts for about 3000 small SA businesses, announced in Lucas’s September 2018 state budget.
Whetton says jobs numbers over the next year-or-so will be partly determined by the fortunes of the state’s farmers.
“Hopefully we’ll have a little bit more rain and the planting side of things will pick up a little bit or at least (the sector) won’t be plummeting in terms of its crop yields the way it has been over the past two years,” he says.
“The National Disability Insurance Scheme doesn’t look like it’s going to be a big driver.
“(And) a lot of the larger capital projects, both government and private sector, will gradually be tailing down over the next year.”
There is no indication of large-scale jobs growth any time soon, he argues.
“So unless you see something biggish coming along I’d expect to see some jobs growth return but I suspect it’s going to be slow-ish.”
“There’s no obvious, big driver of jobs on the horizon – but then, South Australia hasn’t had a big jobs growth for quite a while.
“The thing that really stands out is the lack of jobs growth, particularly over the past six months – whereas you haven’t seen any sort of slowdown in the eastern states.”
Lucas points to the Government’s plan to spend $200 million on training and apprenticeships – aimed at taking advantage of the Federal Government’s record planned defence investment in South Australia.
He says it would be a “crying shame” if tens of billions of dollars were spent in South Australia and few South Australians were directly employed.
“That’s why this $200 million in apprenticeships is so important.”
He also points to efforts by the Marshall Government to lobby the Federal Government over changes to the rules for skilled migration.
“If (the federal government is) going to keep the national migration numbers the same … we’re quite happy to take a bigger share,” he says.
“We see that as an important part of driving the economy.”
Inflation outstrips wages, affecting retail spending
Mullighan points out that inflation has outstripped wages growth in South Australia.
The consumer price index in Adelaide rose by 1.6 per cent between December 2017 and December 2018, meaning it has increased at a faster rate than weekly earnings.
“Wage growth remains slower than inflation, meaning households have less to spend in real terms, further slowing consumption and economic activity,” says Mullighan.
“Retail trade growth is slower than a year previously, and lower than national averages.”
He argues that there are “very concerning trends emerging in the South Australian economy”, compared to other states.
“In trend terms, Australian turnover (current prices) rose 3.2 per cent in December 2018 compared with December 2017 whilst in South Australia it only rose by 1.7 per cent,” he says, adding: “Since the election of the Marshall Government in March 2018, retail turnover has only risen by 1.3 per cent, whilst nationally it has risen 2.1 per cent.”
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