Macks Advisory’s Roundup of SA’s Positives for 2015
To be sure, Government debt will continue to rise in Australia as it will in many countries given current economic fundamentals.
Whilst the growth in government spending and debt during the past GFC period was welcome policy, arguably but particularly in the case of the most highly indebted countries, it must inevitably start a process of deleveraging that would require implausibly large increases in real GDP growth OR extremely deep fiscal adjustments. The consequences of this will visit us. It will, and is, affecting South Australians.
But to crystallise what economists and business analysts have been telling SA media and attendees at a succession of business lunches in the past couple of months, you get gems of positivity.
Despite concerns about the motor and marine industries, some pundits are claiming burgeoning opportunities for the State will emerge in 2015 that business leaders, eschewing all negativity, should not hesitate to grasp.
Indeed, Deloitte Access Economics partner Chris Richard told a pre-Christmas luncheon for 250 business people “The prosperity gap between the States is narrowing. SA can look forward to a bright future despite manufacturing concerns, for in fact not only are economic fundamentals better than most of you think, but they’re moving your way.”
Analysts agree that manufacturers, hard hit in the past by disadvantaging exchange rates, are now well placed to consolidate existing businesses and grasp new local, national and international opportunities as the $A hovers around 78c (tipped in some quarters to be even lower in a couple of years).
Outlook for SA
Towards the end of 2014 SA’s merchandise exports were $887m a month against imports of $624m – a $263m trade surplus at a time when nationally there was a deficit. (After eight successive months of deficits Australia’s annual exports were worth $27.1bn but imports had cost $28bn.)
According to the Australian Bureau of Statistics (ABS), SA’s exports over the same period were worth $12.291bn, a 9.2% increase on the previous 12 months—after ten successive monthly increases.
SA’s exports increase almost doubles the national growth rate (4.8%), exceeding all other States (including Victoria up 7% and WA up 5%), and bettered only by the Northern Territory (12%).
Economists are saying SA has resources and geographical proximity to benefit substantially from an Asian boom that’s stabilising most encouragingly. One went so far as to claim: “We have the best back yard in the world”.
Certainly widespread expectation is that the record value of $7.5bn SA-produced resources in 2013-14 will be exceeded in the current financial year.
The local scene
The South Australian Centre for Economic Studies estimates the total number of direct and indirect jobs from 84 of 88 new projects listed in the State Government’s 2014-15 Major Developments Directory will peak at 10,400 in 2015-16 – should all projects proceed.
They include the $620m Darlington upgrade of the north-south corridor, Playford Council’s $400m redevelopment of Elizabeth’s CBD, the $63m redevelopment of Flinders University’s Plaza and student hub, and provision of increased capacity for the SA Water Aldinga Wastewater Treatment Plant, to cost $62.86m.
Premier Jay Weatherill has said the Directory lists 326 projects to cost $94.7bn of which 38% involves the mining and energy sectors. He’s pointed out that many companies in these sectors operate education facilities training the next generation of graduates who will work in hard and soft infrastructure that will benefit the State as a whole.
The first phase of the redeveloped Adelaide Convention Centre was handed over by the builders on 3 December. Macks Advisory understands close to 600 conferences, seminars and events have been booked, including 30 events, each of which is expected to bring at least 1000 visitors to the city.
Latest figures we’ve seen on confirmed bookings for tourism events indicate they’ll bring more than 70,000 people to SA and provide a $188m boost to the State’s economy.
And international tourism is increasing.
According to Tourism Research Australia, the 390,000 overseas visitors to SA in 12 months to the end of September 2014 represented a 7.5% increase over the previous 12 months, during which there was a 7.2% rise in tourists’ spending to $735m.
UK visitors were up 22% to 69,000, those from China up 13% to 31,000 and from Malaysia there was a 50% increase to 20,000.
Job positivity
Less protection and more free trade has hurt manufacturing much less than many people thought it would, and has tended actually to help other industries.
While tourism figures are encouraging, it’s still early days to gauge the full effect of the falling dollar on these and online retailing, where nonetheless there does appear to be growth in permanent jobs, with more to come if domestic tourism continues to grow.
Because professional jobs in the private sector are also once more on the rise -- as is the case with finance and media jobs -- economists say this is unequivocal good news longer term for industries that have been directly driving much recent growth in blue collar jobs in retail, services and hospitality.
Furthermore the labour market generally has survived losses in mining jobs better than many forecasters expected, especially where the can-do attitude of skilled workers has enabled them to quickly return to jobs they forsook in the mining boom.
A subsiding dollar, implementation of new trade agreements, flexibility in working hours and childcare, all seem to bolster expectation that the labour market will perform strongly in 2015.
A surge in private sector jobs growth is what’s been needed since the GFC and it needs to be growth sufficient to entice some of the hidden unemployed back into the ranks of official job seekers.
It’s a heartening situation given the tight ABS definition of what constitutes job seeking, and the government crackdown on dole payments.
Thus it is time to start a debate about the economic model that South Australia operates under; where we get our State revenue from, where it will come from in the future and how it is allocated; not just dialogue about redistributing tax burdens, moving deck chairs etc. This is not the point. It’s time the whole economic model was re-invented.
All things considered, there’s probably never been a better time for South Australians to follow advice first delivered by the late beloved Louis Armstrong in gravelly-voiced song on New Year’s Eve 70 years ago to patrons of New York’s Zanzibar Club: “Ya gotta accentuate the positive, eliminate the negative, latch on to the affirmative….and don’t mess with Mr In-Between.”
For more information, contact Macks Advisory on 08 8231 3323 or visit our office at Level 11, 99 Gawler Place, Adelaide SA 5000.
