Indications are that 2021 will be off to a good start
Before final effects of the Parafield COVID-9 cluster were known, 38,000 SA businesses came off the JobKeeper program and the Australian Bureau of Statistics (ABS) reported SA’s domestic final demand (DFC) at 6.7% was bettered by only 0.1% in Queensland and NSW.
Further favourable indications are a Department of Finance statement showing Australia’s deficit tracking at $3.6b below expectations for four months into the 2021 financial year, and current surging consumer confidence
This is in the context of Australia’s emergence from its first recession in 29 years and a splurge in household spending that has resulted in the strongest three months of national economic growth in 45 years.
Almost 61,000 SA businesses and more than 200,000 South Australians had been relying on the $1500-a-fortnight wage subsidy under the first phase of JobKeeper, but shortly before the Parafield setback only 23,000 businesses had applied for the program’s second phase which was then supporting about 66,300 workers at the lower rates $1200 or $750.
This was also at a time when jobs and wages data showed wages in SA had recovered to within 0.7% of pre-pandemic levels.
Further indications in SA
The latest Business SA-William Buckley survey shows business confidence up 28.3 points to 95.3 in the September quarter, the biggest jump in 20 years and the highest level achieved since 2019.
Director of the Australian Industrial Transformation Institute at Flinders University John Spoehr says SA is “on the verge of a manufacturing renaissance” that has attracted at least 15 hi-tech international organisations to the state in the past 12 months”.
He says that because BAE Systems and Naval Group operating here on shipbuilding contracts totalling $85b have deep connections in the UK and France, there is every indication companies in their supply chains will be looking to establish offices here.
BAE Systems already works with 1500 Australian companies, and according to Chief of Future Business Chris Keane is spending “more than $70m” with SA companies.
Naval Group two months ago opened a $25m office at Port Adelaide and launched a “Local Manufacturing Package” worth almost $900m by inviting local defence industry companies to deliver submarine equipment.
Technology investors are also showing considerable interest in SA companies that have artificial intelligence capabilities that intersect with developments in defence, space exploration, and cybercrime.
US technology giant Accenture is establishing a hub here along with global organisations Neoen, Tesla, Airbus, Berkshire Hathaway, Massachusetts Institute of Technology and award-winning special effect company Mr X.
Establishing their presence in Adelaide are French defence engineer LGM, IT company Adexflow International (also based in France), Bureau Veritas Offshore and Marine, SE4, Squad Australia Cyber Security, Saber Astronautics, together with consultant companies Cognitive Companions and Ghenova and Space Specialists.
Yet local businesses struggle
All this plus encouraging retail figures may indicate a good start to next year, but Business SA CEO Martin Haese believes it shouldn’t disguise the need for ongoing support needed by many businesses - “particularly hospitality and service businesses that rely on CBD office workers who’ve been advised to work from home”.
State Treasurer Rob Lucas reports that although it’s clear from JobKeeper figures that SA’s economy is recovering, there’s nonetheless been high demand for the second round of SA’s $10,000 cash grants for small businesses - $22m being paid out in a three-week period last month. Businesses will now have till the end of February to apply for grants.
Federal Treasurer Josh Frydenberg says that while the recent GDP increase of 3.3% exceeds market expectations and Australia has performed on health and economic fronts “better that nearly any other country in the world”, there is “a lot of ground to be made up and many Australian households and many businesses are doing it tough”.
Accordingly he says the government, having decided to taper down macro supports like JobKeeper, will however be considering targeted support “where appropriate".
Three of the four major banks have recently upgraded their forecasts for GDP, and NAB has suggested it could surge to 4.1%.
But to put our proposition in context – namely that indications suggest a good start to 2021 -- we point out that even if NAB is right, a 4.1% expansion would still see the economy 3.9% below what it was last year.
While Macks Advisory also notes NAB’s reported forecast that national output won’t return to the pre-COVID-19 level until towards the end of next year, we suggest nonetheless there is ample justification for our belief the New Year will see SA making a good start in that direction.