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Economy

Challenges and opportunities ahead for the South Australian economy

Speaking at the 2020 Economic and Political Overview event in Adelaide, Premier of South Australia, the Hon. Steven Marshall, spoke openly about the challenges facing the South Australian economy, particularly in regional areas, but said that “South Australians should have great pride in the direction that we are heading.”

Reflecting on the recent history of the economy in South Australia, the Premier said that “there have been some patchy results,” but that “the last two years of our government have delivered results for the people.”

He drew attention to the stark divide between the economies of metropolitan Adelaide and regional South Australia. “The economic growth figures for last financial year present a tale of two cities. Adelaide’s economy grew 3.2 per cent against Australia’s overall growth of 1.9 per cent, but country South Australia is doing it extraordinarily tough with dry and drought conditions.”

However, discussing a recent economic update from Bank SA that found business confidence and consumer confidence in Adelaide had increased significantly, Mr Marshall said that “Adelaide’s strong growth is something that should give us cause for optimism.”

“I think that some of the policies that we are putting in place, such as removing payroll tax from small businesses, halving the emergency services levy in South Australia, and putting downward pressure on power prices, are creating a more positive outlook for the future. I personally think that South Australians are looking to put some of the issues in 2019 and some of the issues from early this year, with the bushfires, behind us and they want to think more positively about 2020 and beyond.”

The Premier spoke further on his government’s long-term economic plans.

“I think what we are building here is a much stronger foundation for economic growth and prosperity, not just for a few but for all, and we are laying down some of those fundamentals in terms of our policy development. Later this year we continue our strong plan for real change: more jobs, lower costs and better services with further improvements in business environments here in South Australia.

“On 1 July you will see a substantial reduction in water prices in South Australia. This is something that we have talked about for a considerable period of time. Of course you also see the land tax reductions taking us from the highest most uncompetitive land tax regime in Australia, from a top marginal rate of 3.7 per cent down to 2.4 per cent, a massive reduction in land tax in South Australia that will benefit 92 per cent of all individual investors and 75 per cent of company groups. I think these things will help us to continue the positive sentiment that we saw in the state monitor report this morning.”

The Premier was candid about the ongoing challenges facing the state economy.

“We’re not going to be without our bumps along the way. We have seen that already at the start of the year with the continuing clean-up of the bushfires and the recovery process which is underway. This is not going to be a simple process. It’s not something that money can be thrown at. This recovery is not going to take weeks or months the reality is this is a recovery that is going to take years.”

“I would particularly like to mention some of our drought affected regions in South Australia. I mentioned before that regional and South Australia went backwards last financial year. 70 per cent of our state is in dry or drought conditions many of it quite severe drought. Many of those areas have been in drought for several years now.

“There are desperate conditions across regional and remote South Australia. Often these people feel completely neglected. I think it is something that we need to have uppermost in our minds, certainly the government knows that there’s a great opportunity for economic development and employment growth in our state by leaning into the opportunity that is in regional South Australia. We have already started that work and it will continue into the future.”

The Premier offered further reasons for positivity.

“Despite these bumps – drought, bushfire and the coronavirus – I have massive cause for optimism for 2020 and beyond. Some of the changes that I see occurring are easy to spot here in Adelaide and South Australia more broadly.

“There is a greater focus on innovation. We will always be respectful to our traditional sectors of mining and agriculture and manufacturing and construction and other sectors that have got South Australia to where we are at the moment but we also have to have one eye to future industries, and how those future industries interface with traditional industries, so that we can maximise the opportunity which is before us here as a state.”

Mr Marshall spoke highly of Lot Fourteen, Adelaide’s “innovation neighbourhood” and home of the Australian Space Agency.

“Lot Fourteen embodies our focus in this state on future industries. Lot Fourteen has much more than the Australia Space Agency, it also has the largest space related research program in the history of Australia, the smart satellite CRC; MIT has one of their very few living labs globally based here in South Australia; the Australian Institute of Machine Learning, unequivocally an incredible centre that we are going to hear more and more about in the future with great researchers right at the cutting edge of vision systems and AI; as well as the Australia Cyber Collaboration Centre.”

Mr Marshall also spoke about the government’s approach to skills development.

“I think there is a widespread recognition of the importance of skills development in South Australia right across the state. We recognise that we can only achieve our ambitions as a state if we have a skilled workforce deliver against those ambitions. This is something that we recognised from the day that we came into government.

“We put $200 million into our skilling Australians program in South Australia and I am very proud to report some of the early results from that. In the first three quarters of last year we have had a 17.1 per cent increase in the number of apprentices and trainees in South Australia. That is a fantastic result many times more than the Australian average.”

He also spoke about the benefits that will flow through to South Australia via announced increases in federal defence spending and space programs and some of the other major industries driving the South Australian economy.

“Tourism is massive. It’s one of those sectors that is going to create a lot of employment, a sector that you can’t really automate particularly easily so it creates quality employment.

“Education is now our largest export in South Australia. When we came to government, we had 32,000 international students here in South Australia, last calendar year we got it up to 44,000. This is having a massive effect on the economy in Adelaide. We have set ourselves a goal over the next decade to get it up to 71,000 and I think that that is cautious.

“Food, wine and agribusiness is a massively growing global sector and we are very well poised here with our clean, green production. In particular I am very excited about the interface between technology, space, satellites and agriculture.

“On energy and mining, we can’t forget that we have one of the great copper deposits in the world. The world needs copper and we have a lot of it. We also have fabulous deposits of natural gas and we expect lots of things from the opportunities from natural gas for domestic consumption and for export.”

The Premier spoke about the philosophy underwriting his government’s approach to the economy.

“We are not trying to be everything. One of the critical things we did when we became the government is we went from 54 portfolios down to 14 and have a focus. With finite resources we need to concentrate our efforts on these areas that we think are going to deliver our best opportunity to achieve our ambition of three per cent economic growth.”

Mr Marshall then discussed the role South Australia can play in addressing climate change.

“I think there is a changing national sentiment on this issue. Before the bushfires you had people who were very strongly engaged with what Australia’s response would be to our changing climate and I think that has massively increased. I think people who were previously sceptical about climate change have all of a sudden said that they have seen the practical implications of the changing climate and how it affects us here in Australia.

“I think this is an area where South Australia can show some leadership not because I naively think that what we do here in South Australia can change global weather patterns, I don’t think that, but what I do think is that people are expecting governments today to take action, to be responsible in terms of climate change, but also to be resilient and adaptive.

“In terms of what we are doing in South Australia regarding climate change, I think South Australians can hold their head high.”

The Premier highlighted that South Australia now receives about 50 per cent of its electricity from renewable sources and said that they have set themselves a goal to get that to 75 to 80 per cent by 2025-2026.

“I think the area that I get most excited about is the area of hydrogen. We have got quite a lot of, if you like, spare electrons in South Australia at the moment. Part of what we want to do is establish an interconnector from New South Wales, so when needed we can bring in the baseload from NSW but also we can start to further export those further electrons into other jurisdictions to lower their emissions and focus them on moving towards a more renewable source of energy.”

Related content:
Economic and Political Overview
The event was part of the national series to launch the Economic and Political Overview report. Read and download the report here