Handbrake on SA economy must be released

Government must reduce the cost base of the South Australian economy to kick start it after it stalled in the last two quarters of 2012, State Opposition Leader Steven Marshall has told a CEDA forum in Adelaide.

Government must reduce the cost base of the South Australian economy to kick start it after it stalled in the last two quarters of 2012, State Opposition Leader Steven Marshall has told a CEDA forum in Adelaide.

Mr Marshall told the forum that "on any measure, the State's economy had gone backwards" and the latest NAB Monthly Conditions report showed South Australia had experienced the largest monthly fall in business conditions in the nation and its business conditions were the weakest in Australia.

"Of course all of these reports confirm what we know from the ABS statistics (Australian Bureau of Statistics) and that is, from the September and December quarter results, South Australia's economy is going backwards," he said.

Government spending and the associated annual interest bill of $800 million, together with taxes and charges are putting "a handbrake" on the productive sector of the economy, he said.

The forum, which also included Coopers Brewery Managing Director, Dr Tim Cooper, and Gemtree Wines Managing Director, Andrew Buttery, heard that tackling State Government debt and reducing levies and regulation are critical to boosting the economy in South Australia.

The forum heard:

The rising cost of utilities and weak consumer confidence has accompanied a fall in business confidence in 2012-13. This had been compounded by the high Australian dollar;

SA is heading towards the single largest deficit in its history - $1.2 billion in a year but government borrowing, equivalent to $4 million a day for the past four years, has not been a successful strategy to stimulate the economy;

An increasing regulatory burden is also strangling the productive component of the economy; and Joint ventures with overseas investors could provide a lifeline to capital-poor companies.

"Instead of going back into the black, we are now going to have the single largest deficit that we've had," Mr Marshall said.

"In fact our deficit in South Australia is larger than the cumulative deficits in New South Wales, Victoria, Tasmania, Northern Territory and Western Australia added together. It is a very significant deficit and the problem with these deficits is that they are now accumulating debt.

"We've got the highest electricity prices in the country, water prices are the highest of any capital city."

Mr Marshall told the forum a Coalition government would have a three-pronged strategy to improve the economy by:

  • Reducing government debt and regulatory costs on business and production to make South Australia more competitive;
  • Establishing a stand-alone authority to prioritise investment in infrastructure in a 25-year rolling infrastructure plan to boost productivity; and
  • Implementing measures to retain young people in South Australia.

Mr Marshall also called for a bipartisan auto industry taskforce, such as the defence industry taskforce, to examine options to keep the auto sector in South Australia and policies to promote jobs for young people.

"In the last 11 years we've had net interstate migration of 32,000 people. These are people leaving South Australia not because they don't love it…but because we don't have the jobs for these people," he said.

"We would be a completely different state - we would be transformed if we could keep those people here."

Meanwhile, Dr Cooper said the manufacturing and retailing sectors faced significant cost pressures and had been adversely affected by uncertainty in industrial relations associated with the Fair Work Act.

Coopers Brewery had had to be creative to survive tough times - diversifying into home brewing and exports of malt extracts to the food industry overseas had been critical, he said.

The company had also reduced its costs by investing in its own gas power cogeneration plant and a desalination plant, yet government charges remained a significant problem, he said.

"In 2002, Coopers paid recurring state charges of $700,000, representing 2.3 per cent of our overheads of $31 million. Last financial year these charges represented $1.8 million or 4.3 per cent of our overheads," he said.

Mr Buttery told the forum that his family-owned Gemtree Wines had stepped back from the brink of financial disaster two years ago to form a joint venture with a Chinese company to distribute wine throughout China.

This had transformed the company, helping it to double its sales the past two years with 70 per cent of its wines going to China, and providing an additional $30 million to expand through China, Australia and other international markets, he said.

The forum heard that government should focus more on regional areas - particularly given that agriculture and mining contributed to more than half of the state's $11 billion in exports.