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Economy

SA: Govt. must support industries through economic change

South Australia must differentiate its products, develop high value-added industries and support its automotive industries during a period of rapid global economic change if it is to prosper, a CEDA forum has heard in Adelaide.

South Australia must differentiate its products, develop high value-added industries and support its automotive industries during a period of rapid global economic change if it is to prosper, a CEDA forum has heard in Adelaide.

SA Premier and Treasurer Jay Weatherill said that although the state's economy was being buffeted by international economic turbulence, it was important to focus on the state's strong growth story.

"Economically, we've had over 20 years of continuous economic growth and even with all the changes over the past 12 months… we've still created more than 10,000 jobs than we've lost," Mr Weatherill said.

The SA State of the State forum, which included Flinders University, Vice Chancellor, Professor Michael Barber, and Business SA Chief Executive Officer, Nigel McBride, heard that South Australia must support its critical industries transitioning from traditional manufacturing to advanced manufacturing - but only if they were innovating.

The forum heard:

SA could become "the Switzerland of the premium food and wine" sector. The state was "in a prime position for global food security" and by 2020, the emerging middle class in China was expected to spend US$4.5 trillion on premium products including food and wine.

The controversial desalination plant had future-proofed the state's water security issue and "de-risked" future investment in the state.

Retailing, manufacturing, mining and construction are experiencing "seismic shifts" which would continue to destabilise the economy over the next one to three years.

Collaboration is critical to success - for example between universities, government and industries in sharing information and innovation and between junior miners to develop infrastructure on the Eyre Peninsula.

Mr Weatherill said the SA budget, handed down earlier this month, aimed to support the economy through the transition, rather than slash government spending.

"We wanted to provide stimulus where it was to be effective," he said.

"We wanted to provide support services that underpin our quality of life - not putting at risk all those things that are so beautiful about living in this state.

"We also wanted to look after people in the greatest need."

He said the budget provided support for disability, enabling the state to be the first to sign up for the National Disability Insurance Scheme. It also provided stimulus for the ailing construction, retail and small business sectors with $50 million to build affordable housing, measures such as a temporary payroll tax cut to boost small business, stamp duty relief and funding to promote high-end food processing.

"Of course, the minimum thing a budget must do is try to deliver a prudent set of books, so we've improved the budgetary position from where it stood at the start of this year," Mr Weatherill said.

"We've set out a path to growth that brings the budget back to surplus well within the forward estimates without destructive shocks."

He told the forum that SA must focus on turning its high cost base relative to international economies into an economic advantage.

"We need to find a way of differentiating our products and make a virtue out of our high standards," he said.

"Things you have to comply with … in terms of safety, environmental protection, wages you pay to employees, occupational health and safety, all add a cost basis to your industry.

"One way of looking at that is a cost - the other way is to say that it has a value - that our food has high integrity and that it's something that we should be proud of."

Mr McBride said government had a key role in supporting SA businesses to innovate and change over the next three years and to remove regulatory duplications that added unnecessarily to the cost of doing business in SA.

Automotive industries in Britain had evolved into new manufacturing over the past decade to serve the substantial European market and Australian industries could emulate this for Asia - provided they innovated and lowered their costs, the forum heard.

"We know the automotive industry is probably looking at being an unsustainable industry but we've got to continue the same investment by federal and state governments because otherwise this massive supply chain that so many businesses rely on won't have time to diversify and innovate," Mr McBride said.

Professor Barber said while shale gas exploration had helped to kick-start manufacturing in the United States and had potential in Australia, it would not be a "quick fix" for the Australian economy as it would be more expensive to produce here.

Professor Barber said SA also had significant opportunities to develop models of integrated health and disability care that it could sell to the Northern Territory and into Asia.

"We need to differentiate, we need to focus, we need to intensify and we need to do that through collaboration and simplification. I would say that's really where we are in South Australia," Professor Barber said.