Opinion article

Regional economic outlook for South Australia

With the COVID-19 pandemic now in the rearview mirror, Australia is turning to the future. As we look ahead, the long-run forces shaping our economy – climate change, technological disruption and demographic shifts – all present major challenges as well as opportunities, writes Senior Economist Melissa Wilson.

With the COVID-19 pandemic now in the rearview mirror, Australia is turning to the future. As we look ahead, the long-run forces shaping our economy – climate change, technological disruption and demographic shifts – all present major challenges as well as opportunities. 

These changes are present across the country, but are magnified in our regions. With the 2022/23 River Murray flooding and 2019/20 Black Summer bushfires still fresh in our minds, South Australians know only too well the impact of natural disasters. Such events will become more frequent and more severe as temperatures rise. 

Federal Treasury estimates that without adaptation measures global warming could see Australian crop yields fall by up to four per cent by 2063. Rising temperatures could also have an impact on tourism and other services, as our beaches and natural attractions come under threat. In the aftermath of the 2019/20 bushfires, an estimated 80,000 tourists cancelled or postponed activities across Australia. 

On the flipside, however, there could be increased demand for South Australia’s agricultural exports, as modelling suggests other countries in the region could be more affected by climate change. 

Our state has also been at the forefront of the global energy transition. In just over 15 years, we have successfully shifted our energy base from one per cent renewable energy to around 70 per cent – an achievement that has received international recognition. Continued investment in clean-energy resources will help us to reach the goal of net-zero emissions by 2050. 

While the energy transition is not expected to have a big impact on the total number of jobs in the national economy, it will change the nature of work across a broad range of sectors. Some sectors will decline, while others will grow. There will be opportunities for high quality work in renewables, electricity networks and energy performance across utilities, agriculture, mining and transport. 

Investment in connectivity will also be critical – whether this involves physical infrastructure such as roads, railways and airports, or digital infrastructure like telecommunications and high-speed internet. Harnessing the opportunities of digital disruption will require a skilled and adaptable workforce. Investment in digital infrastructure will need to be coupled with investment in digital skills, so that businesses and communities are empowered to harness the full potential of new technologies. This is particularly important for our regions because digital inclusion declines with remoteness, and the digital ability gap between capital cities and other parts of the country persists. 

Another key ingredient of a dynamic labour market is job mobility. Job mobility in Australia has declined over several decades and is now in the bottom third of OECD countries. Enabling people to move for work leads to better skills matching – that is, getting the right people into the right jobs – and better productivity. Regional South Australia has enjoyed a net inflow of people in the wake of the pandemic, but the labour market is tight and competition for talent remains intense. 

While job mobility is important, we also know that around 70 per cent of young adults born in Australia live in the same local labour market that they grew up in. This means that we must also ensure that all Australian have access to quality employment and continuing education wherever they live. 

International migrants will also play a critical role in complementing existing capabilities and filling skills gaps in a targeted way. This includes making better use of the skills of the nearly one quarter of permanent skilled migrants in Australia who are working in a job beneath their skill level

Attracting more workers to our regions is increasing demand for housing. The South Australian housing market is under pressure, having experienced the most rapid house price growth in Australia over the past year.

Prices have risen by almost six per cent in Adelaide and more than nine per cent in the rest of the state. Our rental markets are also currently among the tightest in the country: the rental vacancy rate in regional South Australia is currently just one per cent, while the vacancy rate in Adelaide is even lower. Improving housing affordability will require significant long-term investment to increase the supply of housing available to renters, owner occupiers and those needing assistance in the form of social housing. 

Regional communities also need affordable, high-quality services in order to thrive. Health care and social assistance is already the largest employer in regional RDAs, at more than 13 per cent of the workforce. 

Growth in Australia’s care economy – including childcare, healthcare, aged care and disability services – is set to be one of  the most prominent shifts in our society in coming decades

The South Australian Royal Commission into Early Childhood Education and Care has identified that economic opportunity is being left on the table because of a lack of childcare in regional areas. Improving access to childcare would help to boost participation in paid work, particularly for women, and could go some way to reducing the widening gap in workforce participation between Adelaide and the rest of the state. 

Australia’s population is also ageing. Over the next four decades the number of Australians aged 65 and older will double, while the number of people aged 85 and older is set to triple. This will place huge strain on the aged-care workforce, which is expecting an annual shortfall of up to 35,000 direct care workers over the coming decade. In regional RDAs, half of the resident worker population is already aged 45 or older, compared with 43 per cent across the state. In the same way that tele-health has increased the availability of health care in remote communities, embracing the opportunities of technology in the aged-care sector could play a pivotal role in improving the quality of care and reducing the administrative burden on staff

It is against this backdrop of change that The Regional Outlook 2023 sets out regional South Australia’s key priorities and investment pipeline. If we are to harness the opportunities and meet the challenges presented by climate, technological and demographic shifts, we need a plan. The investments we make today will be crucial for setting us up for success tomorrow. And  the best outcomes will be achieved if communities, businesses  and governments are able to work together for the greater good.

This article was originally published as the economic forward to the Regional Development South Australia Outlook 2023-2024.

About the authors

Melissa Wilson

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Melissa Wilson is Senior Economist (SA) at the Committee for Economic Development of Australia (CEDA). She also has over a decade of experience as an economist at the Reserve Bank of Australia (RBA), where she worked in a broad variety of areas, including the RBA’s business liaison program, overseas economies and international relations, labour markets, domestic markets, financial stability and public education. Melissa holds Bachelors degrees in Economics and Commerce from the University of Adelaide, an Honours degree (majoring in Economics) from the University of Melbourne, and a Masters of Economics from the University of New South Wales.

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