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South Australian Economic Update

It has been a tough ride for South Australia’s economy over the past few years.

The difficulties in the manufacturing sector are well-known. Coca-cola Amatil has recently added to the list of high profile closures for the State following the closure of car manufacturing in the State.

South Australia never had the same benefits from the mining boom as Queensland and South Australia, despite being resource rich.  On the plus side, this also means it is currently escaping the worst of the mining hangover. However, South Australia is also missing out from the housing boom that has been underway in NSW and Victoria. Not to mention, population growth remains much weaker than in all other States.

Nonetheless, the South Australian economy is probably doing much better than most realise.

Consumer spending is growing at a pace faster than its long-run average. Indeed, retail spending is growing at a faster rate than all other States. It has been helpful that employment gains have been relatively healthy of late. The unemployment rate is down from its highs, although it remains above its long-run average.

Another major positive for the State is the large pipeline of public sector works, which has helped to support economic activity. The recent disruptions to energy supply have meant that big money is flowing into power projects. This includes a Premier Jay Weatherill’s $550 million plan to boost South Australia’s energy supply. There is also a $1 billion battery and solar farm in South Australia’s Riverland, with construction to begin before the end of the year.

Agriculture and farming sectors are also seeing better days with record yields in crop production reflecting favourable weather conditions.  Moreover, export sectors will continue to benefit from a substantial fall in the Australian dollar since early 2013.

Additionally, there is a silver lining from South Australia’s housing market being more subdued than the red hot markets in Victoria and NSW. It’s less likely to cause problems down the track, and housing in Adelaide has become increasingly more affordable relative to those in Sydney and Melbourne.

South Australia will likely continue to undergo another year of tepid economic growth, and it still faces challenges.  However, there is plenty of good news for the State.

Words by Senior Economist, Janu Chan.