House construction in South Australia is emerging from a four year slump – one of the few signs of economic growth in the state, says BankSA boss Nick Reade.
The trend is a response to low interest rates, but it is offset by slow population growth, Reade told a breakfast function in Adelaide this morning.
“Residential construction is gaining some good traction,” he told the Eastwood Rotary Club breakfast.
“However, relatively slow population growth continues to be a drag on the South Australian economy.
“Immigration is positive at 12,000 per year, but SA loses around 4000 people per year to interstate migration.”
Reade said recent housing approvals data suggests a coming boost in economic activity.
“Dwelling approvals have been growing solidly. In the first five months of 2014, approvals were 23.7 per cent higher that the same period in 2013.
“I expect the high levels of approvals will buoy residential construction and help economic activity in the State.”
Reade reminded the audience that the latest BankSA State Monitor had shown consumer sentiment in SA at its lowest level in 17 years.
“For the first time, pessimists outnumber the optimists,” he said.
Looking ahead, however, he said that BankSA economists expect an long term improvement in the State economy.
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“There are plenty of reasons to be optimistic about the outlook.
“Overall, we expect an improvement, but growth will remain fairly modest in coming years.”
Reade said the factors driving the economy ahead included:
- Foreign students.
- The dollar coming down from its peaks above US$1.
- SA remaining a resource rich state.
- An ageing population giving rise to greater demand in the healthcare sector, our largest employer ahead of manufacturing and retail.
- Tourism.
- Niche opportunities in high skill and advanced manufacturing.
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