The South Australian economy is in big trouble and the State Government’s own budget forecasts reveal how we’re going to continue to fall behind the rest of the country, argues economist Richard Blandy.

The June employment and unemployment figures released yesterday by the Australian Bureau of Statistics are quite shocking for South Australia.

Looking at the seasonally adjusted figures, South Australia is the only state to have actually lost jobs over the year ended June 2015. We went down by 1,600 jobs. This is in an Australian economy in which employment grew as a whole by 224,400 jobs. Even Tasmania had jobs growth of 3,100 jobs.

We lost nearly 6,000 jobs in June alone, more than any other state. Our unemployment rate rose from 7.6 per cent in May to 8.2 per cent in June, more than 2 per cent greater than Australia’s unemployment rate as a whole. SA’s unemployment rate has risen by 1.1 per cent over the past 12 months.

Our economy is in big trouble, even before the closure of Holden’s and even if the 12 submarines are built at Osborne. We have got to reinvent ourselves, economically, fast. The South Australian Government has no credible plan for achieving such an economic turnaround.

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That is why the recent South Australian Budget is such a depressing document, even though it initiates some tax reforms that are worthwhile. Table 1, below, reproduces the official Budget forecasts for the South Australian economy by the State Government.

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Table 1: Key economic indicators – Australia and South Australia real growth rates (per cent per annum)

Source: Table 7.1, 2015-16 Budget Statement, Budget Paper 3, p.104

The Australian GDP (output) numbers come from the 2015-16 Commonwealth Government Budget.

SA’s output growth is always significantly less than Australia’s as a whole, even looking well into the future. The South Australian Government does not expect our economic growth rate to catch up on the rest of the country for the next four years. It believes our share of the national economy will continue to shrink over the foreseeable future.

This depressing expectation is reflected in the employment growth figures. The Commonwealth Government Budget gives employment growth as ¾ per cent in 2013-14, 1½ per cent in 2014-15, and 1½ per cent in 2015-16.

Using the GDP recovery expected thereafter (about 3.5 per cent p.a.), and after factoring in trend growth in productivity of 1.5 per cent per annum, it could be expected that national employment growth will average about 2 per cent per annum, in 2016-17, 2017-18 and 2018-19 – double the rate of employment growth expected by the South Australian Government for South Australia over those years.

In other words, the rate of growth of job opportunities interstate will be double ours for the foreseeable future.

Even worse is that South Australia’s labour force is growing at 1 per cent per annum, the same rate of growth as forecast in the SA Budget for South Australian employment growth. In other words, the high unemployment rate in South Australia (7.6 per cent, seasonally adjusted, in May, 8.2 per cent, in June) is not expected by the South Australian Government to come down much in the foreseeable future.

The South Australian government chose not to tell the electorate this bad news in its recent Budget. Its tax cuts are welcome, but are very far from sufficient to stop our economic decline.

The South Australian Government’s plans are all about expanding the public sector. In his National Press Club address this week,  Premier Jay Weatherill talked greatly about what the Government would do, but hardly mentioned how his Government would stimulate an innovative private sector to spring into life.

There has to be much more radical tax and regulation reform to stimulate the rejuvenation of the private sector in the South Australian economy. When the growth of independent new businesses takes off, independent of peculiar special deals with the South Australian Government, that is the moment when South Australians will know that our economy has turned the corner.

Richard Blandy is an Adjunct Professor of Economics in the Business School at the University of South Australia.