Economist Richard Blandy crunches the data which purports to show a massive economic benefit from shifting our time zone to EST – and finds the real impact could be quite different.
Should we shift the time zone half an hour forward to coincide with Eastern Standard Time (EST)? Or should we shift it half an hour backwards to Central Standard Time (CST), bringing us back in line with where we started as a state, where the sun is nearer directly overhead at 12 noon, and to make it easier to communicate and do business with Asia and Western Australia?
Or should we do nothing?
The Department of State Development (DSD) looked into this question for the South Australian Government this year and produced a 20 page report on their consultation with the public entitled What We Heard.
DSD also commissioned a cost benefit analysis of changes to South Australia’s time zone by the South Australian Centre for Economic Studies (SACES) at the University of Adelaide which also produced a report.
DSD’s analysis of community responses was that 42 per cent were in favour of retaining the status quo, 41 per cent were in favour of shifting back half an hour, and only 15 per cent were in favour of shifting forward half an hour and adopting EST. A further 2 per cent were “other”.
The Government has now chosen, in principle, to go with the 15 per cent wanting us to adopt EST.
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The Premier says he wants to change negative national perceptions about South Australia and believes that the time zone difference feeds into this.
Business SA is in favour of moving to EST (consistent with the “agitation by commercial men” that moved our time half an hour towards Melbourne’s in 1899).
"The Premier’s concerns about negative national perceptions of South Australia flow from our long-running economic under-performance."
SACES’ cost benefit analysis shows a $2.5 billion gain to the State’s economy from doing so, and is the most solid evidence in favour of shifting to EST.
Notwithstanding that finding, SACES’ report says that “most (business) respondents consider the current arrangements cause little or no inconvenience to their business operations as was the case in the 2008 study”. Further: “There is no conclusive evidence that business is significantly disadvantaged under current arrangements especially as advances in technology help to overcome the tyranny of distance and time.”
Only 14 per cent of businesses thought that there would be major advantages in a move to EST, while 10 per cent thought there would be major disadvantages. In other words, major disadvantages largely cancel out major advantages.
So where does the $2.5 billion gain come from?
The report (table 3.1) shows an increase in business revenue of $6.98 billion, offset by $6.19 billion of decreased export revenue to Asia and decreased sales to Western Australia, leaving a net revenue difference of about $800 million. The big gain comes from a fall in business costs of $1.83 billion.
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This is very strange, as the report says that “6.5 per cent [of businesses] thought that there would be cost savings and 5.2 per cent thought their costs would increase”.
In other words, the $1.83 billion (net) fall in business costs is captured by only 1.3 per cent (net) of South Australia’s businesses.
This hardly seems credible. The large majority, 88 per cent of businesses, did not think there would be any cost impact, one way or the other.
In fact, SACES acknowledges that there are huge uncertainties about their estimate of a $2.5 billion gain from the shift to EST.
The SACES surveys (one was actually undertaken in 2008 and one in 2015) covered only 422 businesses – 303 in its 2008 survey and 119 in its 2015 survey. The actual number of businesses in South Australia is about 140,000. Four hundred and twenty-two firms is a tiny sample to represent 140,000 businesses. As a result, there is very substantial uncertainty about what the true gain (or loss) might be.
In Table 3.3 of the report, the potential range of gains containing the true gain (with a 95 per cent probability) ranges from -$9.56 billion – $12.42 billion. In other words, the $2.5 billion gain, based on SACES’ survey, could very easily turn out to be a very sizeable loss!
The Premier’s concerns about negative national perceptions of South Australia flow from our long-running economic under-performance.
The rest of Australia knows that we have an excessively government-dominated, “sook” economy. They know that his beat-up on the gains to the state from shifting to EST is an attempt to give the South Australian electorate the impression of decisive action, when the actual outcome of this shift is nebulous, based on the very study that he has taken as a basis for his decision. They will not think better of us for changing our time zone.
The proposed shift to EST becomes yet another substitute for taking the hard decisions to change South Australia’s economic strategy away from overdependence on the South Australian Government, without which our economy is going to continue to underperform the rest of the country. The rest of the country knows this. That is why there are negative national perceptions of us, not because we are in a different time zone. They do not have negative national perceptions of Western Australia because it is in a different time zone.
It is all of a bundle with driverless cars, a significant nuclear industry, Adelaide becoming carbon neutral, and other, possibly worthwhile, Government-mandated things in the far off distant future that cannot possibly contribute to solving our immediate economic crisis.
Richard Blandy is an Adjunct Professor of Economics in the Business School at the University of South Australia.
