SA economy recovering despite global uncertainty
Rising employment, improved household spending, and moderating inflation are bolstering South Australia’s economy despite weakened global growth prospects, according to a new report from the University of Adelaide’s SA Centre for Economic Studies (SACES).
The Economic Briefing found that the state is also outperforming national trends, thanks to increased investment in the public and private sectors.
A key driver for the improved economic conditions is that consumer price inflation has continued to moderate, with goods inflation falling sharply and services inflation remaining slightly above the Reserve Bank of Australia’s RBA target band.
Moreover, aggregate spending in South Australia has risen markedly over the past year, with real state final demand rising by 3.1 per cent through the year to the March quarter in 2025, well ahead of population growth and of the corresponding national increase of 1.9 per cent.
This reflects increases in dwelling investment and a rebound in business investment, the report said.
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The Economic Briefing also found that growth in household consumption has picked up after two years of remaining stagnant.
“Cost of living pressures, which have eroded disposable incomes and dampened consumer confidence, are gradually easing with the inflation rate now running below wages growth,” said Jim Hancock, SACES Executive Director at the University of Adelaide.
“In addition, solid employment growth and recent interest rate cuts are helping to restore household incomes.”
Total employment in South Australia has risen strongly over the past year, reaching 64.1 per cent in June, just below its record high of 64.2 per cent. Meanwhile, underemployment has declined sharply and is at its lowest level since the early 1990s recession.
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The report also found that although housing availability and affordability remain severely constrained, slower population growth and a pickup in housing construction have somewhat improved the demand and supply.
Moreover, agricultural output is expected to increase significantly this year with a return to more typical seasonal conditions.
However, this recovery remains contingent on the Bureau of Meteorology’s optimistic three-month rainfall outlook being realised, SACES noted, as many farmers are still contending with dry conditions.
Despite the positive overall outlook, South Australia’s economy remains at risk of being affected by global instability.
“There are two main risks to the economic outlook for South Australia,” Hancock said.
“The first is that the United States chooses to go through with aggressive tariff increases and that some of its trading partners respond in kind. This would significantly weaken the international economy with detrimental flow-on effects to South Australia.
“So far, South Australia’s exports to the United States have held up well, but any further increases on Australian goods would directly reduce our export competitiveness in the United States and, perhaps more impactful, higher tariffs more generally will damage economic growth and demand for our exports in key Asian destinations.”
The second risk, said Hancock, is that South Australia and Australia cannot restore stronger productivity growth rates.
“Productivity growth is fundamental to raising living standards and it has been weak over the last decade and more,” Hancock said.
“Raising productivity is a key challenge for Australian governments. There are no easy answers but a comprehensive review of a wide range of fiscal and regulatory measures will be needed to weigh up their costs and their benefits.”
