Why SA’s job prospects are flatlining, and how experts are predicting the worst is still to come

STATE Political Editor Daniel Wills examines why SA’s job prospects are flatlining, and why experts are predicting the worst is still to come. Who is to blame, and what can be done to reverse the trend?

Workers in front of HMAS Waller navy submarine in dry dock at ASC factory at Osborne, SA.

SOMETHING isn’t working.

Until recently, South Australia was stuck with a bunch of other states in the slow lane of a two-speed economy, as the mining titans set the pace for the rest of the nation to follow.

In the past year, SA has broken off into an unhappy category all of its own.

The state’s unemployment rate is now 7.2 per cent, and has been the worst in the country for more than a year, even while the doors remain open at Holden’s Elizabeth plant.

Experts warn worse is to come, with double-digit joblessness a serious danger. There is no question that unemployment will be the dominant political issue at the next state election.

But still in dispute is the portion of blame which should be levelled at the State Government, and degree to which simply changing from the red team to the blue team would make any difference.

Public confidence that such a difficult predicament can be overcome is dwindling.

Across the spectrum, there is clear agreement on how we got here. As any close observer will tell you, SA built itself on a manufacturing foundation and was smashed as the ground shifted.

Australian Industry Transformation Institute director John Spoehr said the removal of tariff walls in the late 1980s opened SA manufacturing to competition it failed to fully deal with.

“It has been exposed to the bitter winds of competition in East Asia,” he said on Wednesday.

Employment growth in SA has flatlined.

“That’s no different to elsewhere in the country, but SA is relatively more exposed as a proportion of its economy to forms of manufacturing which have been particularly vulnerable. We’ve seen this gradual erosion of a wide range of manufacturing jobs in the last decade or so and, yes, the worst is yet to come.

“The outlook for unemployment, in the absence of additional infrastructure projects, is for it to exceed 9 per cent by the end of 2017.”

Professor Spoehr said this would most strongly affect men, who dominate the dying industries.

On top of pressure in the car industry, Leigh Creek is at risk of becoming a ghost town as its coal mine closes and closure of the Port Augusta power station adds to regional unrest.

The State Government stridently avoids speaking in terms of economic death or decline. It prefers “transformation”, a word which hints at hope in a different and undefined future.

A key element of Labor’s political narrative is the externalisation of blame. The Government wants to position itself as the solution to a global problem, not the creator of a local crisis.

Analysis by The Advertiser reveals two significant truths. More jobs are being created in SA than lost. However, that growth is a fraction of what’s been achieved in other states.

Since 2010, about 15,000 jobs have been obliterated in SA’s manufacturing sector. That’s more than covered by 18,000 created in health and social assistance. Construction and retail have gone backwards but education, mining, agriculture and logistics have made offsetting gains.

But in the state of origin stakes, its been a 20-goal demolition. We’ve simply flatlined as every other state but Tasmania creates tens of thousands of jobs and leaves us in the dirt.

NEW Employment Minister Kyam Maher rejected suggestions the current State Government, in power for the last 14 years, should have seen this crunch coming and been better prepared.

“It’s a combination of things in SA,” he said. “(There’s) a difficult combination of a decline in traditional manufacturing, particularly without Commonwealth support for the automotive sector.

“We are starting to see the impact of that, particularly in automotive supply companies.

“That’s why things like the future frigates and submarine build are so important to SA.”

Mr Maher highlighted the State Government-backed northern Adelaide food park, city medical precinct and Tonsley manufacturing hub as proactive programs aimed at creating jobs.

The state of employment changes in SA.

In addition, thousands or jobs will be sustained by a $2.5 billion spend of state and federal money on new infrastructure including South Rd upgrades and the O-Bahn extension.

University of SA Business School Adjunct Professor Dick Blandy said much of the state’s problems lay in a mentality which relied on the government for direction, and a seemingly blind faith that a single “silver bullet” — be it Olympic Dam or subs — could turn the show around.

He said individuals must be empowered to take risks, and prepared to fail, in a push to create currently unimagined industries which would become the wealth creators of the future.

“There is nothing wrong with the people here. The strategy is wrong,” Prof Blandy said.

“There doesn’t seem to be any interest by the Government, and not even by the Opposition that much, in believing in a competitive private sector. They believe in a rent-seeking private sector. It’s a political tactic to promote the silver bullet solution and convince people you have it.”

Prof Blandy said removing regulations, like environmental controls or licencing restrictions, on start-up businesses with a small staff would encourage more to take a risk and innovate.

Treasurer Tom Koutsantonis last year announced a major shift in tax policy aimed at bringing down business charges by cutting stamp duty. With a three-year phase in, the plan is being advertised around the country as one which will make SA the cheapest state for business.

Opposition employment spokesman Corey Wingard says it’s not enough. He said immediately rolling back Emergency Services Levy increases would boost confidence and retail spending.

“When we stack up state against state — we trade with the same dollar, get the same prices for our copper, our wine, our exports. This is about the cost of business in SA,” Mr Wingard said.

“That is a key to why SA is struggling, and going so badly.”

YESTERDAY’S Sensis Business Index revealed SA employers are the nation’s least confident.

However, BusinessSA chief executive Nigel McBride said widespread frustration directed at the state’s political class had failed to dent the self-confidence of employers to rebound. He said there was no reason that, with the right policy settings, the state couldn’t lift its performance to be in line with the national average within three years.

Mr McBride said reducing costs like payroll tax, and cutting surging water and power bills were key first steps.

“Everyone on the planet got served up the same sets of circumstances that we did,” he said. “Part of the reason that we’re moving far too slowly is that we’re trying to coat everything in a plausible ‘it wasn’t our fault’ type of approach. “We’ve lived in denial for far too long.”

Mr McBride said the state’s huge mineral resources would be highly-valued when demand returned, Adelaide was an increasingly popular tourist destination, the world was willing to pay top dollar for our premium food products and the nuclear industry offered big potential.

“The fundamentals are there, but only if we grasp the nettle,” he said. “We could turn this in three years. They will be hard, but it’s in our power.”

- with Jackson Gothe-Snape