Analysis: $2.4bn government funds for Whyalla an economic turning point for South Australia

Whyalla should undeniably be saved but $2.4bn in government funds sets a disturbing precedent, writes Paul Starick. Have your say

Just a week after a French firm won a $50bn deal to build 12 conventional submarines in Adelaide in 2016, I was having breakfast at the cloistered staff cafe at Canberra’s Parliament House.

A former colleague, a respected press gallery veteran, and I were having our traditional catch-up on the morning of the federal budget.

Frontbenchers from both major parties were stopping by as they grabbed their morning coffees from Aussies Cafe, a Parliament House institution.

The overwhelming mood, firmly emphasised by my colleague, was that the mendicant South Australia had just scored another taxpayer-funded handout to prop up a rust belt state.

It was a turbulent time. Holden car manufacturing was to close the next year, when the Elizabeth plant shut its doors for the final time.

In SA, people were gun-shy from years of years of gradual economic decline – a steady erosion of living standards in the wake of the 1991 State Bank financial disaster.

This long-term slide had created a $29bn gap between SA’s economic output and the national average by early 2022, according to analysis by the SA Productivity Commission.

South Australian Productivity Commission chairman Adrian Tembel Picture: Matt Loxton

The Covid-19 pandemic, though, marked a turning point in SA’s confidence and economic fortunes.

“There is a lot to be positive about,” said Productivity Commission chairman Adrian Tembel, in February 4 analysis of the current state of SA society and the economy for The Advertiser.

“Low unemployment, rising house prices making Adelaide homeowners now on average wealthier homeowners than their Melbourne peers, and project pipeline upside around the north south (road) corridor, which will improve the efficiency of our city and quality of life of many of our city’s residents, are three examples,” he said.

“There is also the medium and long-term upside around defence and commodity processing industrial development. Our government is driving these opportunities steadily and professionally, particularly around skills and regulatory frameworks.”

Mr Tembel, also the chief executive partner of Adelaide-based national law firm Thomson Geer, warned of headwinds, including inflationary pressures handing most people a real wage cut and making family life tighter and more stressful.

But the biggest headwind of all might end up being the state’s return to a handout state, reliant on taxpayer funds and government-funded jobs to underpin the economic base.

Energy and Mining Minister Tom Koutsantonis and Premier Peter Malinauskas arrive in Whyalla on Wednesday afternoon. Picture: Tim Joy

The $2.4bn being ploughed into propping up the Whyalla steelworks might have been a Hobson’s choice for state and federal governments, which could not afford to abandon the people of the steel city.

Nobody is arguing for Whyalla to be wiped out – nor should they.

But this is a historic juncture for the state. Once again, SA has been forced to go cap in hand to prop up a key economic pillar.

The next big cab off the rank is the $368bn AUKUS nuclear-powered submarine construction project centred on Osborne Naval Shipyard, in Adelaide’s northwest.

President Donald Trump’s America-first stance and turmoil in the United Kingdom defence industry have cast at least some doubt over the future of this government-funded project.

At least the Northern Water project, involving pumping more than $5bn of public money into a water desalination plant and pipeline network, is justified by kickstarting the immensely lucrative expansion of BHP’s far north copper province.

All this matters for the future of today’s young South Australians.

Do we want them to live in a risk-averse society, with living standards forever below the rest of the nation, always reliant on government jobs and handouts?

Do we want them to be forced to flee, like generations before them, in search of well-paid, challenging jobs in private enterprise?

Or do we want them to, at least, have the option of staying in SA, where creativity and enterprise are thriving and living standards are rising?

We are at another fork in the road, as a state. Let’s hope we take the path to a better future.

Originally published as Analysis: $2.4bn government funds for Whyalla an economic turning point for South Australia