Economy powered by creationist chutzpah winds down to a halt

The December quarter labour market figures may yet deliver the welcome news that the working population in South Australia has jumped by 10 per cent.

But then again it may not. So let’s stick our necks out and say that Mike Rann was in La-La Land when he promised six years ago to create 100,000 jobs by this year.

Three and a half terms of Labor government in South Australia have shattered the creation myth, the notion that the labour market responds to the decree of politicians. “Go forth and multiply,” to quote the book of Genesis. And the premier saw that it was so. Creationists harbour a deep faith in technocrats, believing that policy experts, rather than risk-takers and industrialists, drive growth. It’s a belief that runs contrary to natural observation.

The state’s employment market has defied Rann’s election promise; 26,000 full-time jobs have been lost since August 2011. Overall employment has risen by 0.3 per cent, a fraction of the rate in the rest of the country. And those jobs are disproportionately government jobs. South Australia under Labor has been a 14-year experiment in whether an economy can be powered by chutzpah rather than something more conventional, such as capital investment.

Remember the front page news in 2011? BHP Billiton was going to spend $20 billion to expand its Olympic Dam mine. The state’s Treasury factored in more than 58,000 jobs on the back of that.

A year later BHP went cold on the idea because all things considered — red tape, punitive taxes, inflated wages, a threatened carbon tax, a premier with a windmill fetish — the numbers didn’t stack up.

Piqued at the mining company’s failure to respond to his electoral timetable, Rann’s successor, Jay Weatherill, muttered darkly that South Australians would be “very wary” of any future applications from BHP, which had let them down once too often. It was as if the state was doing the miner a favour by allowing it to inject $20bn into the economy. Don’t come knocking on our door again with your bags of cash!

The Olympic Dam expansion would not have been the end of the state’s problems but it would have fixed some of the most intractable, and those it didn’t would have been easier to deal with. Olympic Dam would have turned a moribund state into an investment magnet to the benefit of all. Car workers in Elizabeth would have been able to walk into another job as Holden wound down production; steel workers in Whyalla would be looking forward to the future when towns around the Spencer Gulf would benefit from a sphere of economic influence flowing south from the desert.

Instead South Australia is the busted state in the hands of a left-wing Labor premier who acts like the love child of Mother Teresa and a parking inspector: holy compassion one day, small-minded officiousness the next. South Australia does lead Australia, and most of the world, in the cost of electricity. The closure of the state’s two coal-fired power stations — with the loss of several hundred jobs — was seen as a victory for the planet rather than a blow for South Australians, who lost a reliable electric supply.

It is hard to know if the Premier is being tiresome or obtuse when he refuses to join the dots between the threatened closure of Arrium Steel and the $12 million a year hike in the plant’s electricity bill. Nor is he prepared to acknowledge that the reliability of supply might influence the viability of Olympic Dam, where the power bill reportedly can reach $2.5m a day.

Last week, after its second black­out in nine weeks, a BHP spokeswoman told The Australian: “South Australia is an attractive investment destination; however this means nothing if business cannot access reliable and affordable energy.” Energy Minister Tom Koutsantonis seemed indifferent. If BHP wanted energy so badly, it should build its own power station, as it had done “everywhere else”.

South Australians haven’t seen the last of the blackouts. These will continue while the state government remains fixated on its 2025 renewable target of 50 per cent.

In this year’s budget, with the state’s employment meandering between the lowest and second lowest in the country, the Weatherill government turned to bribes. It offered up to $10,000 to any private sector employer who took on a new worker. The compliance process is, as one would expect, somewhat complicated.

The Jobs Accelerator Grant Scheme is a classic example of churn in which the government takes other people’s money, pockets a large portion of it and hands the rest back. Ten grand over two years amounts to little more than a refund on the payroll tax the state would have collected or the electricity bill for a small business.

And all to what end? South Australia can prime the Keynesian pump as hard as it likes, but it won’t end the investment drought or bring any real relief to the desiccated jobs market. The state cannot create jobs but it can create a regulatory and tax environment in which enterprise can flourish with revenue spent prudently. On those vital measures, the institution of government in the state is failing.

Nick Cater is executive director of the Menzies Research Centre.