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South Australia’s Economic Outlook

South Australia’s Economic Outlook . Richard Blandy AustralAsia*Economics Pty Ltd and School of Management, University of South Australia Thornton Group Barossa Valley Clients 11 June 2009. World GDP growth outlook in 2009 – recession. 2. World GDP growth outlook in 2010 – recovery. 3.

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South Australia’s Economic Outlook

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  1. South Australia’s Economic Outlook Richard Blandy AustralAsia*Economics Pty Ltd and School of Management, University of South Australia Thornton Group Barossa Valley Clients 11 June 2009

  2. World GDP growth outlook in 2009 – recession Thornton Group Barossa Valley Clients 110609 2

  3. World GDP growth outlook in 2010 – recovery Thornton Group Barossa Valley Clients 110609 3

  4. World GDP growth outlook in 2011 – back to trend Thornton Group Barossa Valley Clients 110609 4

  5. World GDP growth scenario to 2050 WorldProduct2050 = 5xWorldProduct2006 Thornton Group Barossa Valley Clients 110609 5

  6. The stimulus effect of national fiscal packages on GDP, per cent, 2009 and 2010 Thornton Group Barossa Valley Clients 110609

  7. Australian and South Australian Budget growth assumptions (%pa) Thornton Group Barossa Valley Clients 110609 7

  8. GDP (Australia) and GSP (States), 1999/2000 – 2007/2008 (1999/2000 = 100) Thornton Group Barossa Valley Clients 110609 8

  9. State Final Demand. March 2008 – March 2009(March 2008 = 100) Thornton Group Barossa Valley Clients 110609 9

  10. Main industries, South Australia, value added, $ millions, 1989/90 – 2006/07 Thornton Group Barossa Valley Clients 110609

  11. Key elements in South Australia’s economic future Strengths • Mining and energy • Defence • Small business • Population growth Problems • Water • Infrastructure • Skills Thornton Group Barossa Valley Clients 110609

  12. Private new capital expenditure, South Australia, industries, $ millions, June 1998 – June 2008 Thornton Group Barossa Valley Clients 110609

  13. Mining and energy Olympic Dam expansion • $20b over 5 years 2011 - 2016? • $6.8b p.a. output 2016 → (10% SA GSP)? • Cornerstone infrastructure provider supporting Eyre Peninsula mining expansion High level of minerals exploration Geothermal • Major potential base load electricity resource to supply Eastern grid at nuclear power prices Thornton Group Barossa Valley Clients 110609

  14. Defence • DSTO anchor asset • Collins refurbishments to 2025 • 3 Air Warfare Destroyers $8b? 2014 → 2025 • 12 Future Subs $30b? 2016 → 2050 • Army Battalion Edinburgh $3b? 2010 → Thornton Group Barossa Valley Clients 110609

  15. Small business:Persons employed in personal, micro, small, and medium/large businesses, and in the public sector, by industry, South Australia, average annual rates of growth, (% p.a.), 1984-2001 Thornton Group Barossa Valley Clients 110609

  16. Why is small business growing so fast? • Increasing affluence and the desire to count as a person • “Long tail” economics increasing demand for specialist products • Internet and broadband decreasing costs for small producers and increasing demand and outsourcing • Globalisation increasing demand for specialist products • Demographic trends increasing supply of entrepreneurs • Baby boomers reaching 50+ years • Women increasing work participation • Gen Y (desire to be own boss) • More migrants Thornton Group Barossa Valley Clients 110609

  17. Policies to support fast growth of small businesses • School, internet and community-based training programs in how to run small businesses • Fast, high-capacity broadband • On-line government (information, regulations. forms, Q&A and payment systems) Thornton Group Barossa Valley Clients 110609

  18. Australian and State populations to 2056, ‘000 persons Thornton Group Barossa Valley Clients 110609

  19. South Australian and Adelaide populations projected to 2056, ‘000 persons Thornton Group Barossa Valley Clients 110609

  20. Summing up: South Australia’s long run economic outlook Past Trend 3.6%pa Aust Trend 3.0%pa 2.6%pa $20b 5.5%pa 1.8%pa 1.8%pa 2.8%pa Employment Thornton Group Barossa Valley Clients 110609 20

  21. Water – problem no.1 • SA strategically poor location – at end of river • Indian ocean dipole source of recurring droughts • Desalination, recycling, storm water capture needed • Increasing price of water needed Thornton Group Barossa Valley Clients 110609

  22. Infrastructure – problem no. 2 • Roads, rail, water, power, ports and airports issues, especially re mining developments • Lumpy, networked delivery systems with long operational lives and high sunk costs • Uncertainty over composition of demands to be met and expansion needs over time • Private sector coordination and funding needed, particularly for mining developments • “Users fund and run” model best (eg Richards Bay, South Africa) Thornton Group Barossa Valley Clients 110609

  23. Skills shortages – problem no. 3 340.000 skilled 700,000 skilled 410,000 unskilled 370,000 unskilled Thornton Group Barossa Valley Clients 110609

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