SA Economy

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Shahkar
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SA Economy

#1 Post by Shahkar » Mon Apr 22, 2013 7:07 pm

CommSec report suggests SA economy could be left behind

SOUTH Australia continues to underperform economically as a three-speed economy taking hold across the country threatens to leave the state behind, a key quarterly report has warned.

The latest CommSec State of the States report says the gap between Australia's best and worst performing states has grown as WA and the Northern Territory outperform the ACT and the eastern states.

There is a further gap back to an "underperfoming" South Australia and Tasmania.

Released today, the report warns that without concerted action to boost economic activity this gap will widen and may entrench long-term inequality.

The report measures state-by-state performance on eight key indicators against decade averages. It says South Australian retail spending last quarter was 0.9 per cent lower than a year ago, the jobless rate was almost 10 per cent above the decade average, and dwelling starts were 18.5 per cent down.

Opposition treasury spokesman Iain Evans said high taxes were eroding South Australian business confidence.

A state government spokesman said CommSec's ranking method failed to fully appreciate the many strengths of South Australia's economy.

"This state has out-performed a number of other states on a number of components," he said.
Thoughts guys? Where do you guys think our economy is going towards?

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Re: SA Economy

#2 Post by Nathan » Mon Apr 22, 2013 8:40 pm

The constant doom & gloom reports don't help business confidence much either. Sure there are real issues, but the habit of constantly talking ourselves down is a self-fulfilling prophecy.

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Re: SA Economy

#3 Post by Waewick » Mon Apr 22, 2013 10:23 pm

Nathan wrote:The constant doom & gloom reports don't help business confidence much either. Sure there are real issues, but the habit of constantly talking ourselves down is a self-fulfilling prophecy.
I agree with what you are saying, but we do have some huge structural problems

We are the 2nd lowest socio-economic state in the Country (1st mainland)
We have a industry which was focused on manufacturing which, due to high wages and $AUD we are no longer competitive
We are the highest taxing state in the Country (Pay roll, land, work coveret al.)
Our economy relies heavily on Government, our biggest employer is the SA Government and the majority of our non rural industries are Government subsidised (Holdens,Defence)
We have one of the oldest populations on mainland Australia and we consistently lose young talent to the eastern and now Western Seaboard.
The value add industry we have is largely reliant on either tourism or the AUD (Wineries, food processing) which again has been adversely impacted.

Don't get me wrong, I'm hear for the long haul, but at the moment the State is in a dire state, the lack of leadership over the last 20+ years has left us in a position that we are entirely reliant on Federal Government assistance.

How do we fix it? well there are a lot of ways, but so many of them will hurt in the short term that I can't see the State Government of any persuasion embracing them

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Re: SA Economy

#4 Post by JamesXander » Mon Apr 22, 2013 10:39 pm

Fundamental changes do have to occur in SA for things to change on the economic front. But our hands are very much tied now that our financial situation is very precarious.


We need to reduce our taxes to the Lowest in the country & reduce our spending. Imagine if we had no pay roll tax, the employment implications would be huge! But not so big as that all the other states would be so willing to match us. The sad part is that our current government has left is in a horrible financial situation. To get us back in shape is going to involve a lot of short/medium term pain

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Re: SA Economy

#5 Post by JamesXander » Mon Apr 22, 2013 10:42 pm

Nathan wrote:The constant doom & gloom reports don't help business confidence much either. Sure there are real issues, but the habit of constantly talking ourselves down is a self-fulfilling prophecy.

True and not true. I don't think I've ever seen a positive economic report about Adelaide/SA... Ever? Yet we are still progressing and we do see developments and employment at respectable levels... But that said... We hardly ever have any positive reports.... Why is that and what can we honestly do to address it?

Propping up holdlen is most probably not the answer

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Re: SA Economy

#6 Post by Waewick » Mon Apr 22, 2013 10:51 pm

JamesXander wrote:
Nathan wrote:The constant doom & gloom reports don't help business confidence much either. Sure there are real issues, but the habit of constantly talking ourselves down is a self-fulfilling prophecy.

True and not true. I don't think I've ever seen a positive economic report about Adelaide/SA... Ever? Yet we are still progressing and we do see developments and employment at respectable levels... But that said... We hardly ever have any positive reports.... Why is that and what can we honestly do to address it?

Propping up Holden is most probably not the answer
I've read a few, the majority leading up to the announcement of Olympic Dam, just before BHP pulled the rug out from under the State Government.

Given we have no control over interest rates or the $AUD I could think a few things..namely.

removal of payroll tax
removal of minimum wage/award wages (I don't really like this one, but we if we reduce capital costs we will get work)
removal of land tax
removal of stamp duty
increase deductions on research and development.
Removal of hidden subsidies to outer greenfield sights.
Increase in migration visas, including taking as many refugees as possible.


Then the State requires a minimum % of management to be located in the state and incentives for the companies to provide child care services.
Maximum FIFO for staff that are not located in the State.

anyone else got any ideas?

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Re: SA Economy

#7 Post by Aidan » Tue Apr 23, 2013 1:50 am

Stop blindly blaming state taxes and look at what's actually causing the problems and why!

Cutting land tax would be extremely counterproductive, as the leasing cost of land including tax is determined by the market. The land tax we have is actually very good, as it provides revenue to our state while making land speculation slightly less lucrative. The biggest problem with land tax is that it isn't broadly enough based. Just imagine how we'd be now if the base had been broadened twenty years ago: houses would be more affordable, and there would probably be no need for any other state taxes.

Payroll tax is a lot less damaging than it may initially appear. It is a small proportion of the cost of employing people, and small businesses are exempt. But there are two big problems with it: firstly we abandoned the system where we generally set state award wages slightly lower than the other states (which cancelled out its effects) and secondly it all kicks in suddenly when a business reaches a certain size, instead of being phased in gradually. So payroll tax reform is certainly needed.

Other state taxes are more damaging, and stamp duty in particular is a big burden to businesses and should be abolished. But be careful - inadequate infrastructure is just as much of a problem to businesses as high taxes.
Last edited by Aidan on Tue Apr 23, 2013 9:56 am, edited 1 time in total.
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Re: SA Economy

#8 Post by Vee » Tue Apr 23, 2013 8:05 am

The automotive industry is an important employer in our state. The interconnectedness of the industry, with component suppliers servicing the different assembly plants in different states, provides the necessary economies of scale in an industry trying to increase technological innovation, upskill their workers and adapt to global realities.

Michael Janda (ABC Online Business Reporter) has written an article expressing the view that ...
"Good economics or not, auto industry subsidies should stay"
The Drum.
http://www.abc.net.au/news/2013-04-22/j ... ow/4640226

The car industry is not alone in receiving subsidies or assistance from government and other countries provide subsidies to their automotive industry. Pulling the pin would have a massive impact on our state economy.

What about transformation into and more investment in more high tech, green industries?

The auto industry, like the share of GST for SA, could be important issues for the state in the Federal election.

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Re: SA Economy

#9 Post by Waewick » Tue Apr 23, 2013 8:22 am

Aidan wrote:Stop blindly blaming state taxes and look at what's actually causing the problems and why!

Cutting land tax would be extremely counterproductive, as the leasing cost of land [/b]including tax[/b] is determined by the market. The land tax we have is actually very good, as it provides revenue to our state while making land speculation slightly less lucrative. The biggest problem with land tax is that it isn't broadly enough based. Just imagine how we'd be now if the base had been broadened twenty years ago: houses would be more affordable, and there would probably be no need for any other state taxes.

Payroll tax is a lot less damaging than it may initially appear. It is a small proportion of the cost of employing people, and small businesses are exempt. But there are two big problems with it: firstly we abandoned the system where we generally set state award wages slightly lower than the other states (which cancelled out its effects) and secondly it all kicks in suddenly when a business reaches a certain size, instead of being phased in gradually. So payroll tax reform is certainly needed.

Other state taxes are more damaging, and stamp duty in particular is a big burden to businesses and should be abolished. But be careful - inadequate infrastructure is just as much of a problem to businesses as high taxes.
how is land tax going to make housing more affordable?

we already spend big money subsidising cheap land in the out rims - our land tax is very good from a revenue perspective, but it isn't any good from an economic development perspective. (remembering that land tax isn't paid on o/o residential land)

The cost of employing people is one of the biggest issues in the state (probably the country) so any improvements would be a welcome change I would have thought.

In terms of infrastructure, it will be interesting to see how we are going to deal with that moving forward given the weak revenues and lack of growth.

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Re: SA Economy

#10 Post by Maximus » Tue Apr 23, 2013 9:27 am

Nathan wrote:The constant doom & gloom reports don't help business confidence much either. Sure there are real issues, but the habit of constantly talking ourselves down is a self-fulfilling prophecy.
The demographics are a self-fulfilling prophecy, too. We have an old(er), low(er) socio-economic population, so there are fewer skilled workers, so fewer businesses want to do business here, so more young, skilled people leave for other states, and so our population becomes even older and less skilled. Rinse and repeat.

We need a circuit-breaker (Olympic Dam???) to interrupt this cycle, supported by other measures that have already been mentioned -- e.g. payroll tax reform, etc.
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Re: SA Economy

#11 Post by Norman » Tue Apr 23, 2013 10:04 am

Aidan wrote:Stop blindly blaming state taxes and look at what's actually causing the problems and why!
Exactly. The recent decision for the processing plant was not the result of taxes, it was the cost of capital and the fact that the actual mine itself is located in the NT.

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Re: SA Economy

#12 Post by wll6568 » Tue Apr 23, 2013 10:26 am

Waewick wrote:
Nathan wrote:The constant doom & gloom reports don't help business confidence much either. Sure there are real issues, but the habit of constantly talking ourselves down is a self-fulfilling prophecy.
I agree with what you are saying, but we do have some huge structural problems

We are the 2nd lowest socio-economic state in the Country (1st mainland)
We have a industry which was focused on manufacturing which, due to high wages and $AUD we are no longer competitive
We are the highest taxing state in the Country (Pay roll, land, work coveret al.)
Our economy relies heavily on Government, our biggest employer is the SA Government and the majority of our non rural industries are Government subsidised (Holdens,Defence)
We have one of the oldest populations on mainland Australia and we consistently lose young talent to the eastern and now Western Seaboard.
The value add industry we have is largely reliant on either tourism or the AUD (Wineries, food processing) which again has been adversely impacted.

Don't get me wrong, I'm hear for the long haul, but at the moment the State is in a dire state, the lack of leadership over the last 20+ years has left us in a position that we are entirely reliant on Federal Government assistance.

How do we fix it? well there are a lot of ways, but so many of them will hurt in the short term that I can't see the State Government of any persuasion embracing them
Let's just move to eastern states... lol

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Re: SA Economy

#13 Post by Aidan » Tue Apr 23, 2013 10:36 am

Waewick wrote:
Aidan wrote:Stop blindly blaming state taxes and look at what's actually causing the problems and why!

Cutting land tax would be extremely counterproductive, as the leasing cost of land including tax is determined by the market. The land tax we have is actually very good, as it provides revenue to our state while making land speculation slightly less lucrative. The biggest problem with land tax is that it isn't broadly enough based. Just imagine how we'd be now if the base had been broadened twenty years ago: houses would be more affordable, and there would probably be no need for any other state taxes.

Payroll tax is a lot less damaging than it may initially appear. It is a small proportion of the cost of employing people, and small businesses are exempt. But there are two big problems with it: firstly we abandoned the system where we generally set state award wages slightly lower than the other states (which cancelled out its effects) and secondly it all kicks in suddenly when a business reaches a certain size, instead of being phased in gradually. So payroll tax reform is certainly needed.

Other state taxes are more damaging, and stamp duty in particular is a big burden to businesses and should be abolished. But be careful - inadequate infrastructure is just as much of a problem to businesses as high taxes.
how is land tax going to make housing more affordable?

we already spend big money subsidising cheap land in the out rims - our land tax is very good from a revenue perspective, but it isn't any good from an economic development perspective. (remembering that land tax isn't paid on o/o residential land)
If that exemption had been removed, land prices wouldn't have shot up so much when the era of low interest rates started. And at the moment, people regard their houses as great investments, so the speculative component pushes the prices up even higher. When subjected to land tax, there would be less speculation pushing prices up - though of course there would still be some, just as there's currently some speculation with rental property. Removing the exemption would also end the unfair tax disadvantage for rental property, so there wouldn't be such a shortage of it as there is now.

Unfortunately with land prices so high and people paying many hudreds of thousands of dollars for houses, such a change could now only be introduced very gradually (over decades) to avoid causing economic damage. But just knowing the change would be made eventually should be enough to slow the rise of house prices somewhat.
The cost of employing people is one of the biggest issues in the state (probably the country) so any improvements would be a welcome change I would have thought.
When consideredd in isolation, of course it would. When compared with what else coudl be done with the money, they wouldn't look quite so good.
In terms of infrastructure, it will be interesting to see how we are going to deal with that moving forward given the weak revenues and lack of growth.
Unfortunately it will probably be by doing less - even though our lack of infrastructure is one of the main reasons for the weak revenues and lack of growth.
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Re: SA Economy

#14 Post by rev » Tue Apr 23, 2013 10:42 am

You speak to most people in SA or in Vic or NSW, and they will say the same thing, there are no jobs in SA. Particularly business owners.

According to Seek.com.au

Sydney 33,659 jobs.
Melbourne 24,555.
Brisbane 12,984.
Perth 12,685.
Adelaide 3,613.

The population argument isn't even valid in this one either. Sydney is what, around 4 times as big? Yet there are ten times the amount of jobs on offer..
Perth only has about 700k more people, yet has more then four times the jobs advertised, almost as many as Brisbane which has twice our population.

There was also a report yesterday I think, from Google, which said Australian tech startups could generate over 500,000 jobs by 2030 and 109 billion for the national economy.
But that computer sciences were on the decline at schools.
This is an opportunity that is waiting to be snatched up. There's no reason why SA could not be part of it.
We've lagged behind on almost everything besides defence. Why shouldn't we get the jump on the rest of the country on this?

There are only 1500 tech startups in the country that employ less then 10,000 people. Over 80% are in Sydney and Melbourne.


You want to know why people leave this state?
It's because there is a lack of opportunities here.

If things are to change, then South Australia needs to accept this reality first.

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Re: SA Economy

#15 Post by [Shuz] » Tue Apr 23, 2013 10:43 am

Why don't we just merge with WA and that way we can include ourselves as an economic powerhouse?
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