Beyond the boom
The latest edition of BankSA’s Trends economic bulletin examines the postponed benefits of a hoped for mining boom in South Australia and the need to refocus on other economic opportunities.
The BankSA report, compiled in conjunction with Deloitte Access Economics, explores this impact on the national as well as the South Australian economies.
BankSA Managing Director Jane Kittel said last year’s announcement by BHP Billiton that it would delay the much-anticipated expansion of Olympic Dam was tough news.
“While the decision was based on pure global economics, there is no doubt it was an important outcome for South Australia and there was disappointment across business, government and community sectors,’’ she said.
“But I do think, at the end of the day, it was not entirely unexpected by the time it was actually made.”
The Olympic Dam news came on top of the damage done to a number of businesses by the strength in the Australian dollar and by Australia’s relatively high interest rates.
In May 2013, BankSA State Monitor showed that business and consumer confidence levels fell to record lows. Only recently have we seen a rebound to more positive levels, as reported through the September BankSA State Monitor confidence survey.
So where does the growth of the future lie, Trends asks, while we wait for a resurgence in resources which is likely to be a way off?
Ms Kittel said that as the bulletin, and many other similar economic reports regularly state, we can look to nearby Asia’s expanding populations and their demands to help fuel our own growth.
“This latest Trends report highlights that as Asia gets both richer and its populations get older, the sorts of the demands it makes on the world, including South Australian businesses, will change and open up a range of new opportunities for expansion,’’ she said.
Over the past couple of years or so, this State found itself on the wrong side of the two-speed divide. It missed out on many of the benefits of the resources boom and also suffered the costs from the strength in Australia’s interest and exchange rates.
But, as Trends says, the bigger picture is changing. China has slowed, commodity supply is rising, and the price of Australia’s main exports – coal and iron ore – have come down.
At the same time the Australian dollar is well off its peaks, and the same is true of Australian interest rates, with mortgage interest rates a “hair’s breadth above their record lows’’.
This opens up new opportunities for growth, and Asia’s rise hasn’t ended – it is merely changing shape, Trends says.
As Asia gets both richer and older, it will need more food, improved housing and healthcare, and populations will look for more travel opportunities and higher levels of education. South Australia already enjoys a proven track record in these fields.
As this issue highlights, the future is brighter than many people realise. It is true that South Australia has been late to the resources boom and delays to the Olympic Dam expansion were a disappointment.
But recent falls in exchange and interest rates are good news for the State and there are a range of sectors which can expect to do particularly well in coming years.
These gains won’t come easily and, sector-by-sector, there are important challenges that will need to be met, but the work will be worth it.
Jayne Flaherty, Head of Communications, BankSA
phone: (08) 8424 4570 or 0478 335 544