Issues Papers

The Centre provides periodic Issues Papers focusing on topical economic issues. Issues Papers are provided to Corporate Members - to subscribe see Membership.

Recent Issues Papers are:

33. The Economic Consequences of the Euro by Dr Colin Rogers
This paper considers the current economic crisis in Greece and argues that the governance structure of the Euro is exacerbating the crisis with the potential to turn what is a liquidity crisis (following the flight of private capital) into a solvency crisis. The inability to use state-backed money requires the European Central Bank to fulfil its role as a central bank and accept responsibility for the solvency of member countries. The paper argues that current policy responses are the polar opposite of what is required. July 2011.

32. Banking Competition: The Rhetoric and the Reality by Dr Penny Neal
The decision by the major Australian banks to raise home loan interest rates by substantially more than the increase in the Reserve Bank's cash rate in November 2010 caused widespread outrage across the community.  The aim of this paper is to take a balanced view and look behind the rhetoric and populist responses engendered by the backlash against the major banks to examine whether the Australian banking sector has become less competitive post the Global Financial Crisis. The paper also seeks to critically assess the policy responses that have been proposed.  A major conclusion of this papaer is that policy responses to support access by the regional banks and the mutual sector to the securitisation and wholesale markets are key to driving competition in the banking sector. May 2011.

31. South Australian Labour Markets: 2000 to 2010 by Mark Trevithick and Michael O'Neil
A previous Issues Paper which considered trends in the South Australian labour market through the 1990s revealed a poorly performing and stagnant labour market. This paper provides a ‘snapshot perspective’ of the South Australian labour market for the most recent decade and considers the performance of the labour market relative to the 1990s. Between 2000 and 2010 labour market conditions improved, driven by stronger economic conditions, led by growth of the defence and mining industries which generated new employment across a wide range of occupations.  Significant challenges affecting the state’s labour market still remain, including the on-going decline of employment in manufacturing, skills shortages in some service industries and the ageing of the workforce. The paper concludes by offering some suggestions for further research into the South Australian labour market. February 2011.

30. Migration Trends in South Australia by Mark Trevithick
This Issues Paper analyses recent migration patterns to South Australia over the period 1998/99 to 2008/09.  Net overseas migration was well above the long-term trend during this period.  Permanent skilled migration experienced the strongest increase providing much of the growth in net overseas migration.  The introduction of the Skilled Regional Sponsored Visa in 2004 can explain a portion of the rise in skilled migration, encouraging more migrants to settle in designated low population growth areas such as South Australia.  The paper presents data showing recent growth in migration numbers, including by migration stream and visa type, and provides commentary on some of the causes. January 2011.

29. Decline and Rejuvenation: The Provincial Cities of South Australia by Michael O'Neil, Mark Trevithick, Daisy McGregor and Antony Pietsch
This paper considers the economic and social rejuvenation of the Provincial Cities of South Australia during the first decade of the 21^st Century, and the challenges to maintaining sustainable growth and competitiveness.  The analysis confirms that the economic decline which was observed across the Provincial Cities during the 1980s and 1990s had come to a halt by 2001, with rejuvenation strengthening through the middle part of the decade.  The authors argue that while there has been investment and diversification of employment into new industries, this has not been matched by new vocational and post-secondary infrastructure to raise the skill level of regional populations.  More broadly, there is a need for better planning and identification for regional priorities. January 2011.

28. Re-Thinking the Approach to Regional Development in South Australia by Michael O'Neil and Cliff Walsh
The authors of this paper contend that regional development in South Australia is an agenda without a policy framework or strategy.  South Australia's economic, social and environmental progress depend entirely on the performance of all of its regions - there is no meaningful sense in which "the State" transcends the sum of its regional components.  However, the State Government has no overarching regional development strategy and the public sector has tended ito engage in tops-down "regionalisation" not "regionalism".  This is clearly reflected in a State Strategic Plan that has only one region-specific target and then only for rural and remote regions.  This is all the more disappointing given that more than a decade ago a Task Force on Regional Development in SA proposed strategies that were at the forefront of modern thinking about promoting regional development.  The authors consequently argue that South Australia urgently needs a new commitment to regional development and a new strategy in which the state government facilitates and supports regions to develop aspirations and plans for themselves for their economic, social and environmental development and also develops partnerships which "democratise" decision-making through engagement, consultation and negotitation with regional communities.  December 2010.

27. Identifying the Main Economic Issues Facing the South Australian Wine Industry by Dr Nicola Chandler
This paper considers the views and opinions of those in the wine industry, combines these insights with an historical perspective and data/trends on the wine industry to identify the main economic issues facing the wine industry in South Australia.  A look back at historical developments in the wine industry indicates that current challenges - most notably those resulting from over-production and a decline in product prices - have been evident at various stages in the past.  Lessons from these cylical patterns include that prices are the natural control mechanism, that global fluctuations will continue to occur, but that the high standard of the product and marketing have contributed to the strengths of the indusrty.  April 2010.

26. Nuclear Power in Southeast Asia: Implications for Australia and Non-Proliferation by Andrew Symon
This paper, which was presented to the Lowy Institute for International Policy in April 2008, has been reprinted with permission in the honour of the late Andrew Symon, who was a Research Associate of the Centre.  The paper explores the growing interest in nuclear power in Southeast Asia, and consequential questions regarding economics and safety, as well as nuclear weapons non-proliferation.  Given Australia's role as a major supplier of uranium, proximity to the region and interests in non-proliferation and safety, the development of nuclear power in Southeast Asia has direct implications for Australian interests and policy.  April 2009.

25. The Global Economic Crisis of 2008: Some Thoughts on Causes and Remedies by Dr Colin Rogers
In this paper, Associate Professor Colin Rogers provides a synopsis of the origins of the global economic crisis of 2008, before going on to provide his thoughts on what has gone wrong with monetary and finance theory and how these failings have led to failings in policy and regulation through the political process.  It is his contention that the fundamental cause of the global crisis can be traced to failings in the theory of money and finance.  January 2009.

24. Assisting Injured Workers Return to Work: The Economy Needs You! by Michael O'Neil and Peter Lumb
This paper summarises a larger report addressing the potential contribution of active labour market programs in assisting injured and recovering workers return to the workforce.  The paper argues that there are valuable lessons to be learnt from the way in which many successful labour market programs are able to transition the long term unemployed into sustainable employment and that these lessons are applicable to long term workers' compensation recipients.  Key principles for the design of assistance programs are identified.  January 2009.

23. A Review of the Literature on Active Labour Market Policies by Michael O'Neil and Dr Penny Neal
There is no single optimal labour market program. This is no better illustrated than the change in objectives in labour market programs from the 1970s and 1980s when unemployment was high due to insufficient aggregate demand for labour, to today's world where the demand for skilled labour continues to outstrip supply. Welfare assistance measures including systems of income support are purposefully designed to support active labour market programs. The paper considers several principles in the design of effective labour market assistance measures and ‘some of the lessons learned' from the more successful individual projects funded by various state governments. One key lesson is that local employers and local industry have a significant role to play in the design (and hence successful outcome) of active labour market policies and programs. June 2008.

22. Self Managed Superannuation Funds: Some Public Policy Issues Regarding their "Decumulation" Phase by Owen Covick
Associate Professor Owen Covick argues that several factors will lead to a substantial growth in the quantum of monies in decumulation phase Self Managed Superannuation Funds (SMSF) in Australia.  This raises the question: what if the ageing process, or the death of the "prime mover" member of a more-than-one-member decumulation phase SMSF allows an SMSF to "drift on", past the point at which it would have been in the best interests of the vehicle's members to wind it up and either rollover into an APRA regulated vehicle, or take the remaining funds outside the superannuation system?  The author argues that this should be viewed as a public policy issue and not simply as a problem for the indivudal SMSF members directly concerned, and should be tackled now before the number of persons directly affected by the problem swells to significant proportions.  Suggestions for ways of addressing this problem are put forward. April 2008

21. Australia's Productivity Growth in the 21st Century by Dean Parham
This Issues Paper presents the visual materials used by Dean Parham of the Productivity Commission in his presentation to the School of Economics (University of Adelaide) and other invited guests on 24th August 2007.  In his presentation, Dean discussed the historical comparative performance of Australia's productivity growth including the underlying causes of particular trends.  He concluded by considering the outlook for Australia's productivity growth and the touchstones for productivity growth going forwards. September 2007

20.Building a Local Defence Industry: Workforce Requirements 2006 - 2010 by Michael O'Neil, Steve Whetton and Edwin Dewan
This paper presents an overview of recent research undertaken by the Centre in relation to identifying and quantifying current workforce capabilities and workforce requirements for the South Australian Defence Industry.  The paper has three components.  The first provides a brief snapshot of planned expenditure within the defence sector outlined in the Commonwelath's Defence Capability Plan out to 2016.  The plan includes annual expenditure on new projects as well as on-going service and sustainability of defence capability.  The second component examines current employment in major defence contracting companies in South Australia, their first and second tier suppliers and growth projections out to 2010.  In the final part, the potential labour supply to the defence sector from tertiary education providers is discussed, concluding with a consideration of issues relevant to workforce planning and future challenges for South Australia. March 2007

19. Running on Empty: The Risk of Continuing to Dither While the Empty Light is Flashing by Peter Cullen
In this Issues Paper, Professor Peter Cullen argues that we need to take urgent action to address growing water shortages.  A range of climatic data indicates that the Australian climate has been drying out over the past decade, while historical data suggests that the period from 1960 to the early 1990s may have been unusually wet in South Eastern Australia. This suggests we may face a future with less rainfall, which will require adjustment that may be painful and difficult, particularly for agriculture.  Fortunately there is an agreed national blueprint for dealing with these challenges in the form of the National Water Initiative. The NWI includes a range of practical and sensible actions to improve water management and address the scarcity of water resources. However, Professor Cullen is critical of the inactivity by governments on impleting the NWI, which can be attributed to various interest groups successfully resisting the necessary changes required. January 2007.

18. South Australia's Recent Productivity Performance by Jim Hancock and Wing Hsieh
It is well known that the South Australian economy has not grown as rapidly as the Australian economy as a whole over the last decade. It is also known that differences in labour productivity trends do not explain much of the differential in growth rates. This study investigates the contribution to output growth from changes in labour quality, the capital intensity of the economy, and multifactor productivity. The analysis strongly reinforces the argument that differences between South Australian and national output growth over the last decade lie entirely in a more rapid expansion of the scale of the national economy. April 2006.

17. Mining the Labour Market: The Estimated Demand for Labour in the SA Mining Sector 2006-2014 by Michael O'Neil and Paul Huntley
This paper presents a summary of commissioned research undertaken by the Centre on behalf of the State Government, for the purpose of estimating the additional labour requriements due to the planned expansion of mining in this State. The paper outlines the size of the mining industry in economic terms, describes the survey and estimation methodology used to quantify the labour requirements, and reports the estimated demand in the mining sector by occupational group. The significance of estimated labour requirements in the context of current labour market conditions is also considered. April 2006.

16. Australia's New Trade Agreements: Beneficial Liberalisation or Harmful Policy? by Andrew Symon
This Issues Paper canvasses bilateral and regional trade negotiations which are now at the centre of Australian trade policy. The recent US-Australia trade agreement and the prospect of an Australia-China agreement are briefly examined. Consideration is given to the relative merits of pursuing freer trade through regional trade agreements rather than through a multilateral approach under the World Trade Organisation. Given that regional trade agreements increasingly cover a broader range of policy areas that cut across the jurisdictions of different levels of government, such as government procurement, investment, competition policy, standards, intellectual property, and services trade, it is concluded that national parliament and state governments should arguably play a greater role in the initiating, negotiation and approval of Australia’s trade agreements. November 2005.

15. Wind Generation and the South Australian Economy by Stephen Nelson
With the Federal Government having implemented the Mandatory Renewable Energy Target (MRET) to reduce greenhouse emissions, there has been rapid growth of wind farm capacity in South Australia over recent years. This paper presents a discussion of issues arising in connection with wind farms, with particular reference to the South Australian economy. The author finds that while wind farms will bring about a reduction in carbon emissions, this needs to be balanced off against other, potentially less beneficial consequences such as the impact on our existing electricity infrastructure, the effect on future investment levels, and the potential impact of higher energy prices on our industrial sector. April 2005.

14. South Australia's Overseas Exports by Paul Huntley
This paper discusses South Australia's recent export performance. The State has become significantly more export-oriented over the last decade and a half. In 2003-04, 17 per cent of Gross State Product was derived from overseas exports of goods and services - a historically above average level. In recent years, our export destinations have diversified, with a rising share going to the United States and Europe, meaning the State economy is arguably better placed to ride out an economic downturn in any one region. However, while the overall picture is encouraging, the author cautions that State exports are concentrated in two industries - wine and motor vehicles - and any slumps in global demand for their products would have a severe impact on the State economy. March 2005.

13. The 2004-05 South Australian Budget by Jim Hancock
This Paper presents an analysis of the 2004-05 South Australian Budget. It looks at how changes in the economic environment have affected the Budget, how the government has changed its revenue and expenditure policies, and medium term directions in fiscal policy. The author cautions that recent positive surprises on the revenue side need to be seen as something of a lucky break, and that funds for new spending initiatives or unanticipated cost pressures will be harder to find over the next two years. July 2004.

12. The Relative Decline of Manufacturing Employment in South Australia by Anthony Kosturjak and Joshua Wilson-Smith
This Issues Paper considers employment outcomes for the South Australian manufacturing sector since 1986. In brief, the paper finds that while employment in the South Australian manufacturing sector has fallen sharply since 1986, its performance is not atypical among the traditional manufacturing States. While the 1990 recession clearly had a significant negative impact on the manufacturing sector, the authors believe that other longer-term factors are more significant in driving the fall in employment. These include a shift in consumer spending patterns towards services (associated with rising incomes), labour displacing technological change, and reductions in protection and subsidies combined with greater competition from imports. The policy implications of recent trends in manufacturing employment are also briefly considered. July 2004.

11. An Ageing Australia: Small Beer or Big Bucks? by Gary Banks
In this Issues Paper Gary Banks argues that ageing does not represent a crisis for Australia. That most of the population live to be old is one of the great successes of modern economies. But an ageing population will have profound consequences for the economy that will require careful policy responses. This article examines two of these consequences: impacts on labour supply, including its implications for future economic growth, and on health spending, the most important age-sensitive component of government expenditure. May 2004.

10. Enhancing Trust in Australia’s Tax System by Owen Covick
In this Issues Paper the Author argues that Australia is divided into two nations as far as personal income taxation is concerned. Members of families in which most incomes comes from supplying labour services as employees to arms-length employers are subject to a much tighter “attribution” regime than are members of families in which income from family-controlled entities is the major income source. The former are less able to allocate income across members of their family unit in a way which minimises the tax payable by the family unit as a whole. This division has consequences which are typically regarded as undesirable: it is horizontally inequitable, vertically inequitable, and allocatively inefficient. In considering possible remedies, the author argues that the best alternative would be to extend to arms length wage-and-salary-earner households a capacity to establish “quasi-trusts” enabling them to allocate income across the family unit in a manner equivalent to that used by families deriving their income via family businesses. April 2004.

9. Inquiry into the Management of Electronic Gaming Machine Numbers by Michael O’Neil and Steve Whetton
In 2002-03 the South Australian Independent Gambling Authority conducted an inquiry into the management of gaming machine numbers. This Issues Paper summarises a supplementary submission to the inquiry that was prepared by the Centre at the request of the Provincial Cities Association of South Australia. The principal aims of the submission were to canvass options for the management of EGMs, identify potential harm minimisation measures, and put forward the case for a reduction in gaming machine numbers in non-metropolitan South Australia to ensure greater equality in the spatial allocation of machines. Comments on other written submissions and the history of the management of gaming machine numbers were also provided. April 2004.

8. Review of the South Australian Economy, 1990-2003 by Michael O’Neil, Penny Neal and Anh Thu Nguyen.
This Issues Paper presents a review of the performance of the South Australian economy since 1990. While noting that South Australia's economic performance has been more subdued in comparison with the national economy since 1990 it reports on the solid performance of several sectors of the local economy. Economic policies over the medium term to support the faster growing services sector and to increase exports are the most likely to contribute to economic growth, accompanied by policies to sustain stronger population growth. March 2004.

7. Darwin: A Gateway to Asia? by Andrew Symon
This Issues Paper considers the implications of the Adelaide-Darwin Railway and Port of Darwin developments for Australian international and interstate transport patterns. While the author concludes that developing an international trade route via the railway and port will present a significant challenge, the prospects for domestic freight are found to be more promising. Immediate cost and time benefits over truck haulage and expected strong growth in domestic demand in the Northern Territory, taken together, suggest that the extended railway will help to further integrate the Territory and South Australian economies. March 2004.

6. Innovation Activity and Income Levels: A Summary of Indicators by Jim Hancock, Marianne Herbert and Steve Whetton
This report presents simple indicators of innovation activity and incomes in the Australian States and Territories, and in the regions of the United States, Canada and Germany. The objective is to explore whether there is a within-country correlation between innovation and income levels. It is concluded that there is a significant positive correlation between innovation activity and average earnings in the United States. While the Australian data is tentatively suggestive of such a correlation, no strong conclusions are possible because the number of States with which to form a cross section is so small. April 2003.

5. The SA Labour Market Through the 1990s by Anthony Kosturjak
This Issues Paper summarises major trends in the South Australian labour market over the 1990s in order to assess the performance of the labour market in light of the 1990 recession and the collapse of the State Bank – two events which had a substantial impact on the labour market during the early part of the decade. The defining characteristics of the labour force over this period have been a poor record of generating new jobs and a persistently higher level of unemployment which are due largely to the weakness of the South Australian economy. Other interesting trends include the concentration of employment growth among females and part-time employment; decline in aggregate male and full-time employment; a fall in the participation of males in the work force; a rise in the relative and aggregate number of long-term unemployed and the average duration of unemployment; and ageing of the labour force. February 2003.

4. The 2002-03 Commonwealth Budget by Owen Covick
This paper presents an an alysis of the 2002-03 Com monwealth Budget. It finds that the stance of Commonwealth government fiscal policy has shifted away from the expansionary stimulus of the second term of the Howard-Costello Government and that "Mr Costello has taken his foot off the accelerator and pressed it onto the footbrake - as far as overall Budgetary policy is concerned". The study argues that a shift towards fiscal consolidation is sensible and appropriate in Australia's current overall economic circumstances. Nevertheless, the author raises concern that the partial embrace of an accruals accounting framework has produced a decline in the transparency of the budget. A shift away from clarity and navigability of the budget has been compounded by the Treasurer's continued denial that the GST is a Commonwealth tax. This outcome makes it difficult to determine whether the introduction of A New Tax System has produced no increase in the overall tax burden as was promised by the Federal Government.August 2002.

3. An Assessment of the Impact of Gaming Machines on Small Regional Economies by Michael O'Neil and Steve Whetton
This Issues Paper summarises results of a study designed to identify the economic and social impacts of electronic gaming machines (EGMs) in the council areas that are members of the Provincial Cities Association of South Australia. The study finds that per adult EGM expenditures are above average in the Provincial Cities. The Centre also estimates that there is a higher prevalence of problem gamblers in the Provincial Cities than for the State as a whole, and that the aggregate net economic and social impact of gaming machines for the Provincial Cities is negative. The higher EGM spending in the Provincial Cities, and differences between the individual Cities, appear to be largely explained by both a higher prevalence of EGMs in the Provincial Cities and by socio-demographic factors, especially the regional unemployment rate, the proportion of persons identifying as Aboriginal and the proportion of dwellings rented from the SA Housing Trust. The higher prevalence of problem gamblers cannot be so confidently explained, but it is likely to be significantly influenced by these same 'risk factors', amongst others. May 2002.

2. Timor Sea Natural Gas Development: Still in Embryo by Andrew Symon
This paper provides a description of the extent of gas reserves in the Timor Sea and of the various projects currently planned or proposed. Development of the Timor Sea gas reserves is, however, at an embryonic stage. Plans are ambitious and their progress to reality is likely to take several years at least. Nevertheless, world demand for natural gas over the long term is expected to be strong and sustained, so that the prospect of major investment in the Timor Sea proceeding is high. The scale of the possible development is such that it is likely to have a major impact on the economy of the Northern Territory, while also contributing significantly to the growth of the Australian economy. August 2001.

1.The 2001-02 South Australian Budget by Jim Hancock
This paper presents an analysis of the 2001-02 South Australian Budget. It finds that the Budget is in approximate cash balance but on an accrual basis has fallen well short of the Government's intended outcomes as set out in its Financial Plan of 1998-99. The bottom line is that South Australia's budgetary position remains fragile and under considerable stress. This is evident in a relatively weak balance sheet position relative to other States. South Australia has a per capita net financial worth which is well below average. August 2001.

Other articles addressing special topics from earlier Breifing Reports are also available for download:

• Deregulation of the Australian Dairy Industry by Steve Whetton
• Ageing Populations: Projections and Trends by Jim Hancock and Anthony Kosturjak
• Why Regulate the Labour Market by Sue Richardson
• Globalisation, WTO and the Next Round of Trade Negotiations by Kym Anderson