Heightened state of uncertainty for SA, national economies

Friday, 3 July 2015

The state, national and global economies have entered a period of heightened uncertainty, increasing the likelihood of subdued economic growth persisting in the short to medium term.

That’s according to the latest Economic Briefing report compiled by the University of Adelaide’s South Australian Centre for Economic Studies (SACES), to be presented in Adelaide today (Friday 3 July).

Global factors continue to play a key role in the difficulties facing Australia’s economy, says the University’s Associate Professor Michael O’Neil, Executive Director of SACES and co-author of the report. “Greece’s financial woes and the potential for it to exit the Euro has increased uncertainty among global investors,” Associate Professor O’Neil says.

“While the Greek economy is small, this situation is already unsettling global markets and could cause significant disruption in Europe and the broader global economy, including Australia.

“Ongoing declining terms of trade, further falls in mining investment and a slowdown in the Chinese economy are also expected to continue to dampen the Australian economy over the next couple of years.”

He says growth in Australia has been driven by exports, which have risen strongly as new resources production has come online. “The depreciation of the Aussie dollar, lower fuel prices and reductions in interest rates also provide for a more supportive environment. However, we forecast that Australia’s Gross Domestic Product will rise by only 2% in 2015/16, which is less than Federal Treasury forecasts of 2.75%,” he says.

Co-author Steve Whetton, Deputy Director of SACES, says the South Australian economy has “performed better over the past year than is popularly perceived”.

“Growth in state final demand – a measure of economic demand for goods and services in an economy – showed solid improvement, rising by 1.9% through the year to the March quarter 2015, compared to just 0.6% over the previous year. Services exports also recorded a solid rise in 2014 (up 8.1%), with education exports reaching a new high,” Mr Whetton says.

“Business investment in South Australia rose solidly, while household consumption expenditure grew despite fragile labour market conditions. Residential building activity has also continued to grow.”

Nonetheless, he says clear areas of weakness in the state economy remain. In addition to reduced engineering construction and labour market conditions, goods exports have fallen over the past year (down 5.9%).

The full report will be delivered to leaders of the South Australian business community at the SACES Economic Briefing, Crowne Plaza Hotel, Adelaide, at midday today.


Contact Details

Associate Professor Michael O'Neil
Email: michael.oneil@adelaide.edu.au
Executive Director, SA Centre for Economic Studies
The University of Adelaide
Business: +61 8 8313 4545
Mobile: +61 (0)408 812 032

Steve Whetton
Email: steve.whetton@adelaide.edu.au
Deputy Director, South Australian Centre for Economic Studies
The University of Adelaide
Business: +61 8 8313 4663
Mobile: +61 (0)432 350 232

Mr David Ellis
Email: david.ellis@adelaide.edu.au
Website: https://www.adelaide.edu.au/newsroom/
Deputy Director, Media and Corporate Relations
External Relations
The University of Adelaide
Business: +61 8 8313 5414
Mobile: +61 (0)421 612 762