Back to black in SA

7 July 2016

According to the SA Government's 2016-17 budget, the period of deficits that followed the Global Financial Crisis will end in 2015-16, despite lower growth in tax receipts. The net operating balance is estimated at $258 million in 2015-16, which will then slightly increase over the forward estimates (The state will still have to borrow some $2.4 billion in 2016-17, due to a payment required for the new Royal Adelaide Hospital.)

The State will also continue to grow, although less than the national average, by a forecast 2% in 2016-17

However, SA is also struggling with the nation's highest unemployment rate, while it has yet to face the closure of Holden's manufacturing plant, one of the State's largest employers.

And of course, there is Whyalla, where its largest employer, the Whyalla steelworks owned by Arrium, entered voluntary administration in April 2016 with billion of dollars of debt.

No wonder, then, that measures targeting job creation feature prominently, such as a $109 million job creation grant scheme.

The challenge for the SA Government is to strengthen existing industries while further diversifying the economy through initiatives that will attract new industries.

The State's economic base is already undergoing a significant transition away from mining and manufacturing toward the services industries. This is highlighted by ABS employment statistics across sectors in the State, which show major job losses in the manufacturing industries (except for food manufacturing), and major employment gains across the service industries.

Defence manufacturing remains a major focus for assistance. The Government will provide a $6 million over three years to attract new industies in this space, as well as $5 million supporting the job opportunities expected from the Australian Government's submarine project.

A new $20 million Economic Investment Fund is to help attract businesses to the State.

And a new $50 million SA Venture Capital Fund is to boost venture capital and private equity investments, which are notoriously low in the State, and a long way off from reaching the Government's target of 100 private equity investments into SA companies between 2011 and 2020.

The target and the progress of South Australia's venture capital and private equity investments Data Source: Australian Private Equity and Venture Capital Association Limited (AVCAL)

Business innovation in the state, as across the nation, is understood as the key to future prosperity, and the budget provides an additional $30 million on new target initiatives addressing this area. They include:

Education is another big budget item, with special committments provided for the STEM disciplines (science, technology, engineering and mathematics).

Somewhat reminiscent of the Gillard Government's 'Education revolution' initiative, there are $500 million allocated for education infrastructure investment initiatives - $250 over three years directly provided for establishing 139 STEM facilities in public schools ($250 million over three years) and another $250 million for establishing a loan facility for non-government schools.