In every state there are certain subjects of discussion that are debated more spiritedly than others.
In South Australia, it’s your allegiance to the Power or the Crows, an opinion on whether the Barossa Valley or McLaren Vale produces the best local drop, or even the correct pronunciation of the iconic Lego brand (it’s lay-go, by the way).
However, with the impending closure of the local car manufacturing industry – a long-standing pillar of the South Australian economy – a new debate has emerged among local business leaders and various industry stakeholders. And that’s how best to get South Australia back on track, following what will undoubtedly be a seismic shift in the state’s economic landscape.
Concerns have been fuelled by the recent release of two major economic reports, both of which paint a rather bleak picture for South Australia over the short to medium term.
CommSec’s ‘State of the States’ report ranked South Australia’s economy, over the last quarter, as the sixth-best performing out of eight nationally. Deloitte’s latest Business Outlook described our economy as being stuck “in the slow lane” due to a rapidly shrinking manufacturing sector and speculation over the loss of the state’s submarine defence contracts.
In the face of such gloomy forecasts, it’s no surprise that many industries and business leaders are looking for a solution. A growing number have identified the state’s sluggish population growth rate of (0.9% per annum, compared to the national average of 1.7%) as a potential major growth driver, should it be properly addressed.
So, is the answer to our economic woes as simple as bringing more people into the mix?
Experts wise to the inner workings of the South Australian economy are right to chuckle politely at the question before they attempt to answer it. Rarely is anything in their field black or white, and when it comes to a broad, sweeping solution to a state wide economic slowdown, it turns out that any suggested solution is nothing but grey.
Not that there aren’t many shades of grey to be explored.
Daniel Gannon, executive director of the SA Property Council, and former state president of the Migration Institute of Australia, Mark Glazbrook, are both firm advocates for the use of strategic population growth as a means of achieving a business-led economic recovery.
Whilst neither is proposing, or recommending for that matter, an opening of the floodgates to all comers – as has occurred in the past – both agree that a key priority of the government should be to address the state’s gross underperformance in regards to its own population target of two million people by 2027.
Their view is that greater use of a targeted skilled migration strategy would help South Australia adhere more closely to the plan, which was initially set by the government in 2007.
“The state government did the right thing in regards to its State Strategic Plan. It put a target in place of two million people by 2027,” Mr Gannon said.
“However, we are not even close to keeping up interms of meeting that target now. We are currently sitting at 1.68 million, so we need about 320,000 people over the next 13 years to meet the state governments own target.
“That will require about 24,000 people coming to South Australia every year, currently we currently receive only about 15,000.” Mr Glazbrook, a migration agent who has been working in the Australian immigration industry for almost 20 years, concurs.
“As well as growing the state’s tax revenue base, skilled migrants often play a critical role in allowing local businesses to grow and expand, should they require access to skills that are unavailable within the local labour market,” he said.
“They also drive on our roads, eat in our restaurants and build houses in our districts, and overall provide a significant economic contribution to our state.”
At the other end of the spectrum are organisations such as Sustainable Population Australia, which claims that even the state’s current growth rate is excessive.
Their proposal is for South Australia to use the opportunity of a major economic overhaul to increase our reliance on renewable energy sources. This goal, they say, could be achieved through the electrification of major infrastructure networks such as the public transport system, eliminating the need for greater numbers of people to increase demand for local goods and services.
Renowned South Australian demographer Dr Graeme Hugo sits somewhere in between the two camps.
Despite describing zero population growth rate advocates such as SPA and the Stop Population Growth Now political party as “somewhat scary”, he is equally reluctant to throw his full support behind the thinking of population growth equating to increased economic growth. Instead, his opinion is that South Australia would be better off focusing its efforts on developing a more responsive and flexible migration program, one that is able to more quickly and accurately respond to changes and opportunities that develop within the economy.
“Getting the composition of your population right, to me, is more important than the overall numbers,” he said.
“Quite often you hear this very simplistic view in relationship to the environment: one extra person is bad for the environment. The reality is that it’s much more complex than that.
“It’s really quite a vex situation (for South Australia). Immigration certainly has a key role to play, but it’s not a case of getting anyone that’s warm and vertical to come.
“Right now the economy doesn’t look like it’s going to be expanding to any great extent in the near future. Therefore, we need to be very selective about the people we target to bring in to make sure we’re matching migrants to skills that we really need.”
Darryl Gobbett, chief economist at Prescott Securities, agrees that at an international level, South Australia’s population growth rate is nothing to be alarmed about.
He is also of the opinion that it’s the make-up of South Australia’s population, rather than the numbers themselves, which is of the greatest importance to the future prosperity of the state.
“Our population growth rate of 0.9% is actually pretty fast, if you look at it compared to most of Europe, and even parts of Asia,” he said.
“My concern, from an economists’ point of view, is the concept of population growth in the context of a rapidly ageing community, and the economic challenges that will present over the next few years.
“For example, in the housing sector, if you have a static population and you’re getting older as a state, you’re going to have less housing turnover and therefore less demand for building. Younger people tend to move more frequently as their family conditions change, whereas older people tend to be more stationary.
“All of that, combined with the fact that an increasing proportion of the population will be above the age of 65 and no longer working and contributing to our tax revenue base is something that needs to be considered.”
Professor John Spoehr, executive director of Adelaide University’s Australian Workplace Innovation and Social Research Centre, is another expert who agrees that the answer is significantly more complex than simply bringing more people in.
He said that while it is easy to understand the underlying assumption that greater population growth behaves as an economic stimulant given the historic correlation between the two, it is in fact as much a symptom of job creation and industry growth as it is a cause of it.
“(It’s important) to understand the interaction between population and the economy and the complex relationship that exists between the two,” he said.
“Jobs and employment opportunities are a fundamental driver of population growth, but what we have right now is this chicken-and-the-egg situation when it comes to population growth being an objective of a strong economy.
“Population growth is following the economic trajectory of the state, and South Australia’s relative economic position in Australia is a reflection of our population growth rate.”
“It’s very difficult to have any influence over population growth rates directly. What we have to think about is urban policy that makes South Australia an attractive place to live and work in.”
Also important, according to Professor Spoehr, is for South Australia to adopt a more knowledge and skill intensive approach to its manufacturing industry, given the closure of the auto industry and our inability to compete on cost with neighbouring superpowers in Asia.
It’s a strategy that he said would benefit domestic workers as well as having the beneficial side-effect of attracting more skilled migrants to the state.
“The creation of a sophisticated, modern, urban infrastructure and regional infrastructure is something that attracts migrants,” he said.
“In the past, migrants have been attracted to come to South Australia for the lifestyle, scale and affordability, and all those factors plus access to employment mean that people must be able to see genuine employment prospects here.
“(If not) they might come and live here for a couple of years, but then decide to move interstate if we’re not able to provide secure and rewarding employment opportunities for them.”
If nothing else, the discussion reveals some of the many hidden complexities and pervasiveness of the challenge we face as a state over the next several years.
Not only is the local economic landscape on the verge of a major shake-up, but with the effects of an ageing population expected to peak in the near future, South Australia is entering a significant period of change over the next 5-10 years.
When asked for their own perspective on what South Australia needs to do in order to improve the health of our economy, the similarity in our experts’ responses was startling.
Reducing regulatory red tape and cutting the cost of doing business in South Australia were both quickly highlighted, as well as moving away from the development of a two-speed economy – a trait inherently tied to population growth according to Professor Spoehr.
“Population growth in many ways is a function of a healthy, growing and diversified economy,” he said.
“Can you use migration as an economic solution? On its own, no you can’t.
“But in tandem with sound and sophisticated industry and urban development policies that create an attractive environment in which to live, high standards of living, quality infrastructure and also high-quality employment opportunities and career paths… you’ll be able to realise the benefits of population growth, because that will enable us to attract people and retain them as well.”
* This article first appeared in In-Business magazine. The original article can be seen here.