Adelaide’s burgeoning economy is providing a lifeline for South Australia, according to new research, but it is also concealing the struggles faced by the state’s rural regions. Recent findings indicate that while the capital city has experienced a 1.8 percent economic growth, many rural areas are grappling with negative growth, reaching declines of up to 2.6 percent over the past financial year.
The analysis of the latest Gross State Product (GSP) figures, described by the State Government as a “positive endorsement” of South Australia’s economic trajectory, reveals significant regional disparities. BDO’s SA-based chief economist, Anders Magnusson, noted that “published statistics can obscure significant regional disparities,” highlighting the uneven economic landscape.
Rural Regions Face Economic Challenges
While Adelaide’s growth has propelled the state’s overall GSP growth to 1 percent, rural regions such as the Murraylands and Riverland, the Limestone Coast, and Eyre Peninsula are facing economic downturns. These areas are battling the aftermath of droughts, flood recovery efforts, and rising costs, alongside challenges like the fruit fly infestation.
Jodie Hawkes, chair of Regional Development Australia Murraylands and Riverland and CEO of Bowhill Engineering, emphasized the disparity. She remarked, “The statewide economic figures tell a pretty positive story, but they also smooth over the reality that some regions are doing it really tough.”
“Our region is still juggling drought, flood recovery, fruit fly, and rising costs. The combined impact has worn down community resilience – our volunteers are tired, and our small businesses are constrained even while they’re doing their best to keep people employed,” Hawkes added.
Calls for Sustainable Support
Hawkes advocates for long-term, consistent support rather than temporary programs. “Real resilience comes from investing in local leadership, mental health, and the strength of our businesses – including helping them build a financial ‘war chest’ so they’re better prepared for the next disruption,” she asserted.
On a more optimistic note, Hawkes pointed out that the Greater Adelaide Regional Plan identifies Murray Bridge as a key growth center. With appropriate policy settings and investments, regions like hers could contribute significantly to the state’s job creation, productivity, and overall liveability.
Industry Challenges and Opportunities
South Australian Business Chamber CEO Andrew Kay welcomed the growing complexity and diversity of the state’s economy but cautioned against neglecting key sectors. “We need to ensure the longevity of our agriculture and aquaculture communities as we embrace opportunities in critical minerals and defense-related industries,” Kay stated.
“Our regions still face significant challenges in attracting workers, housing affordability and availability, access to training, and cost of doing business,” he added.
To bolster regional competitiveness, the SA Business Chamber is advocating for a 50 percent payroll tax discount for regional businesses. This initiative aims to level the playing field with interstate counterparts.
Economic Disparities Across Regions
Negative Gross Regional Product growth was noted across most of the state’s regions, with the exception of Adelaide Hills, Fleurieu, and Kangaroo Island, which saw a modest growth of 0.4 percent. The most severe declines were recorded in Murrayland and Riverland (down 2.6 percent), Limestone Coast (down 2.5 percent), and Eyre Peninsula (down 2.1 percent).
According to BDO’s research, the downturn in rural South Australia is primarily linked to severe drought conditions, with these regions heavily reliant on industries such as agriculture, forestry, fishing, and mining. “The impact of the drought on regional economies has been masked by the growth in Adelaide,” Magnusson explained.
Sector-Specific Struggles
In the Murrayland and Riverland, the wine grape industry is particularly affected. Riverland wine grape growers have recently appealed to Premier Peter Malinauskas for urgent intervention as the industry faces historically low prices that fail to cover production costs.
Meanwhile, the algal bloom crisis off the coast of South Australia has devastated marine life, impacting the aquaculture and coastal tourism industries. Magnusson anticipates that the economic effects of this crisis will become evident in the current financial year’s data.
Adelaide’s Economic Strength
Adelaide’s economy, driven by its service-oriented employment structure, has been a stabilizing force for South Australia. With 86 percent of the GSP generated by services, sectors such as professional services, health, education, and finance have been leading contributors to growth. Residential construction, finance, insurance services, and healthcare have also bolstered Adelaide’s economic performance.
BDO’s findings highlight South Australia’s strong economic complexity score compared to other states and territories. “The higher the economic complexity of an economy, the more productive you would expect it to be,” Magnusson noted.
However, despite the positive indicators, South Australia remains one of the weaker jurisdictions in terms of productivity. “SA isn’t a boom and bust state, like a lot of others,” Magnusson remarked. “While labor productivity is relatively low, and complexity is in the middle of the pack, the relatively high diversity of the SA economy cushions it against downturns in any particular market or industry, leading to the stable growth that characterizes the state.”
“Opportunities for improvement lay in promoting modern construction methods, keeping the momentum on infrastructure upgrades, and enabling migrants with the skills that SA businesses really need to live and work in SA,” Magnusson concluded.
As South Australia navigates these economic challenges and opportunities, the focus remains on fostering sustainable growth across both urban and rural areas, ensuring that no region is left behind in the pursuit of prosperity.
