Adelaide’s burgeoning economy is providing a crucial lifeline to South Australia, according to new research, yet it conceals the economic hardships faced by the state’s rural areas. The latest Gross State Product figures, celebrated by the State Government as a positive indicator of South Australia’s economic trajectory, reveal a stark contrast between urban prosperity and rural decline.
A detailed analysis by BDO’s SA-based chief economist, Anders Magnusson, highlights that while Adelaide experienced a 1.8 percent economic growth, driving the state’s overall Gross State Product growth to 1 percent, several rural regions suffered negative growth, with declines reaching up to 2.6 percent.
Rural Regions Face Economic Challenges
Regions such as the Murraylands and Riverland, the Limestone Coast, and Eyre Peninsula are enduring significant economic downturns. These areas are grappling with the aftermath of drought, flood recovery efforts, fruit fly infestations, and escalating costs.
Jodie Hawkes, Chair of Regional Development Australia Murraylands and Riverland and CEO of Bowhill Engineering, expressed concerns over the disparity in economic conditions. “Statewide economic figures tell a pretty positive story, but they also smooth over the reality that some regions are doing it really tough,” she remarked.
“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,” she added.
Calls for Long-term Support
Hawkes emphasized the need for sustained support, advocating for long-term investment in local leadership, mental health, and business resilience. “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 stated.
Despite these challenges, there is potential for growth in certain areas. The Greater Adelaide Regional Plan identifies Murray Bridge as a key growth center, suggesting that with appropriate policy settings and investment, regions like Murraylands and Riverland could contribute significantly to the state’s overall economic health.
Balancing Urban and Rural Development
South Australian Business Chamber CEO Andrew Kay highlighted the importance of balancing the state’s economic complexity and diversity with the needs of its traditional 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 said.
He also pointed out the challenges faced by rural areas, including worker attraction, housing affordability, access to training, and the cost of doing business. To address these issues, the SA Business Chamber is advocating for a 50 percent payroll tax discount for regional businesses to enhance competitiveness with interstate counterparts.
Negative Gross Regional Product growth was reported across all of the state’s regions, except for Adelaide Hills, Fleurieu, and Kangaroo Island, which saw a modest growth of 0.4 percent.
Understanding the Disparities
The downturn in rural South Australia is primarily linked to severe drought conditions, affecting regions heavily reliant on agriculture, forestry, fishing, and mining. “The impact of the drought on regional economies has been masked by the growth in Adelaide,” Magnusson explained, noting the concentration of the population in the capital city.
The challenges are not uniform across regions. In the Murrayland and Riverland, the wine grape industry has been particularly hard hit, with growers recently appealing to Premier Peter Malinauaskas for immediate intervention as grape prices plummet.
Additionally, the algal bloom crisis off South Australia’s coast, which has devastated marine life and impacted aquaculture and coastal tourism, is expected to have financial repercussions in the current fiscal year.
Adelaide’s Economic Complexity
Adelaide’s growth is bolstered by its service-oriented employment landscape, with services contributing 86 percent of the Gross State Product. Key growth sectors include professional services, health, education, and finance, with residential construction, finance, insurance services, and healthcare leading in Adelaide.
BDO’s research indicates that South Australia’s economic complexity score is strong compared to other states and territories, suggesting a productive economy. However, Magnusson cautions that productivity is “not growing quickly enough,” posing a risk of falling behind other states.
“SA isn’t a boom and bust state, like a lot of others,” Magnusson said. “While labour 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.”
Moving forward, opportunities for improvement lie in promoting modern construction methods, maintaining momentum on infrastructure upgrades, and enabling skilled migrants to live and work in South Australia.
