SA after Holden - BankSA Trends examines the realities

The latest edition of BankSA’s economic bulletin, Trends, paints a picture of a state at the crossroads. Released today, the bulletin looks closely at ramifications of last year’s announcement by Holden that it will cease manufacturing in Australia by 2017.

Conducted in conjunction with Deloitte Access Economics, this edition also examines Australian living standards, South Australia’s housing sector and prospects for the State’s rural sector.

When it comes to living standards, the bulletin suggests developments in the broader economy gave national incomes a boost in past years that may not continue across the next decade.

South Australia’s employment levels are decreasing, and the State’s population and output growth is falling below the national average.In the rural sector, the BankSA Rural Price Index shows that a moderating Australian dollar is reducing one source of pressure on local farmers. Sitting in the middle of these indicators is the local housing sector, where news is broadly good across a range of leading gauges.

The bulletin’s main article tackles numerous questions relating to Holden’s decision to cease manufacturing, including:

• Will the move knock the economy notably off course?
• Will the loss of skilled jobs prove problematic for the prospects for South Australian
• workers?
• Are many of the fears overblown?
• Can we refine future economic opportunities?

BankSA Chief Executive Nick Reade says Trends examines these questions by assessing the likely scale of the difficulties posed by Holden ceasing its local manufacturing.“Naturally, the announcement by Holden that it would no longer manufacture in Australia past 2017 was a blow,” Mr Reade said.“

As Trends reports, Holden’s role as a car manufacturer based in Adelaide has been one of the jewels in the crown of this State’s economy for more than half a century.

“Holden’s announcement has led to numerous questions and, with the more recent announcement that Toyota will also follow suit with ceasing its manufacturing in 2017, concerns have been further exacerbated. As with any step into the unknown, there’s a lot of uncertainty – and in some cases fears – as to what lies ahead.”South Australians have been aware for a long time that there was a risk that Holden would no longer continue to make cars at its Elizabeth plant in Adelaide.While Holden’s closure is not ideal for the State’s economic outlook, Trends asks, just how bad is it?

The reports suggests the answers are likely to range somewhere between a best case, where the only jobs lost are those already announced by Holden, Ford and Toyota as going, adding to around 7,000 jobs nationally and 2,000 jobs in South Australia, and worst case, where wider losses within the auto sector are realised and flow on effects to other industries swell these losses up to around 70,000 jobs nationally and 9,000 jobs in this State.

Trends concludes that, although the loss of car manufacturing operations and associated jobs will be a blow to South Australia, the size of those challenges are easy to exaggerate.

“The car industry is just one part of a broader South Australian economy, and it is important not to forget the good news for jobs wrapped up in the downshift in the Australian dollar and interest rates in recent years,” the report says.

“In the midst of headline grabbing ‘horror stories’, we forget there are still many success stories, both small and large.”

Despite upcoming challenges for the State as it sheds manufacturing jobs through 2016 and 2017, while our economy is already softer than usual, there is great potential for South Australia to capitalise on a number of developing opportunities over the next decade, including overseas students, food and wine, resources, tourism and healthcare.

“At the same time, let’s not underestimate the innovation and entrepreneurship driven by the State’s small to medium-sized business sector,” said Nick Reade.

“We must remember that, the car industry is just one part of a broader South Australian economy. The good news for jobs is wrapped up in the downshift in the Australian dollar and interest rates in recent years, as well as opportunities identified in other sectors.”

FURTHER INFORMATION:
Jayne Flaherty, Head of Communications, BankSA