August 2018 A bulletin of economic developments Trends in South Australia
Is bigger better when it comes to population? South Australia’s focus must be on attracting skilled workers
banksa.com.au TRENDS AUGUST 2018
Chief Executive’s Foreword SA must welcome more skilled workers
Welcome to the latest edition of BankSA’s economic bulletin, Trends, compiled in conjunction with Deloitte Access Economics. In this edition, we look at the population debate in South Australia, including the importance of attracting more skilled workers to the state and how our living standards are affected by changes in population.
Population growth has long been a The sluggish result for South Australia is vital for a strong economy and that contentious topic in South Australia, immediately sparked renewed concern we should be doing all we can to attract especially over the past decade during among local business groups, while the more people to live and work in South which time the state’s population state’s new Premier Steven Marshall also Australia. But we need to be smart. growth rate has steadily declined. weighed in, labelling the low figures As highlighted in this Trends report, “completely unacceptable” and that “a This edition of Trends considers the population growth for its own sake growing population is integral to the pros and cons of increasing resident isn’t necessarily the best approach, and conversation of how we bolster the South numbers in South Australia, with a instead more targeted growth is required. Australian economy”. focus on how living standards would be That is, we need to attract and retain more impacted if we welcomed more skilled “Much more must be done to stop the skilled workers from around the country, workers from interstate and overseas. exodus of young South Australians and indeed, from around the world. This pursuing job opportunities interstate and South Australia’s rate of population also includes reversing the ‘brain drain’ overseas,” said Premier Marshall at the growth is slower than any other state in in South Australia and giving our own time. the country. We’re also ageing faster than talented young people every opportunity any mainland state. “One of the highest priorities of my to stay here to live and work. government will be addressing low In fact, latest figures from the Australian To do this, South Australian businesses population growth in Adelaide and the Bureau of Statistics released in late April must be willing – and empowered – to regions. Driving a population growth show that South Australia’s growth rate invest more in higher growth industries, agenda is integral to creating more jobs of 0.6% lags behind all other states, while as a state we need to make a more here in South Australia.” including Victoria’s 2.3% and the national concerted and sustained effort to better growth rate of 1.6%. I agree that strong population growth position Adelaide and South Australia as
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an appealing place for young people to coming here under the skilled migration carve out their careers. category. 1,723,548 We need to keep promoting our first- It has also been shown that migrants to South Australia’s class education system, and ensure it Australia are often more skilled than the is skilling our young people for roles of existing workforce, which again leads to current population the future. And then we must provide an greater productivity, and in turn, greater (Australian Bureau environment for our best and brightest living standards overall. of Statistics, April to viably stay and set up businesses right So as this Trends report emphasises, 2018). here. This will both grow our own and the economic arguments in favour of further attract skilled population. expanding our skilled workforce are not There is also an interesting analysis in just to generate a bigger population for this Trends report about the link between the sake of being bigger, but because population growth and living standards. It more skilled workers lead to a stronger notes that participation and productivity economy and higher living standards are key drivers of living standards, so with through increased workforce participation greater numbers of highly skilled workers and productivity. 40 – who have proven to be more productive Ultimately, more skilled people means – it stands to reason that greater living more jobs, not less. The median age in standards will follow. South Australia, which For example, skilled migrants from is two years older interstate and overseas all need homes than the median age “At the end of the to live in and places to shop, which helps generate new jobs in construction, nationally. day, we need to retail, hospitality and a range of other grow our economy industries. or risk stagnation With this in mind, it’s time that South Australia pursues a bolder migration and irrelevance program based on increasing skilled as a state. And migration. 83% while there are We should be looking to entice more young people from interstate, with our The percentage of no magic bullets, relative housing affordability compared to Victoria and New South Wales an obvious incoming migrants to as Trends points starting point, along with Adelaide’s Australia who are aged out, increasing our regular high ranking in liveability surveys under 40. comparing the world’s top cities. population through At the end of the day, we need to grow skilled migration our economy or risk stagnation and irrelevance as a state. And while there would certainly be a are no magic bullets, as Trends points out, great start.” increasing our population through skilled migration would certainly be a great start.
When looking at the research and outcomes in other cities, the positive impact that skilled migrants have on local economies is difficult to dispute.
For example, skilled migrants are more Nick Reade likely to be young adults ready to enter Chief Executive, BankSA the workforce, meaning governments provide relatively less to subsidise their education and health care while young. In fact, some 83% of incoming migrants to Australia are aged under 40, with more than two-thirds of the 190,000 migrants who arrived in our country as part of the Australian Migration Program in 2015-16
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Is bigger better when it comes to population? “Our first requirement is additional population.” - Arthur Calwell, Minister for Immigration, 1945 “Have one for Mum, one for Dad and one for the country.” - Peter Costello, Treasurer, 2002 “I’m in favour of immigration. It’s the rate of immigration that’s the problem.” - Tony Abbott, ex-Prime Minister, 2018
Population growth – and immigration part of a decade, leaving South Australia In summary, bigger isn’t necessarily levels in particular – has emerged as a with the fastest ageing population of any better: population growth for its own sake controversial topic in both Australia and mainland state. isn’t necessarily a smart play. around the world in recent years. This edition of Trends goes behind the But there are some joys that come with And population growth is a hot topic media headlines to: being bigger. And South Australia would in South Australia too, with the state’s indeed benefit from more skilled workers, • Think about what’s best for South population growth having lagged behind whether they are coming from the rest of Australia; Australia as a whole for more than half a the nation and the world, or whether the century. In fact, local population growth • Analyse the data; and state gets better at hanging on to some of has been broadly easing for the better the young people who currently head off • Plot a path forward.
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elsewhere to carve out their careers. CHART 1 SOUTH AUSTRALIA'S SHARE OF NATIONAL POPULATION - % SOUTH AUSTRALIA'S SHARE OF NATIONAL POPULATION - % Two obvious things stand out: Chart 1 Source: Australian Bureau of Statistics 10 0 • First, relative to Australia as a whole, South Australia still relies on more ‘lower growth’ industries. It will be important to see business willing to 0 invest in industries with greater growth potential – the more investment that business makes, the more 8 South Australia will be an attractive destination. 8 0
• Second, South Australia needs to not only rank highly on global liveability indices, it also needs to go on the front 0 foot in making the state attractive to young workers.
Source: Australian Bureau of Statistics.
“In summary, bigger CHART 2 POPULATION GROWTH - % CHANGE ON 12 MONTHSChart EARLIER 2 isn’t necessarily POPULATION GROWTH - % change on 12 months earlier Source: Australian Bureau of Statistics better: population 1 growth for its own 1 2 sake isn’t necessarily 1 0 a smart play.” 0 8
There are no magic bullets here, but 0 these two measures could provide welcome momentum to South Australia’s 0 population growth and, through that, to greater prosperity. 0 2
What’s the problem? 0 0 Many commentators assume that there’s a un 00 un 02 un 0 un 0 un 08 un 10 un 12 un 1 un 1 problem here that needs fixing. Source: Australian Bureau of Statistics. After all, South Australia’s share of Australia’s population peaked in 1966. sell into the pace of growth. Australian population is also ageing, And although there have been many ups it’s projected to happen faster in South And it cements South Australia’s position and downs over time, there’s broadly Australia than it is in the nation as a as having a rapidly ageing population been a trend downswing in the pace of whole. relative to other states – along with population growth in South Australia the challenges that ageing brings to As a result, the relative shrinkage of the since a peak in 2009 (see Chart 2). local businesses, councils and the State state’s share of Australia’s population That downtrend has been evident for the Government. gradually translates into a matching better part of a decade now. reduction of our political power within Accordingly, the dependency ratio the Commonwealth of Australia (and This weakening in population momentum – effectively, the share of the total hence a shrinking say in the running in South Australia has a range of knock-on population that’s either too young or of Australia). Chart 4 traces the falling effects. For example, it is bad news for too old to work – is set to climb notably. number of Federal seats in South those sectors – such as construction – that As Chart 3 shows, although the wider
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Australia, with the next Federal election CHART 3 DEPENDENCY RATIOS - SIZE OF 0-14 AND 65+ GROUP RELATIVE TO POPULATION AGED 15-64 (%) – expected any time from late 2018 to Chart 3 Source: Australian Bureau of Statistics, Deloitte Access Economics DEPENDENCY RATIOS - size of 0-14 and 65+ group relative to population aged 15-64 (%) mid-2019 – to see the state lose yet another seat in the Federal House of 0 Representatives. At the same time, there are fewer job opportunities for young South 0 Australians. By definition, younger workers – and older ones – have more options when the pie of available jobs is 0 growing faster.
0
“But that begs the true question – the 0 one that lies at the Aust 201 SA 201 Aust 20 0 SA 20 0 heart of this issue: Source: Australian Bureau of Statistics, Deloitte Access Economics. CHART 4 SOUTH AUSTRALIA'S POPULATION AND POLITICAL REPRESENTATION - SHARE OF NATIONAL (%) just how fast should Source:Chart Australian 4 Bureau of Statistics, Western Australian Electoral Commission database SOUTH AUSTRALIA'S POPULATION AND POLITICAL REPRESENTATION - share of national (%) South Australia’s 10 0 population be growing?” 0
8 To be clear though, it isn’t that there have been no jobs. As Chart 5 illustrates, 8 0 there are comfortably more jobs in South Australia today than there were a decade Share of ouse of epresentatives members ago. It is just that other states have an 0 opulation share advantage on that front. Though that’s not as bad as it may seem. 1 01 1 1 1 28 1 0 1 1 1 1 0 200 201 In fact, the main reason why most other Source: Australian Bureau of Statistics, Western Australian Electoral Commission database. states have created jobs faster than CHART 5 South Australia is simply because their JOB GROWTH BY STATE - ANNUAL % CHANGE 2006-07Chart 5TO 2016-17 JOB GROWTH BY STATE - Annual % change 2006-07 to 2016-17 populations have been growing faster. 0 That said, and as Chart 6 shows, South Australia’s standing is relatively modest 2 on the job creation front even accounting for that. For every 100 extra people in 2 0 South Australia over the past decade, 40 have obtained jobs, which compares to 1 the 49 jobs for every extra 100 people across the nation as a whole. Note that 1 0 this ratio is never as high as 100, as many people are either too young or too old to 0 be working.
So South Australia has a problem … 0 0 or does it? T A AUST S A T SA TAS
While South Australia’s population growth Source: Australian Bureau of Statistics.
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looks sluggish in a national context, it CHART 6 JOB GROWTH AS SHARE OF POPULATION GROWTH BY STATE - 2006-07 TO 2016-17 doesn’t when considered in a global Chart 6 context. JOB GROWTH AS SHARE OF POPULATION GROWTH BY STATE - 2006-07 to 2016-17 110 Chart 7 is a reminder that the state’s population growth looks very much in 100 line with or ahead of many of South 0 Australia’s global peers, with average annual population growth rates over the 80 past decade higher than seen in the likes 0 of the United States, the United Kingdom and France – and a world apart from the 0 shrinking population rates seen in Japan. 0 Or, if you like, it is Australia that’s out of 0 step here more than South Australia.
But that begs the true question – the 0 T TAS S AUST A SA A T one that lies at the heart of this issue: just how fast should South Australia’s Source: Australian Bureau of Statistics. population be growing? CHART 7 Most people would say that population POPULATION GROWTH - 2006-07 TO 2016-17Cha (10rt 7YEAR CAGR) POPULATION GROWTH - 2006-07 to 2016-17 (10 year CAGR) growth isn’t necessarily a goal in its own 1 right. 1
Yes, bigger markets have greater 1 2 economies of scale. But the key aim is 1 to ensure that the South Australia of the future is as sustainably prosperous as it 0 8 can be. 0
So is there a link between population 0 growth and living standards? Yes, but it’s 0 2 complicated. 0
Back in the early 2000s, Federal Treasury 0 2 began to point out that the amount that AUS A SA USA U A A any economy can produce is driven by Source: Australian Bureau of Statistics. the “3Ps” of population, participation and productivity: as the two million by 2027 proposed in It’s important to note that highly skilled • Population: How many people there are Deloitte’s Make it big Adelaide report may workers are not only more productive, in the economy. be desirable. they also earn higher incomes and tend to stay in the workforce for longer. • Participation: How many of those Achieving that larger population would people choose to work. generate direct benefits of its own Accordingly, if South Australians are to flowing from the existence of a larger have higher living standards in the future, • Productivity: How much each of those market in this state. And both public then they must have higher skills, giving workers can produce. and private capital chase towards them both relatively higher wages and The population angle is obvious: India and where people choose to live, resulting long-lived careers. China have many more people than South in positive incentives in the way of So how is South Australia doing? Australia, so their economies are bigger investment from population growth itself. Currently, ‘living standards’ (measured by and they can therefore reap the benefits Yet it is the other two levers – our spending on ourselves) are lower in of being bigger. participation and productivity – that South Australia than in some other states, Economists term those benefits the between them are the key drivers of but not by much. “economies of scale”, and they are why living standards. And the measure shown in Chart 8 (our a population target for Adelaide such
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spending on ourselves) is arguably too CHART 8 PRIVATE CONSUMER SPENDING PER HEAD - 2016-17Chart ($ 8 THOUSANDS) simplistic a yardstick of living standards. PRIVATE CONSUMER SPENDING PER HEAD - 2016-17 ($ thousands) Chart 9 takes that same measure, but then subtracts spending on food and shelter – the two key necessities of life. In doing 2 so, it creates a measure of ‘discretionary’ living standards. 0
Given that shelter (housing) is relatively 8 cheaper in South Australia than it is in some other states, there isn’t much of a gap between average living standards across Australian states, with South Australia’s average living standards just 6.5% below the national average. 2 That’s a relatively sound position. That is, even in the absence of stronger 0 S A SA TAS population growth, South Australia isn’t doing that badly. Source: Australian Bureau of Statistics.
But that doesn’t change the fact that the CHART 9 PRIVATE CONSUMER SPENDING (LESS FOOD AND IMPUTED RENT) PER HEAD 2016-17 ($ THOUSANDS) state could be doing better – and that Chart 9 PRIVATE CONSUMER SPENDING (LESS FOOD AND IMPUTED RENT) PER HEAD 2016-17 ($ thousands) faster population growth could be one 0 way to help boost living standards in South Australia. 2 The link between productivity and participation suggests that faster population growth can help raise living 28 standards in South Australia if it results in a lift in the state’s skill levels. 2 To consider that, think about the ways in which Australia’s migration program provides benefits to the nation’s living 2 standards.
One benefit comes from the age profile of 2 migrants. Relative to existing residents, S A SA TAS skilled migrants are more likely to Source: Australian Bureau of Statistics. be young adults, which means that governments provide relatively less to Note that these arguments do not boil Or, in other words, the economic subsidise their education and health care down to ‘bigger is better’. Bigger is arguments in favour of a migration while young – taxpayers in other nations neither better nor worse in terms of its program focused on skilled workers arise have already done that for us. Moreover, impact on our living standards unless not because migrants generate a bigger the age profile of migrants to Australia there is a change in quality. However, that Australia, but because they support a means that they are likely, other things lift in quality is exactly what Australia’s ‘better quality’ Australia through lifting equal, to be in the workforce for some current migration program generates. workforce productivity and participation. time. The key benefit to the average Australian Although the tabloid view of people Further, and even more importantly, of migration lies in the improvement in arriving in Australia might focus on migrants to Australia are more skilled the national average in productivity and refugees, the dominant stream of new than the existing workforce. Those participation from the relatively higher (permanent) arrivals are skilled workers. relatively higher skill levels mean they skills of migrants and their relative age Even better, those skilled migrants are earn relatively higher wages and hence profile. younger than the average Australian pay relatively higher taxes. worker: some 83% of incoming migrants
8 IS BIGGER BETTER WHEN IT COMES TO POPULATION?
to Australia are aged under 40, and over While bigger isn’t necessarily better population policy to maximise the state’s half of arrivals are aged between 20 and on the population front, bigger can be living standards rather than to maximise 34 years (compared with only one in five a means to an important end: higher its population. To summarise: resident Australians). living standards. That is because where • Size isn’t absolutely everything; increased migrant numbers can generate In fact, of the 190,000 migrants arriving a genuine gain is through the impact • But if ‘bigger’ is achieved via a targeted as part of the Australian Migration they can have on South Australia’s skilled migration program, then it can Program in 2015-16, more than two- economy due to higher productivity and lead to a lift in living standards for the thirds arrived under the skilled migration participation. Our migrants are mostly population as a whole (not just the category. highly skilled and relatively young – a migrants themselves). Those strengths, in terms of both skills combination which offers gains in both But on the other hand, bigger itself does and age, translate into wider gains in productivity (thanks to their skills) and have its own benefits. These are due productivity and participation, meaning participation (thanks to their age and to strong population growth driving that migrants can raise our living to their skills). Other things equal, that economic growth, and a larger population standards. means skilled migrants more than pay creating economies of scale. their way, contributing notably to tax This isn’t exactly new – after all, Australia collections while drawing on public And without people power, economies shifted to an immigration program spending by rather less than the average. just don’t work as well as they could. dominated by skilled workers long before People produce, build, spend, organise the rest of the world began to think about That doesn’t mean it should be open and lead. Population growth will therefore these issues. slather – for example, it wouldn’t be help to ensure Adelaide remains a a framework that would lead to an But do those benefits spread? You may significant city in Australia’s economic endorsement of the calls made by some think those higher incomes are wholly life. Quality is the key to most of the gains commentators for South Australia to allow and solely being earned by the migrants that migration has to offer, but quantity visa access for those with lower skill themselves. Higher skills mean higher helps too: it will work in our favour if levels. wages, while younger workers will also we attract those with the right skills and stay in the workforce for longer. That Why not? Because settling for lower skills ambition to Adelaide, because they share means that migrants pay above average would provide, at best, a short-term sugar ideas from one side of the city to the rates of tax, which is then returned to the hit to South Australia’s growth, but at the other and beyond. wider populace via the spending of State cost of our longer term living standards. Are there other objections worth and Federal Governments. That is, the smart play is to use considering here? Three are often raised:
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• That “migrants steal jobs”; think that we should never have any that “migrants stress infrastructure” – children, because those children would turned out not to be true because there • That “migrants stress infrastructure”; then grow up and “steal jobs”. aren’t a fixed number of jobs or schools or and roads or other types of infrastructure. Do “migrants stress our infrastructure”? • That “migrants dilute our mineral Only temporarily. Nor do migrants mess But that changes when it comes to the wealth”. up our infrastructure. Yes, this is a nation nation’s mineral wealth. When it comes All three are worth considering. with key infrastructure failures. And to minerals, it’s undoubtedly true that by definition extra people means extra there’s only so much mineral wealth to go Do “migrants steal jobs”? stress on everything from our roads to our around. No. The argument that “migrants steal schools. jobs” is commonplace, along with the Yet it’s possible to put some figures on belief that there are only so many jobs to But, just like the last objection, the that, and they turn out to be pretty small. go around. underlying assumption here is that there’s The states – as a group – raise around a fixed amount of infrastructure. $8 billion a year in royalties on mining, Actually, that’s not right. The number of which translates to an annual benefit to available jobs grows alongside population And, once again, that’s just not true. More Australians from the nation’s mineral for the simple reason that someone who roads and more schools can be built. Even wealth of some $320 a year. gets a job then earns an income. And better still, a bigger population can pay when that income gets spent, that then for the better infrastructure that the extra But a full decade of migration (with a creates the next job. people need – with the increased tax take permanent intake of 190,000 a year) paying for the likes of extra schools and would reduce that by just $25 a year – or In fact, if you believed that there was new roads. 50 cents a week. only ever a fixed number of jobs, then you’d believe – as some argued back in So although extra people can temporarily Accordingly, while “diluting our mineral the 1970s – that married women were stress infrastructure, the key word is wealth” is entirely true, it is a very “stealing jobs” when they entered the ‘temporarily’. small negative to stack up against some workforce in large numbers. potentially large positives. And that Do “migrants dilute our mineral would be likely to remain true even if Or, to fully point out the logical wealth”? there are some other channels by which absurdities here, if you really believed Yes. The last two objections examined – our mineral wealth benefits Australians – that migrants steal jobs, then you’d also the view that “migrants steal jobs” and
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such as through a share of the wages that CHART 10 SOUTH AUSTRALIA'S SHARE OF NATIONAL POPULATION AND MIGRATION - % miners earn or the company tax that they Chart 10 Source: Australian Bureau of Statistics pay. SOUTH AUSTRALIA'S SHARE OF NATIONAL POPULATION AND MIGRATION - % From the world? From the rest of the 8 nation? Or keeping people here at home? The discussion above has been wholly and solely in terms of the potential impact of migrants from the rest of the world on the living standards of South Australians. et overseas migration opulation But the exact same concepts apply if: 2 • Young, skilled people from the rest of 1 Australia can be tempted to move to South Australia, and/or 0
• South Australia can hang on to more of its best and brightest locals rather than losing them to other states or the rest Source: Australian Bureau of Statistics. of the world. Between Censuses, the number of increased by almost one million people What’s happening? people living in capital cities grew between the 2011 and 2016 Censuses, In a debate that’s known to generate nearly twice as fast as the number of rising from 25% of the population in more heat than light, it’s worth a moment people living outside of capital cities 2011 to 26% in 2016. While England to consider some of the basic facts and (10.5% and 5.7% respectively). and New Zealand remained the most figures. common countries of birth after • Sydney remained the largest city, Australia, the proportion of people At the national level, Australia’s growing by an average of 1,656 people born in China and India has increased population is sprinting. The 2016 Census per week between the 2011 and since 2011. shows that Australia remains on track to 2016 Censuses. Melbourne however have a population of close to 40 million is catching up, growing an average of • Couple families with children people by the middle of this century. 1,859 people per week over the same remained the most common type of period. Australian family in 2016. However, the The Bureau of Statistics, when it released proportion of Australian families they the key elements of the 2016 Census • The 1981 Census was the first to count make up has decreased over time. In data, summarised as follows: more women than men in Australia. 1991, 54% of families were couples Women have continued to outnumber • The 2016 Census counted 23.4 million with children, dropping to 45% in men since, making up 50.7% of the people living in Australia, an increase 2016. population in 2016. of 8.8% since the 2011 Census. Finally, allow us to put those numbers – as Australia’s population has more than • The median age of all Australians well as more recent population stats – doubled in the 50 years since the 1966 increased to 38 years in 2016, after into perspective: Census, which counted 11.6 million being at 37 years since the 2006 people. Census, reflecting Australia’s ageing • Population growth in Australia has population. This is also highlighted by lifted of late to be 1.6%. That’s the • The majority of Australians continue the increase in the proportion of the best we’ve seen since mid-2014, to live in the eastern mainland states. population aged 65 years and over, with that small recovery mirroring a Almost 80% lived in NSW, Victoria, from 14% in 2011 to 16% in 2016. matching degree of recovery in net Queensland and the ACT in 2016. The immigration. ACT, Victoria and WA experienced the • The proportion of the population fastest growth between 2011 and that is female increased with age. Of • It also keeps Australia near the front of 2016, with each increasing by 11%. those aged 65 years and over, 54% the pack among the rich nations of the are female, compared to 63% of those world. • In 2016, more than two-thirds of aged 85 years and over. Australians lived in a capital city. • That pick-up partly reflects nothing • The number of people born overseas more than the slowing wind-down in
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engineering construction work as the CHART 11 NET OUTFLOWS TO INTERSTATE MIGRATION FOR SOUTH AUSTRALIA (5 YEAR TOTAL) impact of slower growth in China since Chart 11 NET OUTFLOWS TO INTERSTATE MIGRATION FOR SOUTH AUSTRALIA (5 year total) 2012 passes through the economy. 11 000 • Part of this is actually a lift in numbers 0 1 20 of foreign students and international 000 visitors, as the matching fall in the 0 Australian dollar since 2012 boosts the 000 number of people studying or coming as tourists. 000 It’s a similar story in South Australia, just older: 000 • The median age in South Australia is 40 years, which increased by one year 1 000 over the five years since the 2011 Census, and by two years since the 1 000 2006 Census. 2000 01 200 0 2010 11 201 1
• The median age of persons born Source: Australian Bureau of Statistics. overseas is older in South Australia CHART 12 than the nation as a whole, at 49 SOUTH AUSTRALIA NET INTERSTATE MIGRATION - ANNUAL compared to 44 years old. This reflects 2 000 the relatively low share of younger incoming migrants settling in the state. 0
• The typical housing arrangements in South Australia are the same as that 2 000 for Australia, with couple families with children being the most common 000 family type.
South Australia also has relatively low 000 levels of net overseas migration, as well as relatively large net outflows of 20 to 8 000 34-year-olds to interstate migration.
The relatively low share of net overseas Source: Australian Bureau of Statistics. migrants landing in South Australia comes CHART 13 despite Adelaide being one of the largest REGIONAL POPULATION GROWTH AS SHARE OF CAPITAL CITY POPULATION GROWTH (%) - 2005-06 TO 2015-16 cities included in Australia’s regional visa Chart 13 category until November 2017 (which REGIONAL POPULATION GROWTH AS SHARE OF CAPITAL CITY POPULATION GROWTH (%) - 2005-06 to 2015-16 80 makes it easier for incoming migrants to access a skilled visa, but requires they 0 live in a regional area for several years on 0 arrival). Following the removal of Perth from the regional list, Adelaide is now the 0 largest city in this category. The regional visa category started in 2004, and net 0 overseas migration to South Australia 0 almost doubled between 2003-04 and 2005-06. 20
Yet net overseas migration to South 10 Australia was less in 2015-16 than a 0 decade earlier, suggesting more needs SA S A TAS T
Source: Australian Bureau of Statistics.
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to be done on this front. The removal CHART 14 NET ANNUAL MIGRATION AND THE TERMS OF TRADE of Perth from the regional category for Chart 14 Source: Australian Burea of Statistics NET ANNUAL MIGRATION AND THE TERMS OF TRADE migration purposes might help, and this is something that will become clearer in 0 000 1 coming years. igrants Terms of Trade 00 000 1 As a state, South Australia has been losing 2 0 000 some of its best and brightest. The age 12 distribution of outflows to interstate 200 000 migration shows the clear majority of 10 outgoing individuals in the 20 to 34 age 1 0 000 cohort. The next largest groups are 0 to 8 19 and 35 to 49 years, such that the only 100 000 age groups not moving in relatively large 0 000 numbers from the state are those aged above 50. 0 Looking at migration outflows by age indicates that these are the groups most likely to be pursuing opportunities Source: Australian Bureau of Statistics. elsewhere in Australia – whether that be education or employment. for the state as a whole, or is it more the state capital’ across Australia over Finally, Chart 12 shows how those flows specific to areas outside of Adelaide? the decade to 2015-16. It is interesting of people from South Australia to other to note that South Australia has been That’s a relevant question because weak states have moved over time. That’s a second only to Queensland in maintaining population growth – and the associated reminder that, if there’s a global “war regional population momentum relative risk around economic decline – has been a for talent”, then South Australia has to the pace of population gains being front of mind issue for some parts of rural been losing the battle of late: interstate made in the state capital. and regional Australia. migration hasn’t gone our way (in net That’s relatively good going. terms) since a brief flurry at the start And, if true, then there may be a case of the 1990s. And although the latest to consider ‘region specific’ issues and Or, to put that differently, Adelaide is news is slightly better, that comes after incentives. having more success on the population a notable worsening from late 2014 growth front than the rest of the state, but Yet the data doesn’t particularly lend onwards. the gap in South Australia is much less itself to that view. than that evident in the rest of Australia. Is this an Adelaide versus the rest of the Chart 13 shows the ratio of population state issue? Other things equal, that says that regional growth ‘outside the state capital’ to ‘in To the extent we have an issue, is it one prioritisation isn’t quite as pressing an
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issue in South Australia as it is in some CHART 15 2017 GLOBAL LIVEABILITY RANKING - TOP 10 other states. Chart 15 Source: The Economist Intelligence Unit 2017 Global Liveability Ranking - Top 10 What next? 8 Bigger can be a means to an end for higher living standards, and is even better if it consists of highly skilled people.
Yet there’s a chicken-and-egg issue to address. After all, even if we do want population growth to be different in the future to what we’ve achieved in the past, is that achievable?
There are no magic wands that can be waved: South Australia’s population won’t grow faster simply by wishing for that to happen.
In fact, that raises a larger issue – the extent to which governments and citizens Source: The Economist Intelligence Unit. have a say over population policy. For example, although Australia has a tight rein over its permanent migration intake, business visas); The upshot is that, at any moment in the actual level of net migration has time, economic conditions are actually a • Expatriates (Australians temporarily moved substantially over the years. That’s more accurate indicator of net migration living overseas); and the result of swings in the number of: to Australia than is the level of the • New Zealanders (who essentially have permanent migration intake set by the • Temporary migrants (for example, the right to come and go). Federal Government. students and those here on temporary
14 IS BIGGER BETTER WHEN IT COMES TO POPULATION?
In turn, that’s why the single best leading To be clear, economic growth – and the We can do that by leveraging the indicator of migration flows is the terms resultant implied potential for good competitive advantages that we have of trade – the ratio of export prices to incomes that grow over time – isn’t the now, building on our existing strengths to import prices. only factor in the decisions that people grow service sector jobs. make. And there’s already a lot going for There are good reasons for that. When As a simple example of that, South South Australia. the world gives Australia a pay rise (as Australia already punches above its it does when it ‘costs’ fewer tonnes of Perhaps most notably, Adelaide is one of weight in some industries, and has the iron ore to buy a TV), then purchasing the best places to live in the world. potential to double down on those power goes up, construction and retail existing successes in the likes of: Chart 15 shows one of the relevant spending lift, employment makes gains, surveys here, from the Economist • Defence industries; unions backpedal on their opposition Intelligence Unit. It indicates that to migration, business groups demand • Creative industries; Adelaide’s ‘liveability’ is ranked in the action to address developing skill world’s top 10 cities – a great result. • Health and medical industries; and shortages, Australian expatriates find Adelaide scored a little lower than returning home more attractive, would-be • Professional and information technology Melbourne, but higher than any other expatriates are given pause, and those services. state capital in Australia. who face fewer restrictions on their Our service sectors require people to be Yet ultimate success will be measured, at movements – such as New Zealanders – living here in Adelaide, with greater scale least in part, by South Australia’s ability are more likely to come. important in encouraging investment to snare a larger share of the net migrant and in developing such sectors. And flows to Australia. And, as Charts 10 and without growth in services, we may miss 12 show, the simple summary on that “Perhaps most our opportunity to fill the hole left by front is that our share of international and traditional manufacturing and decades of notably, Adelaide domestic migration flows is still running slower growth. is one of the best well below our share of Australia’s population. Yet this focus should not come at the cost places to live in the of missing opportunities that allow South All that points to work needing to be done Australia to surf the waves of future to help ensure continued prosperity for world.” global growth. Industries where global the state. growth is strong and where there are That explains the broad relationship – the To get there will require businesses significant global growth opportunities ‘migration equation’ – shown in Chart 14: operating in South Australia to invest in for South Australia include the likes of: economic good times foster an increase industries with greater growth potential. • International education; in migrant inflows, while downturns see By doing so, that will generate the those flows ease off. stronger economy required to make the • Energy and gas; In turn, that points to the chicken-and- state a more attractive place for families • Tourism; and egg issue that exists. South Australia can to settle and for businesses to set up • Agribusiness. indeed attract more high quality migrants shop. than it already does, but those migrants Most importantly, South Australia needs South Australia’s performance in these are more likely to come if the state’s to proactively retain and attract young industries is already reasonable, but there economy is already stronger in the first workers. is still room for greater growth in each. place. The bottom line is simple: ensuring our In each of these sectors we must identify After all, South Australia has seen a falling existing jobs continue to be based in opportunities to lead the nation, not come share of Australia’s population since Adelaide and that we’re able to attract middle of the pack. But, as the old adage 1966, and a trend slowdown in population the best and brightest will be ever more goes, ‘a rising tide lifts all boats’ – and growth over the past decade. reliant on scale in the future. investment in high potential industries will certainly help on this front. Or, to put that another way, there are no So how do we attract and retain the easy answers. people needed to drive economic growth? Then again, despite debating these issues And how do we ensure that we own a for many years, we've been relatively culture that fosters innovation, creativity short on action, let alone a wider plan. and productivity?
15 TRENDS AUGUST 2018
Managing a business can be complex. Your banking doesn’t have to be.
At BankSA, we have dedicated industry banking specialists who are committed to helping businesses in both metro and regional South Australia. Find our bankers in your industry on our website. • Professional Services • Manufacturers & Wholesalers • Consumer & Transport • Hospitality & Accommodation • Health • Property • Agribusiness • Small & Emerging Business
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414231-1_WBCBSA07767_0418.indd 1 11/5/18 11:47 am STATISTICS
Managing a business Statistics can be complex. CHART 1 SA TRENDS SECURED HOUSING FINANCE COMMITMENTS - TREND ($M)
Source: ABS Cat No. 5609.0 Chart 1 Sou Your banking doesn’t SECURED HOUSING FINANCE COMMITMENTS - Trend ($m) Housing finance commitments in South Australia are again on 1200 21 00 the increase – rising back from a low seen in the middle of 2017 SA Aust right scale – although commitments still remain below levels observed 1100 1 800 have to be. a year earlier. As with a number of statistics that are strongly 1000 18000 influenced by population growth, South Australia’s trends
00 1 200 are lagging behind those of the rest of the country. National commitments themselves are starting to slow, suggesting a 800 1 00 cooling down of the nation’s property market. 00 12 00
00 10800 an 1 ul 1 an 1 ul 1 an 1 ul 1 an 1 ul 1 an 18
STATISTICAL SECTION
CHART 2 BUILDING APPROVALS - TREND ($M)
SA TRENDS The value of local building approvals has been falling since on residential building Additions alterations Sou it peaked in October last year, with commercial construction ew residential building Source:Aust right scale 0 12 00 (‘non-residential building’) leading the charge. This is expected
0 following the completion of two large projects; the Royal 10000 Adelaide Hospital and the upgrade to the Adelaide Convention 0 00 Centre. Despite the slowdown in building approvals, the outlook 0 seems reasonable. The State Budget has allocated over $750 000 2 0 million for new health and education infrastructure that is 2 00 At BankSA, we have dedicated 1 0 expected to unfold over the next few years. Housing approvals are easing as well, but may rebound once the rise in housing industry banking specialists 0 0 an 1 ul 1 an 1 ul 1 an 1 ul 1 an 1 ul 1 an 18 finance commitments shown in Chart 1 flows through to actual who are committed to helping construction. businesses in both metro and STATISTICAL SECTION regional South Australia.
Find our bankers in your industry on our website. CHART 3 MEDIAN PRICE OF HOUSES SOLD - ADELAIDE ($'000) • Professional Services SA TRENDS Source: Real Estate Institute of Australia: "Market Facts" !"#$%&' Last year marked a fifth successive year of solid house price • Manufacturers & Wholesalers MEDIAN PRICE OF HOUSES SOLD - ADELAIDE ($'000) 0 growth in Adelaide, with Adelaide’s median house price rising • Consumer & Transport 3.3% across 2017, thanks in large part to a sharp jump to 0 • Hospitality & Accommodation rice 000 12 month moving average $465,000 in the final three months of the year. The most recent 0 • Health data shows that median house prices are increasing in all capital 10 cities across Australia with the exception of Canberra. This • Property upward local trend was seen across all South Australian zones 0 • Agribusiness with the exception of the Middle Adelaide zone where the 0 median price remained steady.
• Small & Emerging Business 0 ec 0 ec 10 ec 11 ec 12 ec 1 ec 1 ec 1 ec 1 ec 1
STATISTICAL SECTION banksa.com.au/corporate-business/industry-specialists
17 BankSA – A Division of Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714. BSA07767 0418
414231-1_WBCBSA07767_0418.indd 1 11/5/18 11:47 am TRENDS AUGUST 2018
SA TRENDS CHART 4 CHART 5 SA TRENDS HOME LOAN AFFORDABILITY - INDICATOR STATISTIC INDEX OF DWELLING RENTS - % CHANGE ON PREVIOUS YEAR S Source: Real Estate Institute of Australia: !"#$%&'& Chart 4 "Housing Affordability Report" Source: ABS Cat No. 6401.0 INDEX OF DWELLING RENTS - % change on previous year HOME LOAN AFFORDABILITY - indicator statistic 0 ore a ordable 0 8 Adelaide 8 apital ities 0 2 2 2 0 1 0 SA Australia 1 0 28 ess a ordable 0 2 0 0
STATISTICAL SECTION STATISTICAL SECTION The last 18 months have seen a moderate fall in housing Relatively stable affordability has been matched by easing rates affordability across South Australia and Australia – although of growth in dwelling rents both here and in Australia more South Australia’s housing remains close to the most affordable generally – with local rent rises now sitting well below the in the country. But, as the chart shows, despite the strong general rate of price increases in the economy. Even though increases in prices across the past five years, falling mortgage the local economy is performing better than it has over the interest rates have seen affordability improve slightly over that past decade, inflation growth is starting to edge upwards and extended period. Critically, the number of loans to first home population rises remain solid, low growth in average wages is buyers is currently buoyant, rising 19.0% since the end of 2016. making it difficult for landlords to raise rents. This drove a solid rise in overall loans, with the average loan size rising 2.7% across the year.
SA TRENDS CHART 6 CHART 7 SA TRENDS RETAIL TRADE - % CHANGE OVER PREVIOUS YEAR - TREND SOUTH AUSTRALIAN RETAIL - % CHANGE JANUARY 2017 TO JANUARY 2018 Source: ABS Cat. No. 8501.0 Chart 6 - TREND !"#$%&'& Source: ABS Cat. No. 8501.0 RETAIL TRADE - % change over previous year - Trend ()*+,&-*(+.-/0-1&.2+-0/&3&4&5"#678&9#6:#$;&<=>'&%?&9#6:#$;&<=>@&3&+$86A&
ospitalit SA Australia ood retailing Total retail ousehold goods ther retailing 2 lothing soft goods 1 epartment stores
2 0 2 8 10 12
STATISTICAL SECTION STATISTICAL SECTION Retail growth in South Australia has picked up, and is currently A breakdown of total retail growth provides more insight across outpacing the nation. Although this is nothing new – retail different spending groups. South Australia’s recent retail growth growth in the state has outperformed the national average was largely driven by the surging hospitality sector, a continuing across most of the period shown above. The gap between the trend in a state known for its culinary excellence (the pace of state’s retail growth and the national average diverged sharply growth has almost doubled since the middle of 2017). At the in the second half of last year. That resulted in an acceleration other end of the scale, department stores continue to not just in local growth even as retail growth in the nation slid down to fall behind, but contract overall. That is, however, a continuing its lowest point over the past four years. That pace of growth trend for Australia more generally. might be hard to sustain without better growth in wages.
18 STATISTICS
SA TRENDS CHART 8 CHART 9 SA TRENDS NEW MOTOR VEHICLE REGISTRATIONS - TREND POPULATION TRENDS - % CHANGE ON PREVIOUS YEAR AND LOCAL LEVEL !"#$%&'& Source: ABS Cat. No. NEW MOTOR VEHICLE REGISTRATIONS - Trend ('000S) Source: ABS Cat No. 3101.0 !"#$%&'& 9314.0 POPULATION TRENDS - % change on previous year and local level ('000s)
000 10 000 2 2 1 0 SA Australia right scale SA Aust SA 000s right scale 00 00 1 1 20
000 0000 1 1 00
1 1 80 00 82 00 1 0 1 0 000 000 0 1 0 00 00 0 1 20 000 0000 ec 1 un 1 ec 1 un 1 ec 1 un 1 ec 1 un 1 ec 1
STATISTICAL SECTION STATISTICAL SECTION New car sales picked up slightly in the state towards the end The state’s population growth still remains close to the weakest of 2017, after a slight dip recorded mid last year. The longer it has been in years, although it is starting to turn. Trends in term picture here suggests that car sales, both locally and national growth have generally emerged earlier than in South nationally, are rising steadily, but no faster than what underlying Australia, with a resulting lag between national and local trends population growth would suggest is necessary. across a number of economic variables – particularly in the housing sector. The key negative for South Australia remains the outflow of population to other states, with the loss of young adults a critical problem for longer term prospects.
CHART 10 CHART 11 SA TRENDS SA TRENDS TREND UNEMPLOYMENT RATE (%) EMPLOYMENT - % CHANGE ON PREVIOUS YEAR - TREND SERIES
!"#$%&'(& Source: ABS Cat. No. 6202.0 Chart 11 TREND UNEMPLOYMENT RATE (%) EMPLOYMENT - % change on previous year - trend series 0 8 0 SA Australia Sour SA Australia 0
0 2 0
1 0
0 0 0
1 0
0 2 0
STATISTICAL SECTION STATISTICAL SECTION Unemployment rates are affected by two critical factors – the South Australia’s employment growth continues on its upward rate of employment growth (which Chart 11 shows is pretty trend and is now at its strongest since mid-2011. The state’s positive) and the number of people entering (or leaving) the pace of job growth increased despite a recent slowdown across workforce. While the longer term trend shows how the local the rest of the country. This is an even better story for the state labour market has been improving since 2015, the most recent given its challenging demographic position. Population growth results show unemployment rates rising. This increase, however, remains below average, and the state’s population remains older is significantly due to a rise in participation rates suggesting that than the other mainland states. (at least in part) people are more confident about their prospects of finding employment. As a result, even this minor increase is less worrisome than it might appear.
19 TRENDS AUGUST 2018
CHART 12 SA TRENDS CHART 13 SA TRENDS TOTAL AVERAGE WEEKLY EARNINGS ($) - PERSONS IN FULL-TIME EMPLOYMENT CONSUMER PRICE INDEX, ALL GROUPS - % CHANGE ON PREVIOUS YEAR Source: ABS Cat No. 6302.0 Chart 12 Chart 13 TOTAL AVERAGE WEEKLY EARNINGS ($) - Persons in full-time employment !"#$%&'()*(+!')+#,'-.)/00)1("%*$)2)3)456789):7);<9=>:?@)A96<) 1 00 Adelaide 8 apital ities 1 00 SA Australia 0 1 00
1 00 0 2 1 00 2 0 1200 1 1100 1 0 1000 0
STATISTICAL SECTION STATISTICAL SECTION The news on the number of jobs is positive, but when it comes Inflation is gradually returning to the economy – with the to the money we are getting, the story is far less impressive. national rate pushing back closer to the Reserve Bank’s target Nationally, wages growth is still running far slower than it did zone of 2-3%. Adelaide’s inflation revved up further and has across the period until 2013, while local wages are not just even surpassed the nation’s rate lately. In fact, over the past slowing, they actually declined through the middle of 2017. That year, Adelaide recorded the largest increase of all capital cities fall has occurred despite the state’s stronger economy, and a – a result largely reflective of improvements in the state’s slight rise in inflation – meaning that the purchasing power of economy. workers has been eroded.
CHART 14 CHART 15 SA TRENDS SMALL BUSINESS CONFIDENCE - NET BALANCE EMPLOYMENT GROWTH AND JOB VACANCIES SA TRENDS Chart 15 !"#$%&'(& S A US SS et balance EMPLOYMENT GROWTH & JOB VACANCIES 0 8000 2 0 0 2 0 SA Australia 0 00 1 0 2 0 1 0 20 000 0
10 0 0 0
0 00 0
10 2 0 1 0 ob acancies number mplo ment right scale 20 000 1
STATISTICAL SECTION STATISTICAL SECTION Small business confidence remains solid in the state, generally Job vacancies in the state remain at some of the highest levels trending up across the past few years. That reflects trends both observed in recent years. The number of vacancies has eased nationally (where a similar trend is evident) and internationally off recently, which is reflective of rises in job growth – more – where earlier concerns about global economic growth have vacant job spots are being filled up. However, the series is also turned out to be overstated. While the state result suggests that a solid leading indicator of further trends in the labour market, relatively more businesses expect conditions to improve than suggesting that local employment growth may peak across 2018. decline, the outlook is significantly more positive among metro businesses than in regional areas. While a similar trend is seen in other states, the gap is far larger in South Australia.
20 STATISTICS
CHART 16 SA TRENDS CHART 17 SOUTH AUSTRALIA - SHARE OF NATIONAL OUTPUT AND POPULATION (%) OUTPUT - % CHANGE ON PREVIOUS YEAR SA TRENDS Chart 16 SOUTH AUSTRALIA - Share of national output and population (%) Chart 17 !"#$"#%&%'%()*+,-%.+%/0-12.34%5-*0% SA Australia 2 0 Share of national output Share of national population 8
2 1 2 0 0
8 1
STATISTICAL SECTION STATISTICAL SECTION South Australia’s share of the national output continues to Overall output growth suggests that South Australia’s economy follow a downward trajectory, while population growth in is now growing at its fastest pace for a decade – suggesting the state has consistently lagged the national average. The that the strong labour market performance has been more state’s younger cohort continues to move interstate, the share important than the less impressive results on population. of international migrants remains low, and a relatively older Key recent positives include rising utility investment in gas, population means relatively fewer births. However, there has renewable and battery storage projects, particularly strong been a pick up in the state’s share of the nation’s economy of growth in retail, exports, agriculture and tourism. Looking ahead, late, reflective of improved output growth for the state – notably the current pace of growth will be very hard to maintain in an from the resurgent agricultural sector. economy challenged by weak population growth and a shrinking manufacturing sector.
CHART 18 CHART 19 SA TRENDS DWELLING INVESTMENT - % CHANGES AON TRENDS PREVIOUS YEAR BUSINESS INVESTMENT - % OF OUTPUT
Chart 18 !"#$%&'(& DWELLING INVESTMENT - % change on previous year Source: ABS Cat No. 5206.0 BUSINESS INVESTMENT - % of output 20 1 1 SA Australia 18 SA Australia 10 1 1 0 1
1
10 1
1 12 11 20 10 ec 0 ec 10 ec 11 ec 12 ec 1 ec 1 ec 1 ec 1 ec 1
STATISTICAL SECTION STATISTICAL SECTION Despite lagging behind in terms of building approvals South Australia’s business investment (measured here as a and housing finance, overall spending on housing across share of the overall economy) has eased of late. But that fall South Australia (including additions, alterations and other looks worse than it really is, given the recent strength in output developments) continues to rise even as the national level growth. Over the longer term, the data shows how little of the declines. As housing investment has been a key pillar of mining boom (which drove huge investment in Western Australia economic growth in Australia across recent years (rising around and Queensland) actually eventuated in South Australia. Local 10% per annum while the overall economy rose at a quarter that levels of business investment remain in respectable territory; pace), the decline means other types of growth will be needed largely driven by new utility investment – a trend that will to keep the overall economy expanding. provide a pipeline of further work across 2018.
21 TRENDS AUGUST 2018
SA TRENDS CHART 20 CHART 21 SA TRENDS PUBLIC SECTOR OUTPUT - % OF TOTAL CONSUMPTION AND INVESTMENT MERCHANDISE EXPORTS - % CHANGE LAST TWELVE MONTHS TO PREVIOUS Source: ABS Cat No. 5206.0 Chart 20 !"#$%&'(& !"#$%&'()&*+,'+"*!"*'-'.'/0'1/123'4/56789:/5'25;'<5=>618>51' MERCHANDISE EXPORTS - % change last twelve months to previous 2 0 2 SA Australia 2 20 SA Australia 2 0 1 2 10 2 0 2 0 2 0 22 22 0 10
21 1 ec 0 ec 10 ec 11 ec 12 ec 1 ec 1 ec 1 ec 1 ec 1 an 1 ul 1 an 1 ul 1 an 1 ul 1 an 1 ul 1 an 18
STATISTICAL SECTION STATISTICAL SECTION The state’s public sector share of the economy is rising, Merchandise exports are surging locally – and even more suggesting the public sector is continuing to grow more rapidly so nationally – as the global economy continues to exhibit than its private sector counterpart. Over recent years, the South surprisingly strong growth. The same factors that pushed Australian Government has increasingly allocated funds towards business investment levels across the last 10 years – expansion utilities and transportation investment, boosting this share – of Australia’s mining capacity – are now showing up in an although the end of the mining boom more generally has played increasing ability to supply those materials to the rest of the its part in limiting private sector growth. This measure may see world. Sadly, that is less of a boon to South Australia, where the further upward pressure in future years as an ageing population decline in manufacturing has been a brake on export growth. As sees increasing demand placed on the public health sector. a result, the state’s share of overall exports has now fallen back to the lowest levels on record.
CHART 22 SA TRENDS MERCHANDISE IMPORTS - % CHANGE LAST TWELVE MONTHS TO PREVIOUS
!"#$%&''& MERCHANDISE IMPORTS - % changeS last twelve months to previous 20 SA Australia 1
10
0
an 1 ul 1 an 1 ul 1 an 1 ul 1 an 1 ul 1 an 18
STATISTICAL SECTION South Australia’s imports growth has been fairly stable for a number of years – at least relative to the national trend which has a number of periods of growth and contraction over the past three years. The national trend was largely driven by imports of capital goods (despite big engineering projects wrapping up) suggesting that it should drive longer term growth in the Australian economy.
22 STATISTICS
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407041_WBCBSA07887_0218.indd 1 8/3/18 4:14 pm Trends August 2018
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