Lead Story
Issue No. 51 - February/March 2010
Business driven
In Table 1, I have summarised my views of the potential trajectories of South Australia’s, and Australia’s, economic activity over the next five fiscal years, as well as recorded outcomes for the 2008-09 fiscal year.
These outcomes and forecasts differ from those presented in my article, ‘Right Future’, in the August-September 2009 issue of in-business. The recession has turned out to be less severe and the recovery is turning out to be more rapid than seemed likely using data available six months ago.
Correspondingly, national output growth in the years following recovery is likely to be slightly less rapid, and the return to trend growth slightly quicker, because the availability of excess capacity will be less.
In SA, output growth in the years following recovery has not been reduced because of the structural improvement in the SA economy reflected in those projections.
Employment growth nationally is likely also to be correspondingly slightly slower following the recovery, because unemployment does not seem likely to reach the high levels earlier anticipated, and because output growth is slightly slower. In South Australia, employment growth is likely to continue to be as rapid as previously anticipated because output growth has not been cut back.
The peak for the unemployment rate is now likely to fall far short of the 9% previously anticipated for 2010-11 therefore, and is likely to be a full percentage point less (at 5.5%) in 2013-14. The Australian Treasury expects the “equilibrium” (so-called NAIRU) rate of unemployment of 5% to be reached soon after.
A notable feature of Table 1 is that for the next five years (and for longer, in fact), I expect that South Australia’s rate of economic growth will equal (or marginally exceed) the national growth rate (and that South Australia’s employment growth will also match employment growth nationally). This equates to a 20%–25% improvement in SA’s economic gro...
