South Australia: The Panda Clutching State


Published in The Australian, December 11, 2013

IF the Rolling Stones play in Sydney, Brisbane or Melbourne, it is known as a concert. If theRolling Stones play in South Australia it is known as “a coup for Adelaide.”

In other states, the promoter hires a venue, charges the baby boomers a small fortune and ensures the Stones turn up at the appointed time. In South Australia, the government builds the venue, the baby boomers still pay through the nose, but the premier has to bung the Stones a wad of cash to convince them to turn up at all.

Old habits die hard in South Australia, a state addicted to so-called “assisted development” for 70 years. Glad-handing the world’s most successful rock band is but the latest manifestation of the funny money culture upon which the SA manufacturing industry was built.

Greased palms, sticky fingers, call it what you will; Premier Jay Weatherill prefers to think of it as an investment. “You really get, on really conservative estimates, a $10 return for every dollar we put in,” he told journalists.

This dubious economy-wide figure relies on the same false assumptions that have kept subsidised Commodores rolling off the line at Elizabeth for decades.

Bill Scales, who led the implementation of the Button car plan, wrote in this newspaper in October that he had yet to see a credible study justifying assistance to the car industry on the grounds of its spillover benefits. Estimates of the number of motor-industry jobs lost are wildly inflated; those who work in sales, distribution and marketing, for example, will continue to be employed whether the cars are made in Elizabeth or Seoul.

Without the crowding effect of a subsidised industry, other businesses may thrive. Yet the multiplier argument is common currency in SA government propaganda.

Channel Nine led its bulletin on Sunday with “breaking news” that the state was $10 million richer for staging a Test match, which is risible compared with the $36.3m boost from the year’s Clipsal 500 V8 supercar race. A Cajun band, Jimmy Cliff and a bloke from Mali playing at the Womadelaide festival earned the state a cool $11.1m, apparently.

The hope for future economic growth, however, rests with the pandas. Wang Wang and Funi, loaned to Adelaide Zoo by China, represent a “financial bonanza” for the state, head keeper Chris West predicts, reaping an estimated $632m benefit.

The figure the state government would rather not talk about is its rising state debt which in dollar terms is expected to be bigger than that from the collapse of the South Australian State Bank in the early 1990s. Nor does it want to focus on the viability of the manufacturing sector more generally.

In 1966, when the Stones first came to Adelaide, there was one manufacturing job for every nine South Australians. As late as 2002, when Labor’s Mike Rann was elected premier, there was one manufacturing job for every 15 people. Last year the figure was one in 20, but the employment statistics contain an even more ghastly secret.

Under Labor, South Australia has become the pen-pushing state. The state’s public sector workforce has grown by 30 per cent since 2002. In 2010, the employment market reached tipping point. State public servants now outnumber manufacturing workers.

Labor’s employment record – should it care to campaign on it at the March state election – is a net loss of 23,000 manufacturing jobs and a net gain of 20,000 bureaucrats. The public service bubble has helped hide the overall weakness in the state’s economy. The average public service salary is $82,600; in manufacturing it is $60,000.

The spending power that keeps Adelaide restaurants and shops buzzing at the moment is illusory since it comes largely from the unproductive sector of the economy.

Government agencies have flourished in recent years in the way manufacturing thrived under premier Thomas Playford, with the same scant regard for their long-term usefulness or viability.

When Labor came to power, the public service salary bill ate up 43 per cent of the government’s income. Now it accounts for 47 per cent, the largest figure of any state in Australia.The Energy Consumers Council furnishes the public with graphs demonstrating that the average electricity bill is now three times larger than it was when Labor was elected in 2002.

The cost of power is one more reason that making an honest living in South Australia is somewhat harder than it used to be. Labor’s expanded public service is largely an economic deadweight that must be carried by the productive sector of the economy. Payroll tax is up by 47 per cent in real terms since 2002.

Cheap power used to be one of SA’s competitive advantages, yet power bills are three times larger than they were in 2002.

The budget deficit last year was an uncomfortable $1.3 billion.

The recent Mid Year Economic Forecast shows the expected deficits for this year and next year have worsened. The forecast surplus for 2015-2016 looks increasingly unlikely.

At times like these, it might seem desperate to be clutching at pandas, but the prospects for SA’s future prosperity are bleak. BHP still struggles to make the investment case on Olympic dam stack up and there is little other prospect of a resource-led recovery.

It is indicative of Weatherill’s luck that he will probably be in opposition by the time the Stones play Adelaide Stadium on March 22. When he announced the gig last month, Weatherill claimed it would be “the only full-scale stadium show in the Rolling Stones’ Australian tour.” Indeed, it was until the promoter announced last week that there would be gigs at the Perth Arena, the Sydney Allphones Arena, Melbourne’s Rod Laver Arena, Auckland’s Mt Smart, Brisbane Entertainment Centre and Victoria’s Macedon Ranges.

As far as is known, no other state government has been obliged to pay for the privilege. Weatherill should ask for his money back.