We have recently been undertaking research into the extent to which current migration policies meet South Australia’s needs, and how migration interacts with the broader economic challenges facing the state, in particular our ‘demographic deficit’ of an older, less active in the labour market, lower qualification, working age population.

These demographic challenges present some specific difficulties for South Australian employers that aren’t seen in the major cities on the east coast; not least that they can face labour shortages for semi- and low- skilled occupations as well as skilled occupations.

Our research found a number of aspects of the current migration system that did not meet the needs of the South Australian economy or South Australian employers, in particular that:

  • the use of a single level for the minimum wage level for jobs to be eligible temporary skilled visas (called the TSMIT) means that many positions in lower wages areas, which is most of South Australia, are locked out of the skilled migration system;
  • the current migration system lacks regional flexibility and is focussed on jobs with unmet demand nationally, whereas the skills gaps identified by many regional South Australian employers are often in different areas (and often for occupations that require Certificate III or equivalent which are not typically eligible for skilled worker visas);
  • it was felt that the visa subclass targeted at business owners and investors (the BIIP) generally does a poor job of increasing the number of entrepreneurs in Australia, or in assisting retiring business owners find potential purchasers, and that the local business environment, and the criteria around business size set for key streams of this visa made it even less suitable for South Australia’s needs.

In the final report from our study, we focus on the ways in which migration policy could be changed to meet the needs of South Australia (and regional Australia more broadly), rather than those of Sydney and Melbourne.

Most importantly we recommend re-introducing a temporary work visa that gives greater flexibility to regional needs, and allows local employers to address their own unmet demand, rather than positions in demand in the major cities. The key elements that we believe should be included in a temporary regional visa are:

  • A TSMIT that reflects local labour market conditions.
  • Allow access to a greater range of occupations (and to lower skill levels).
  • Allow greater pathways to permanent residence
  • Verification of compliance with visa conditions
  • Exempt regional employers from paying the new training levy if they meet a training benchmark based on good practice for their industry sector

Other key recommendations are to:

  • Reverse the recent changes to the RSMS program which will significantly reduce its flexibility
  • Re-target BIIP visas at those planning to establish or take over businesses in Australia by increasing visa grants for the ‘business innovation’ and ‘entrepreneur’ streams
  • Allow applicants for the ‘entrepreneur’ stream of the BIIP visa to access funds from a wider range of sources (at the moment entrepreneurs can only apply for this visa if they are receiving an investment from one of a small number of approved sources, and the approved sources do not reflect the funding sources generally accessed by Australian entrepreneurs.
  • Create a ‘start-up’ visa for those in the country temporarily on other grounds, allowing them temporary right to remain to pursue a business idea.
  • Increase regional flexibility in migration policy settings, including through the use of region specific occupations in the skill lists
  • Review the recent impact of changes to student visas on South Australian VET providers.
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Another positive labour market report for South Australia
The August results of the Labour Force Survey released by the Australian Bureau of Statistics (ABS) last week paint a brighter picture of labour market conditions for South Australia. Trend estimates indicate that total employment rose by 2,040 persons to approximately 827,000 persons in August, while unemployment fell by 2,103 persons to 53,700 persons. These complimentary movements helped bring the trend unemployment rate down from 6.3 per cent in July to 6.1 per cent in August, which is its lowest level since May 2013.

The trend participation rate remained stable at 62.3 per cent in August. Meanwhile, the employment to population ratio, which is perhaps one of the best indicators of the overall health of the labour market, rose by 0.1 percentage points to 58.5 per cent in August.

Although South Australia’s trend unemployment rate in August (6.1 per cent) remained elevated compared to the corresponding national figure of 5.6 per cent, the further reduction in unemployment has helped bring South Australia back in line with other mainland states. For instance, Victoria (6.1 per cent), Tasmania (6.1 per cent) and Queensland (6.0 per cent) all had similar trend unemployment rates in August.

One of the striking features of the August Labour Force Survey results is that the seasonally adjusted estimates point to an even stronger improvement in relative labour market conditions for South Australia. South Australia’s unemployment rate in seasonally adjusted terms fell by 0.5 percentage points to 5.7 per cent in August, which is only marginally above the national unemployment rate of 5.6 per cent. However, seasonally adjusted estimates exhibit a high degree of noise, particularly at the state level. We consequently advise caution against reading too much into the latest seasonally adjusted results.

Mixed result in new motor vehicle sales
Sales of new motor vehicles in South Australia rose by 0.4 per cent in August 2017 to be up 4.1 per cent compared to a year earlier. In comparison, national sales rose by 0.3 per cent in August and were 2.7 per cent higher than a year earlier.

While the trend data point to continued momentum in spending in South Australia, in seasonally adjusted terms sales of new motor vehicles actually fell by 2.3 per cent in August. Whether this signifies a turning point or simply a temporary blip remains to be seen.

House prices continue to rise, with uneven results nationally
The ABS’s Residential Property Price Index indicates that Adelaide recorded a small rise in house prices in the June quarter (0.8 per cent). House prices nationally grew more strongly (1.9 per cent), which continues a pattern of more moderate expansion in house prices for Adelaide compared to the nation. For instance, residential property prices in Adelaide rose by 5.0 per cent through the year to the June quarter 2017, while weighted average prices for the eight capital cities rose by 10.2 per cent.

The solid increase in national residential property prices over the past year was driven by strong increases for both Sydney and Melbourne (13.8 per cent respectively). There were also solid rises for Hobart (12.4 per cent) and Canberra (7.9 per cent), and a modest increase for Brisbane (3.0 per cent). On the other hand, house prices continued to fall in both Perth (-3.1 per cent) and Darwin (-4.9 per cent).

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There are some interesting submissions at the PC’s Horizontal Fiscal Equalisation (HFE) Inquiry website.

Victoria, Queensland, SA, Tasmania, ACT and NT are all in favour of HFE albeit with some suggestions for improvement. None of these States buy the line that HFE is undermining reform, growth or productivity. NSW and WA are opposed to HFE and support an equal per capita distribution, and they say that HFE does undermine growth. I’ve given a potted summary of each State’s position below.

To some extent WA wants to have its cake and eat it: it wants equal per capita in the GST distribution and says it wants the Commonwealth to take on the HFE role. Maybe this involves the Commonwealth finding another pot of money to top up States funding and implementing HFE with this? In this case the substance of the new arrangement is that WA is better off as a result of expanded grants from Commonwealth to States—as indeed are all States. But aggregate grants are still distributed according to HFE and as such will not be equal per capita. (A separate issue is that GST has underperfomed as a funding base for the States and something needs to be done about it as was foreshadowed in the 2012 GST Distribution Review—see especially Chapter 11 of the Final Report.)

While WA is very dissatisfied with its current treatment under HFE, Victoria says that since Federation WA has received $25 billion more in Commonwealth payments than it would have with a per capita distribution. Victoria has received $86 billion less. These unequal funding shares are a direct consequence of the long standing practice of distributing funds to support equity in the service levels and revenue efforts of the States. It is that long standing practice that now delivers a low share of Commonwealth funds to WA in consequence of its strong mining royalties.

NSW proposes that “A new HFE Board should be established charged with overseeing the distribution of GST. This board should comprise state treasurers with voting powers reflecting population share or the number of seats each state has been allocated in the Commonwealth Parliament” [pp. 35-36]. On current populations that would mean that a coalition of NSW and Victoria or a coalition of NSW and Queensland could exercise absolute power over defining the meaning of HFE and thus the GST distribution!

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Expenditure on electronic gaming machines (EGM) located in hotels and clubs fell across most regions of South Australia in 2016/17. These results are contained in the latest edition of SACES’s Gambling Database which provides regional level data on gaming machine activity in South Australian licensed venues (excluding the Casino).¹ The database is compiled from data […]

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This week’s data wrap considers the latest National Accounts data, which indicates that the South Australian economy was growing at a solid pace in the June quarter. However, consideration of more recent partial indicators suggest that economic conditions had eased early in the September quarter.
State final demand continues to grow solidly
The various partial indicators of […]

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In today’s data wrap we review the key data releases from last week that provide insight into South Australia’s recent macroeconomic performance.
Construction activity continues to grow solidly
Activity in the South Australian construction sector rose solidly in the June quarter, extending the strong recovery that emerged in late 2016. Preliminary estimates released by the Australian Bureau […]

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This week has been a quiet week for Australian Bureau of Statistics data releases in respect of the South Australian economy.
There was good news for the state economy with the announcement that OZ Minerals’ Board had approved the $916 million development of its Carrapateena copper gold mine. The mine is located 160km north of Port […]

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Labour market conditions continue to improve
Results from the Labour Force Survey (LFS) released by the ABS yesterday indicate that labour market conditions in South Australia continued to improve in July. The total number of persons employed measured in trend terms rose by 1,091 persons (0.1 per cent) in July, while the number of unemployed persons […]

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On August 28-29 the School of Economics at the University of Adelaide is hosting a workshop on “Federal Relations and Tax Reform” at the National Wine Centre. The workshop will focus on the operation of fiscal equalization systems and broader questions of taxation within federal systems, and taxation reform of especially interest to States and […]

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The National Australia Bank’s latest Australian Markets Weekly notes that business conditions in Australia as measured by its monthly business survey have improved considerably over the past 6 to 8 months. This improvement has been driven primarily by the South Australian, Queensland and Western Australian economies. All three of these states were previously negatively impacted […]

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